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TMI Blog2013 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ken into consideration various factors while accepting the burning loss shown by the appellant which in our considered opinion the Tribunal had failed to advert into - Matter remitted back - Decided partly in favour of assessee. - Income Tax Appeal Defective No.-6 of 2004 - - - Dated:- 7-2-2012 - Hon'ble R.K. Agrawal And Hon'ble B. Amit Sthalekar,JJ. For the Petitioner : R. S. Agarwal, S. K. Garg, Shakeel Ahmad,Siddh Nath Pathak For the Respondent : S. S. C., A. Kumar, A. N Mahajan,B. Agarwal,D. Awasthi,G.Krishna,S. Chopra ORDER Present appeal filed under Section 260-A of the Income Tax Act, hereinafter referred to as the Act, against the order dated 9th September, 2003 passed by the Income Tax Appellate Tribunal, New Delhi has been admitted on the following substantial questions of law: "(i). Whether on a true and correct interpretation of the provisions of section 145(2), the Tribunal was legally correct in upholding the rejection of accounts and in sustaining the addition for sums aggregating Rs. 49,13,859/- as had been made in the assessment, on the ground that the burning loss as claimed by the assessee was excessive? (ii).Whether the Tribunal was legall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TISCO billets, the Assessing Officer came to the conclusion that the burning so claimed is excessive and relying on the report of S.H.John M. Smith as also the burning loss shown by another manufacturer, namely, M/s J.K. Iron and Steel Co. Ltd, he fixed burning loss at 2.5% in respect of own production and at 2% in conversion work of TISCO billets which resulted in an addition of Rs. 39,92,646/- in own production and Rs. 7,76,747/- in job work. The assessment was made on a total income of Rs. 86,37,960/-. The appellant preferred an appeal before the Commissioner of Income Tax (Appeals) who vide order dated 9th August, 1994 had allowed the appeal by accepting the trading result of the appellant as also the disclosed burning loss. The Revenue feeling aggrieved preferred an appeal before the Tribunal. The Tribunal, by the impugned order had partly allowed the Revenue's appeal and had fixed the burning loss in respect of own production at 3% whereas in respect of job work of TISCO billets at 2.5%. We have heard Sri V.B.Upadhyaya, learned Senior Advocate assisted by Sri Shakeel Ahmad, learned counsel for the appellant and Sri S.Chopra, learned Senior Standing Counsel, appearing for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Stein and Adkinson wherein it has been mentioned that these furnaces will reheat steel billets two inch/three inch square at the rates indicated on the plates, using 10 gallons per tonne of steel Re-heated operating on a single shift and that the furnaces can be heated up and deliver steel at the required temperature in one and half hours. The burning loss in these furnaces would not be more than 2 to 2.5% and with good operation this case be 1.5%. The A.O. has further placed reliance on the comparable case of M/s J.K. Iron Steel Co. Ltd. ( A.Yr. 88-89) where the C.I.T.( Appeals) had allowed burning loss of 3.02% against 2.5% taken by the A.O. The order of the C.I.T.(Appeals) has not been accepted by the Department, and the Deptt. has gone before the ITAT on this basis. On page 7 of the assessment order on own production he has worked out the addition of Rs. 9,13,436/- and in conversion job he has worked out the addition of Rs. 7,98,467/-. Before me it has been stated that in the assessment year 1986-87 the burning loss has been 4% and in the A.Yr. 1987-88 it has been 5.92% but these have been accepted. For the first time the appellant has taken up the conversion w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying lengths of finished goods 2"/3" square thick ingots can produce can not be the same. In other words, marketable commodity our Mill produces is different that marketable commodity Stein Adkinson case produces. In appellant's case, due to power restrictions, furnace is shut down every day and operation time is 16 hours. It has further been stated that in the Expert report it has been stated that the shortage is normally shown under two different heads i.e. Burning Loss which may be called invisible wastage. Now the question is what is the second head of shortage or loss or wastage in case referred to by the A.O. Apart from that it has been stated that the burning loss in rolling mills would depend on a number of variable, each variable having number of sub-variables and the appellant has given examples which are being reproduced as under: 5.10.(a) Furnace Design. 5.10.(b) Furnace Temperature. 5.10.(c) Fuel Air Ratio. 5.10.(d) Furnace Pressure. 5.10.(e) Burner Design. 5.10.(f) Fuel used. 5.10.(g) Octane Value of Fuel. 5.10.(h) Temperature of Work piece. 5.10.(i) Atmosphere conditions. 5.10.(j)Moisture content in fuel. 5.10.(k) Carbon content in fuel. 5.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he U.K. was at the request of the Government of India and was assisted by one Mr. Banerjee, who was technical advisor and Special Officer of the Association. Mr. Smith, while dealing with the subject of Re-heating Furnace in the report, observed as under: "Using an oil fired furnace, it is possible to cut down the labour force considerably,but it is necessary that an intelligent man who has been properly instructed, be employed to have charge of furnace and operate the Burners. The Verma Sales Co. hope to be able to instruct operators in this technique at their Bombay Training Centre, and this service would be available to all re-rollers contemplating changing over to the oil fired furnace. Stein and Adkinson Gurantee these furnaces will reheat steal Billets two inch/three inch square at the rates indicated on the plates, using 10 gallons per tonne of steel Re-heated operating on a single shift and that the furnaces can be started up and deliver steel at the required temperature in one and half hours (excepting after week ends and holiday shut downs when an extra half hour would be reduced to 8.5 gallons per tonne. Burning losses in these furnaces would not be more than 2 to 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingots/billets etc. received from TISCO for rolling. In other words, the assessee was to return 90 kgs of finished material against every 100 kgs. of material received in the shape of ingots/billets etc. and since the assessee was charging job charges for rolling separately, the question of allowing loss to the assessee could arise only if it was established that the left over 10% of the raw material has been credited by the assessee in its profit and loss account otherwise there is no question of allowing any loss to the assessee. In other words, the assessee could account for left over 10% material in its profit and loss account by two ways, namely, (1) by crediting the profit and loss account by total left over materials caused (cost of 10% of the material received from TISCO) and then claimed the burning loss during the process of rolling or by way of crediting its profit and loss account by the value of net left over material after accounting for the burning loss (10% minus burning loss). 13.1. So far as assessee's case is concerned, none of the parties has furnished the aforesaid details and it is also not clear either from the order of the revenue authorities or from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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