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TMI Blog2018 (6) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... non-ferrous scrap etc., the Ld. CIT(A) has provided adequate relief to the assessee by restricting the addition to the extent of ₹ 19 lac being 50% - the fact that there are incomplete maintenance of records by the assessee we considered it will be appropriate to restrict the disallowance to the extent of 16 lacs - appeal of the assessee is partly allowed. - ITA No. 2591/Ahd/2014 - - - Dated:- 12-1-2018 - Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member Revenue by: Shri Mudit Nagpal, Sr. D.R. Assessee by: Shri B.R. Popat, A.R. ORDER Per : Amarjit Singh, Accountant Member:- This assessee s appeal for A.Y. 2010-11, arises from order of the CIT(A)-XX, Ahmedabad dated 28-08-2014, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee has raised following grounds of appeal:- The learned CIT(A)-XX Ahmedabad has erred in law and on facts in - 1. Confirming the rejection of the books of account for the reasons as stated in the order; 2. Confirming the addition to the extent of ₹ 19,00,000/- out of the total addition of ₹ 38,00,000/- originally made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed three ships. Every ship contains various type of machineries which mainly includes at least one Main engine,2 DG Sets, so many motors, panels, electronic items, compressors, Hydraulic pumps, fresh water equipment work shop machineries, life boats etc. Therefore the assessing officer observed that the abnormal increase in the shortage then the preceding year was only due to the fact that the assessee had not disclosed proper sales of items recovered after cutting the ships and further observed that the same were sold without entering in the books of accounts. On examination of the record during the course of assessment proceedings the assessing officer observed that assessee has disclosed sale of 1 DG set whereas after considering the fact the assessee must have recovered at least 7 DG sets from M.V. Eurasion Alliance and Crystal Lilly through M.V. Eurasion Alliance as per detail available in record besides other machinery. Consequently, the assessing officer has made addition of ₹ 28 lacs for DG sets after taking into consideration that the assessee himself has disclosed sale of DG set on 14th Feb, 2009 for ₹ 40 0000/ and two sets of other type of machinies for S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of finished or semi-finished ' goods is shown at the end of the year. However, with regard to the issue of non-maintenance of day-to-day consumption and production records and also for the reasons of suppression of sales of engine, D.G. Set and other machineries etc, the AO has rejected the books of account and made the addition of ₹ 38 lakhs as above. 3.5. I have pursued the submissions made by the AR before the AO as well as before me. It needs to be emphasized that in this peculiar nature of business it is difficult to maintain quantitative details in the desired manner. This is largely because of the fact that when a ship is purchased, its actual weight at the time of purchase is not at all either taken physically or otherwise correctly ascertainable. The Appellant has pointed out that it is the international standard practice to show the weight of the ship to be dismantled as the one as mentioned in the ship registry documents and it refers to the actual weight when the ship was built, mostly 3 to 4 decades back. The ship registry papers show this weight and the ship breaker agrees to purchase such ship for dismantling and the figure of tonnage shown in such re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng activity results into plates/scrap etc and there is no any standard input and output formula. In this sense, there is no question of maintenance of day-to-day production which, if required, would only involve huge labour and transport cost i.e. first uploading the scrap and plates cut from the ship to a transport vehicle and sending the same to a weigh bridge and bringing it back to the plot only to know the weight without any other apparent gain. The AO has misunderstood the requirement of day-to-day production records in the context of this business i.e. ship breaking where day-to-day yield cannot be ascertained in absence of any specific input and weighing the scrap generated each day before storing the same and again incurring further expense of loading and weighing at the time of its sale does not make any commercial sense. But at the same time in absence of maintenance of those records, the book results shown are also not verifiable and those becomes at the sweet will of the appellant and open for all kind of manipulations. 3.6. On careful consideration of the facts and legal position as discussed above and in absence of maintaining the quantitative records of consumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship is very old, the engine is also to be dismantled and sold as scrap. 3.7. I have carefully considered the facts on record and the arguments of the Ld. AR. I find from the assessment records that the AO has annexed certain bills of other assessees' who were in the same line of business and these bills indicate that they have in fact sold engines/DG set recovered from ships dismantled by them. On perusal of these bills, it is seen that there is absolutely no technical detail mentioned not even HP of any engine which is the most elementary technical character associated with these types of items. 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. 3.8. The AR has, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year end is shown in the books of account on the estimated basis in the form of balancing figure. Being estimated figure it is always at the sweet will of the assessee to reduce or enhance the shortage/consumption of raw-material as well as production of the finished goods. This is supported with the fact that at the end of the year the assessee has not disclosed any stock of finished goods or semi finished goods even though there was sufficient raw material in the hands of the appellant at the year end and his manufacturing activities were also going on regularly till end of 31.3.2009 but still no stock of the finished or semi finished goods have been shown. It was unbelievable that on the last day of the year there was no production of the finished goods or semi finished goods. 3.11. Even the appellant was required to furnish the basis of closing stock of uncut sheet at 2680 M.T. but the appellant has failed to furnish such details. He failed to furnish the inventory of the said stock also. It has also been observed that the valuation of the un-cut ship i.e. balance raw-material at the end of the year was always estimated without having any basis which has also been admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is on higher side and hence confirm the lumpsum addition of ₹ 19,00,000/- being 50% of the total addition made by the A.O. which would take care of all possible leakage of revenue and meet the end of justice. I therefore sustain addition of ₹ 19,00,000/- in place of ₹ 38,00,000/- made by the A.O.. Thus, this ground of appeal is partly allowed. 5. During the course of appellate proceedings before us, ld. counsel has submitted paper book containing written submission made before the assessing officer and ld. CIT(A) and detail of machinery, ledger account etc. He has also placed reliance on the judicial pronouncement in the case of M/s. Hindustan MI Swaco Ltd. Vs. DCIT ITA No. 3774/Ahd/2008 dated 05th Aug, 2011. On the other hand, ld. departmental representative supported the order of ld. CIT(A Ground No.3 6. The AO has made addition of ₹ 38,00,000/- being unaccounted sales of 7 DG Sets after considering the fact that assessee himself has disclosed sale of one DG set on 14.4.2009 for ₹ 4 lakhs and for two set of other type of machineries of ₹ 10 lakhs. The AO has rejected the books of accounts after findings various discrepancies in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y expenditure on the cloth of bride-groom and other family members, music band, videography, photography and on jewellary items.Consequently the assessing officer has estimated expenses of jewellary of ₹ 3 lacs, for clothes expenses of ₹ 1 lacs, and for remaining item at ₹ 1 lacs. 8. Against the decision of the assessing officer, assessee preferred appeal before the ld. CIT(A) who has dismissed the ground of appeal by observing as under:- Decision 6.3. I have considered the facts of the case and submission made by the appellant. The AO has made the addition of ₹ 5 lakhs towards unexplained expenditures on various items in the marriage of his son Shri Akshay which has been telescoped against the addition of ₹ 38,00,000/- made on account of unaccounted sales of D.G. Sets and machineries as has been discussed in the ground No. 1above. As per the A.O. the estimation of the unexplained expenditures towards purchase of jewellery at ₹ 3 lakhs, clothing's at ₹ 1 and for the remaining items at ₹ 1 lakh were made. The appellant simply contended that it has shown the marriage expenses of ₹ 30,46,269/-which were debited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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