AI Drafter 
TaxTMI 
TaxTMI 
2018 (2) TMI 260
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....fair enough in not disputing correctness thereof during the course of hearing. We therefore condone the impugned delay of 11days in filing of assessee's appeal ITA No.2102/Ahd/2014. The same is now taken up for adjudication on merits. 3. The assessee appears to have pleaded three substantive grounds in its instant appeal inter alia challenging the CIT(A)'s order upholding Assessing Officer's action rejecting its books u/s.145 of the Act as well as partly affirming his assessment action making unaccounted machinery/DG sets/engine set of Rs. 55lacs to the extent of Rs. 10lacs on lump sum basis as well as in partly concurring with unaccounted oil sale of Rs. 10,57,240/- to the extent of Rs. 1lac only; respectively. The Revenue's appeal ITA No.2276/Ahd/2014 on the other hand raises only the latter two issues hereinabove in seeking to revive the original unaccounted addition figures of Rs. 55lacs and Rs. 10,57,240/- (supra); respectively in entirety. 4. We now advert to assessee's first grievance of rejection of books of accounts by lower authorities after invoking Section 145 of the Act. The assessee admittedly is engaged in ship breaking business. The Assessing Officer rejected ....
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.... of the raw material. Once the dismantling of the ship is started the recovery of the total weight can be ascertained only after the goods weighed and sold. Likewise, it is impossible to arrive at the daily shortages occurred in the manufacturing process because neither the chunks of broken ships could be weighed nor the production derived there from could be measured. Further, the goods are subject to the watch of the Central excise Authorities and VAT authorities of the state government also. It was also argued by the appellant that in the past the book results in the cases of ship breakers have never been disturbed for the reasons as attributed by the A.O. The ld. A.O. ought to have considered these factors in its right and true spirit considering the overall factors and circumstances affecting to the ship breaking activity. 4.5. It is true that considering the nature of the ship breaking industry it is difficult to maintain the day-to-day consumption and shortage records because of the volume and various coincidences in measuring the same. Even the purchases made at the specified weight of the ship is also un-measurable because of the practical difficulties. But at the....
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....tail not even HP of any engine which is the most elementary technical character associated with these types of items are mentioned. These bills also do not indicate the name of ship from which the same have been recovered and sold; therefore there is no clue as to whether the ship from which it was recovered was a war-ship or a small fishing-trawler. Be that as it may, it certainly indicates that the engine / DG set are capable of being sold as such. This is further to be inferred from the fact that when the ship came for dismantling, it came on its own i.e. without being towed. It is therefore to be presumed that though the engine / DG set may be old, still they are in running condition. 5.7. The AR has, on his part, contended that it is generally not possible to sell engine of a broken ship as such and in such situation, the assessee has to dismantle the engine also and sell machinery parts. It is further stated by him that the AO has not dealt with the above issue in the light of detailed clarification given by the assessee at the time of hearing. The AR has vehemently argued that AO's belief of sale of the engines and D G Sets and further belief of unrecorded recei....
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....the ships. Of the weight loss shown above, it may be noted that the weight loss at yard is only 2-3%. The rest is the weight loss due to corrosion in 20-25 years of the ship's active life. " 5.9. The appellant has relied upon the decision of Hon'ble Mumbai IT AT 'H' Bench in ITA No.7522/Mumbai/2007 dtd, 7.8.2013 in the case of Aapee Ship Breakers Pvt. Ltd. Vs. CIT(A) Central XXVII and Dy.CIT, Circle-3(l) whereby the shortage came upto 15% was held to be reasonable. Likewise the Hon'ble IT AT Mumbai Bench in -the case of Goyal Traders, Mumbai Vs. AO in ITA No.4431/Mumbai/2010 and CO 63 of 2011 has observed that the shortage claim varies from 10% to 20% in ship breaking business. Similar view has also been taken by the Hon'ble IT AT Mumbai Bench in the case of Anupama Steel Ltd. in ITA No.2949/Mum/2004 dtd. 12.9.2007 and in the case of Hariyana Steel Co. in ITA No.l861/Mum/1998 dtd. 26.7.2004. 5.10. It has been submitted that as per the MOU for purchase of one vessel MV WINDSOR RUBY the vessel has 1150 permanent ballast which consisted of Pig Iron and Cement Concrete. The quantity of cement concrete was of 460 MT which was part of the total p....
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.... N.P 4.48 0.20 5.31 Burning Loss 5.03 5.58 12.07 SHIVSHIP BREAKING CO. A.Y. 2008-09 2009-10 2010-11 G.P 82.39 LOSS LOSS N.P 8.85 LOSS LOSS Burning Loss SHETH SHIP EREAKIG CORP A.Y. 2008-09 2009-10 2010-11 G.P 6.21 6.58 14.44 N.P 27.64 0.97 3.48 Burning Loss 0.0 0.0 0.0 P.PATEL SHIP BREAKING CO. A.Y. 2008-09 2009-10 2010-11 G.P No business 24.18 5.95 N.P 05.82 2.65 Burning Loss 9.00 13.42 ALANG SHIP BREAKING CORP. A.Y. 2008-09 2009-10 2010-11 G.P No business 7.52 6.28 N.P 2.18 2.77 Burning Loss 9.00 12.11 ....
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....les of movables and also not shown any closing stock under this head. The Assessing Officer accordingly raised a query. After having considered the assessee's reply the Assessing Officer held that in absence of item-wise verification of movables from miscellaneous sales declared by the assessee, the assessee must have sold the movable outside the books. He accordingly took the cost of movables sold outside the books at Rs. 8,66,933/- that is as shown in the inventory made by the customs authorities and presuming GP of 20% worked out the sales of such movables at Rs. 10,40,322/-. 21. By the impugned order, the CIT(A) deleted the addition by observing as under: "There is no denying the fact that the items such as furniture and appliances have outlived their utility period. At the time of taking inventory, the items are valued as per their identity i.e. air- conditioner, washing machine, etc., and not as per their actual condition. Under the circumstances it is rightly pointed out by the AR that the valuation shown in the inventory cannot be an indicator to the amount to be realized on sales of these items. I ' am, therefore, in agreement with the decision ta....
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.... 192.73 MT. Assessee-company preferred an appeal before the FAA. After considering the assessment order along with the annexure-1 and annexure~2,he found that recovery and sale of the non ferrous metal was about 208 MT(1.3% of the LDT), that according to Government High Power Committee recovery has to be taken between the .5% to 1% of LDT, that Tribunal had taken .8% recovery as normal. Considering the above, he held that recovery and sale in the case under consideration was within the parameter generally accepted in the industry, that there was no material available on the record to show that appellant had diverted any part of the recovery of non ferrous metal outside the books of accounts. Finally, he directed the AO to delete the entire addition amounting to Rs. 1.75 Crores. 3.2.a.Before us, DR supported the order of the AO and AR relied upon the order of the FAA. We have heard the rival submissions and perused the material before us. We find that FAA has, while deciding the issue, taken into consideration the findings of High Power Committee on ship breaking industry established by Government of India as well as report of leading international surveyors. He has also co....
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....any basis for calculating the sale price of the Cranes at Rs. 40 lacs. In these circumstances, upholding the order of the FAA we decide ground no. 3.3 against the AO. - The Hon'ble IT AT, Rajkot Bench in the case of M/s Western Ship Breaking Corporation vs. ACIT in ITA No. 1741/Ahd/1997 and 2267/Ahd/1997 whereby the similar addition of Rs. 8 lakhs was reduced to Rs. 50,0007-. The observation of Hon'ble ITAT at para 15 are reproduced below: "We have considered the rival contentions, gone through the orders of authorities below and found from the record that the AO has not found any item being sold out of books of account. He has just assumed that these items are generally found at the ship, which was just based on estimation. Keeping in view the totality of the facts and circumstances of the case, we direct the AO to retain the addition of Rs. 50,000/- in place of addition of Rs. 1.50 lakhs retained by the CIT(A)." 5.17. I have carefully considered the facts on record and the submissions of the assessee made before the AO as well as before me and I am not fully convinced with the same. While, on one hand, the sale bills appended with the a....
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....qua this former limb of its grievance are therefore rejected. 10. Now comes to equally important latter question as to whether the CIT(A) ought to have affirmed the impugned disallowance of Rs. 55lacs in entirety or to the tune of lump sum figure of Rs. 10lacs only. The Revenue's case is that it is entire disallowance amount which should have been confirmed in lower appellate proceedings whereas the assessee seeks to add only GP component therein. We find in this backdrop that a co-ordinate bench order in M/s. Madhav Steels vs JCIT ITA Nos. 1963 & 2274/Ahd/2014 has restricted an identical disallowance of unaccounted sales of machinery/engine sets to the extent of profit element embedded therein only than the entire amount. We accordingly support there from to reject Revenue's grievance in supporting Assessing Officer's action adding the entire sum of estimate sale price. Mr. Hemani highlights assessee's NP in the impugned assessment year @2.65% only. We find no substance in the instant appeal for the reason that profit element in account and unaccounted sales figures may not be uniform on presumption basis. We therefore direct the Assessing Officer to compute the impugned additi....
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....eaching. 1 M.V. Durban star 21-05-2009 28-05-2009 2 M.V. Windsur 18-11-2009 22-11-2009 3 M.V. Icon 15-01-2009 20-01-2009 As per the technical report when ship is at anchorage it may consume fuel oil of between 2 to 6 Tons per day and considering the delay in beaching because of the wait of the beaching permission, it has consumed approximately 25 tone of the fuel oil for the delay of 5 to 7 days and the consumption of the 2 to 3 tons of oil per day which is a genuine reason for shortage in the actual availability of oil on the ship. Further there was no adverse view on the output of the oil from the VAT department, as no discrepancy about such unaccounted sales as alleged by the A.O has been pointed out by them. 6.4. It has been contended by the appellant that the AO has proceeded on the assumption that actual quantity of oil in tank of vessels was as mentioned in the bunker report. While preparing the bunker report at the anchorage point, quantity of oil in tank is measured through a measuring rode by taking depth on estimated basis and there is always variation in quantity actually found. When the measurement is take....
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....ter discounting 20% of oil available for the purpose of anchoring and beaching, the Assessing Officer held that 43,530 Itrs. Was sold by the assessee outside the books. He accordingly calculated the value of 43,530 ltrs. Oil at Rs. 1,7,602/- and added the same to the income declared by the assessee. The assessee at the time of assessment proceedings had given detailed reply substantiating the actual availability of oil in the ships and emphasizing the act that the figures arrived at by the Assessing Officer for availability of oil at the time of purchase of the ships in question was subject to various conditions and was therefore, not the actual figure of oil available in the ships purchased. 16. By the impugned order, the CIT(A) deleted the addition by observing that consumption rate of oil and frozen waste was reasonable and the Assessing Officer has no material for coming to the conclusion that the assessee has undertaken any sale without receding sale in its books of account. 17. We have considered rival contentions and find from the records that the addition was made by the Assessing Officer on certain assumptions which is not fully supported by facts and fig....
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.... has sold any oil outside the ship. Therefore, we are of the view that the CIT(A) is justified in deleting the same and our interference is not required." 19. In view of the above, we do not find any reason to interfere with the order of the CIT(A) in deleting the impugned addition of Rs. 1,77,602/- made on account of oil. " - In the case of Aapee Ship Breakers Pvt. Ltd. Mumbia Vs. CIT(Central)-XXVII and DCIT, Cir.3(1) in ITA No.7522/Mumbai/2007 dtd. 7,8.2013 has observed as under:- "2.1 The first ground of appeal is about addition made on account of suppressed sale of oil. As per the AO from the bills of entry prepared by the custom authorities, the ships were having 301 MT oil and same was valued at Rs. 39,73,120/-.As per the AO no sale of oil was shown by the assessee. Therefore, he held that assessee has suppressed sale value of the oil and he added Rs. 43.7 lakhs to the income of the assessee, as stated earlier. 2.2. Assessee preferred an appeal before the First Appellate Authority(FAA).After considering the submissions of the assessee, he held that there an apparent mistake was committed by the AO while giving narration of the items sold, t....
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.... the assessee before the CIT(A) that the above addition has been made without appreciating that whatever oil is recovered is sold and duly accounted for. Also the figures for grease, oil, thinner etc mentioned in the bill of entry are indicative-based upon the survey report determined on the tank calculation book available on the board and not physically verified. The ship breakers do not dispute such figures to avoid delay in beaching of the ship. The oil available includes various impurities accumulated over a period of time. The appellant is not in the trade of sale of oil and is only a scrap dealer. Customs duty levies it at international price of pure oil, whereas these are used or contaminated oil with impurities. The details show that grease is worth only Rs. 21,463/- from 2 ships and nothing from the third ship. This grease if recovered is used in own process of cutting in machinery employed such as which, cranes or generator. Regarding lubricating oil, these are sold as lube oil and included in total sale of oil-copies of sale bills are duly entered. Regarding paint, thinol and chemicals-they are not recoverable and they either get destroyed in the dismantling process qr u....
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....ed by Hon'ble CIT(A) has been upheld by Hon 'ble IT AT, 'A' Bench in ITA No. 258/RJT/1999 vide order dated 31.07.2009. 6.6 After careful consideration of the above facts, various decisions of the ITAT's briefly discussed above, and keeping in view the detailed submission of the Appellant, the AO's observation about the suppression of oil in production/output of fuel oil, MGO and Lubricant oil and consequently to arrive at the suppression of sales is not a reasonable view for various reasons discussed above. The type of the three ships, their year of manufacturing were different to each other and hence their consumption of oil during the period from the date of survey to the date of bleaching is obviously different. Thus the formula of consumption of oil of a particular ship cannot be applied to arrive at the consumption of oil of the another ships. It has been an undisputed fact that the quantity shown in ship records as per the survey report cannot be the actual quantity of the oil available in the ship. Further, there is sludge deposited in the bottom of the oil tank which could never been estimated and the same reduces the actual quantity of oil. So ....