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TMI Blog2021 (8) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. Disallowance of stores and spares expenses - HELD THAT:- Upon perusal of the record particularly the ledger account of stores and spares of the firm, we find that it is specifically demonstrates the expenses in question which has further been debited in the books of accounts. Moreover, similar expenses have also been allowed in the previous year. Thus, the view taken by the Ld. CIT(A) is found to be contradictory and we do not find any rational in such decision made by the CIT(A) when the primary onus on the part of the assessee is discharged and no evidence is found that purchase has been used for non-business purposes. Thus, we do not find any justification in disallowing the said expenses out of stores and spares account in the present facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither has rejected the books of accounts and therefore, it appears that he has also accepted the closing stock as on 31.03.2012 and the sales shown out of excess stock from 24.09.2011 to 31.03.2012. Thus, the books of accounts and entries made thereunder were accepted by the Ld. AO. In that view of the matter further addition of ₹ 2,50,98,362/- as per the assessment order tantamounts to double addition as also the case made out by the assessee. 6. The assessee submitted the following before the Revenue in support of its case:- 3. The addition of ₹ 2,50,98,362/- in respect of excess stock found during the course of survey operation and surrendered by the appellant firm is not justified in the facts and circumstances of this case because of the following reasons:- (A) A ship breaking unit works under different set of parameters compared to a manufacturing unit. In a normal manufacturing industry, a 'unit' is created and on the other hand in a ship breaking industry a 'unit' is dismantled. There are various kinds of ships which are used for ferrying passengers and carrying goods like bulkers, container carriers, oil tankers, gas tankers, car ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prising of custom duty, port charges, L/C charges etc. divided by the weight converted in MT and thus one can get cost per Ton. After multiplying the per MT cost with the closing stock in MT, one can arrive at the valuation of closing stock. The appellant firm is also following the above method and the same is duly (E) mentioned in the Notes forming Part of Balance Sheet Proit Loss A/c attached to the audited Balance Sheet and Profit Loss Account. (F) The appellant firm had honoured the commitment of surrender of excess stock made by its partner Shri Ram Krishan jain vide his statement dated 23rd September, 2011, a copy of the above statement is enclosed herewith vide Annexure- C to these submissions. Accordingly, the alleged excess stock was credited to the Profit Loss Account. As submitted earlier, this alleged excess stock is not on the basis of out of books purchases but because of estimation and as stock does not result in income till it is sold hence instead of income the stock is rightly credited in Profit Loss Account. The appellant firm had divided its Profit Loss Account in two parts i.e. before Survey and after Survey. The Gross Profit Ratio of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is settled position of the low that statement recorded ; luring survey proceedings .u/s 133A does not have evidentiary value. In this connection reliance is placed in the cases of Paul Mathews v/s CIT 263 ITR 101 (Ker) and CIT Ws S. larder Khan Son 300 ITR 1571 Mad). (I) The Id. A.O. had accepted the purchases, sales and stock position and he had not rejected the books of account hence he had also accepted the closing stock as on 31et March, 2012 as well as sales shown out of excess stock from 24th September, 2011 to 31st March, 2012. It means books of account and entries made there under were accepted by the Id. A.O. Thus further addition of ₹ 2,50,98,362/- as per the assessment order is tantamount to double addition: (J) For the above submissions, reliance is placed on the judgement of Hon'ble Delhi High Court rendered in the case of CIT v/s Paramount Communications Limited (ITA No. 287/2010 dated 3rd August, 2010). A copy of the above judgment is enclosed herewith vide Annexure- F . 7. Further that the case of the assessee before Revenue is this that there was foreign exchange fluctuation due to which there was excess loss of ₹ 4,41,43,245/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s loss of ₹ 4,41,43,245/- was debited in the account after the post survey period and due to this abnormal loss, the effect of excess stock found during the survey has been adjusted. The AO has not examined the above aspect and did not held that the foreign exchange loss was not genuine. The appellant further submitted that in earlier year due to the foreign exchange fluctuation the appellant has earned profit of ₹ 15,38,977/- and the same was offered for taxation while filing the return of income. Therefore on similar line foreign exchange fluctuation loss should be allowed in the year under consideration. it is found from the accounts submitted by the appellant that the excess stock found during the survey has already been included in the closing stock thus closing stock in books of accounts has been increased by ₹ 2,50,98,362/- in view of the above the contention of the appellant found tenable that the addition of ₹ 2,50,98,362/- will be amount to double taxation. The AO has not brought any evidence and material on record and merely on adhock basis made the addition. In view of the above, the contention of the AO that the appellant has not offered the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d spares which were purchased and used as and when required as per the requirement for smooth conduct of ship cutting operations and hence those are routine business revenue expenditure incurred for the day to day manufacturing process which cannot be treated as capital expenditure. The Ld. AO disallowed the same as he was of the opinion that no such frequent expenditure was debited in stores spares account in support of the contention made by the assessee. 11. Before the First Appellate Authority it was placed on record by the appellant that the firm had incurred a sum of ₹ 10,65,726/- during the previous year and in that case not a single penny was disallowed out of stores spares account. However, the Ld. CIT(A) reiterated the stand taken by the Ld. AO that the period between 10.03.2012 to 31.03.2012 the appellant though has shown purchase of stores spares of ₹ 4,66,795/- the same has not been debited to the stores spares account and ultimately disallowed the same. However, upon perusal of the record particularly the ledger account of stores and spares of the firm, we find that it is specifically demonstrates the expenses in question which has further be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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