TaxTMI 
TaxTMI 
2021 (8) TMI 869
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....ship breaking activity and following the mercantile system on accounting filed its return of income on 27.07.2012 declaring total income at Rs. 1,50,15,270/-. The fact culled out from the order passed by the Ld. AO is this that a survey was conducted in the case of the assessee on 23.09.2011. During the course of survey statement on oath of Shri Ramakrishna Jain, the partner of the assessee company was recorded wherein he admitted that they keep stock on estimate basis. The Ld. AO was of the view that the additional stock though found from the survey the same was not added in its books of account of the firm. The excess stock of 435MT valued at Rs. 2,50,98,362/- though has been admitted by the partner of the company as his undisclosed income, such undisclosed income has not been offered by the assessee in the return of income filed for A.Y. 2012-13 as was the case of the Revenue and ultimately the same has been added to the total income of the assessee which was in turn deleted by the Ld. CIT(A). Hence, the instant appeal before us. 4. We have heard the rival submissions made by the respective parties, we have also perused the relevant materials available on record. 5. It ....
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.... 1.016 MT, Weight of the ship is also provided in the Trim and Stability book (T&S Book) which is always available onboard. The weight of the ship further varies on various factors viz. type and kind of ship, its life, nautical miles covered, etc. besides due to addition, removal or alteration of items on-board. Further with passage of time, i.e. in course of 25 to 30 years, due to corrosion during voyages and other environmental factors there is further loss- of weight. Moreover, the recovery out of dismantled ship is also uncertain and varies depending upon many factors viz. nature and kind of ship, comprising materials etc. In view of this particular nature of business, no fixed norms have been prescribed for calculating 'wastage' in ship breaking activities. (D) Due to the above reasons it is not feasible to maintain physical stock in ship breaking activity. Hence, in the industry of ship breaking, the normal procedure followed to maintain the books of accounts are that the opening stock is added by MT in respect of purchase of ship less removal of goods, less estimated weight loss on the basis of past experience in dealing with similar types of ships ....
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....ustry practice prevalent in the ship breaking industry 'stock' is always measured on estimate basis. Moreover, the quantum of 'wastage' varies from 10% to 15% depending upon the kind and nature of ship and other factors. In order to purchase peace of mind and cooperate with the Department, the partners of the appellant firm had admitted the quantum of excess stock and offered the same in the Profit& Loss Account. Admittedly this excess stock was due to fact of'estimation' only and it is not the case of the Department that there was purchases out of books. Not an iota of evidence was found indicating that the appellant firm had indulged in out of books purchases even after extensive survey operations. Thus the excess stock is part of the business of the appellant firm only and. therefore rightly added to the Profit & Loss Account. This stock cannot be added under deeming provisions of section 69, 69A, 69B or 69C of the Income Tax Act, 1961 as held by the Hon'ble ITAT, Ahmedabad in the case of M/s Fashion World v/s ACIT (ITA No.1634/Ahd/2006 dated 12th February, 2010, a copy of order enclosed herewith). As 'stock' itself do not yield ....
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....l/ship remains was found excess. Therefore the partner offered excess stock of 435 MT having value of Rs. 2,50,98,362/- as undisclosed income of the year. 5.5 However, the AO noted that while filing return of income, the appellant has not offered additional income of Rs. 2,50,98,362/- in the return of income on account of excess stock found during the survey. The AO issued show cause to the appellant and the appellant filed working and explanation before the AO. The AO held that the appellant has not offered additional stock found during the survey in the return of income and has not increased income from the additional stock found of Rs. 2,50,98,362/- therefore the same is undisclosed income of the appellant. The appellant submitted that the AO has wrongly mentioned the fact as the additional stock found during the survey was included in the closing stock of the firm. The appellant further submitted that the excess stock was calculated on the basis of estimation only though there was no other incriminating material was found. The appellant also submitted the pre-survey and post survey bifurcation of all expenses which shows that there is no abnormal increase in t....
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....k in the books of accounts has been increased by Rs. 2,50,98,362/-. The said fact is also emanated from the records filed before us. In that view of the matter the contention of the appellant that the addition of Rs. 2,50,98,362/- tantamounts to double taxation is in fact justiciable. Over all the decision of addition on the observation that the appellant has not offered the additional stock found during the survey as made by the Ld. AO is under the present facts and circumstances of the Act not sustainable which has rightly been taken into consideration by the Ld. CIT(A) while deleting addition without any ambiguity so as to warrant interference. Hence, the appeal filed by the Revenue is found to be devoid of any merit and, thus, dismissed. C.O. 67/Ahd/2017(A.Y.2012-13):- 9. First Ground:- This ground relates to disallowance of Rs. 4,66,795/- out of stores and spares expenses. 10. During the course of assessment proceeding in reply to the showcause issued to the assessee as to why the purchases made between the period 10.03.2012 to 31.03.2012 in the store & spares account should not be disallowed and added to the total income of the assessee, the assessee replied that the....