Income Tax Appellate Tribunal - Mumbai
Aapee Ship Breakers Pvt. Ltd, Mumbai vs Department Of Income Tax on 1 August, 2013
आयकर अपीलीय अिधकरण, एच ्"् खंडपीठ मुंबई
अिधकरण "एच
INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'H' BENCH.
सव[ ौी एच ्.एल
् एल ्.कारवा
् कारवा,अÚय¢
कारवा अÚय¢ एवं राजेÛि,ले
ि लेखा सदःय
Before S/Sh. H.L.Karwa, President & Rajendra,Accountant Member
आयकर अपील सं./ITA No.7522/Mum/2007,िनधा[
िनधा[रण वष[/Assessment Year-2004-05
Aapee Ship Breakers Pvt. Ltd. CIT(A), Central-XXVII, & Dy
2, Ivanhoe, Ground Floor, 193, CIT, Circle 3(1),
General G.J. Bhosale Marg, Vs. Mumbai.
Nariman Point,
Mumbai-400021
PAN: AACCA4299C
(अपीलाथȸ /Appellant) (ू×यथȸ / Respondent)
आयकर अपील सं./ITA No.390/Mum/2008,िनधा[
िनधा[रण वष[/Assessment Year-2004-05
Dy CIT, Circle 3(1), Aapee Ship Breakers Pvt. Ltd.
R. No. 607, 6th Floor , 2, Ivanhoe, Ground Floor, 193,
Aayakar Bhavan, Vs. General G.J. Bhosale Marg,
Mumbai-400020 Nariman Point,
Mumbai-400021
PAN: AACCA4299C
(अपीलाथȸ /Appellant) (ू×यथȸ / Respondent)
िनधा[ǐरती ओर से / Appellant by : Shri Bhupendra Shah
राजःव कȧ ओर से/Revenue by : Shri Ashutosh Rajhans
सुनवाई कȧ तारȣख / Date of Hearing : 01-08-2013
घोषणा कȧ तारȣख / Date of Pronouncement : 07-08-2013
आयकर अिधिनयम,1961
अिधिनयम कȧ धारा 254(1) के अ Ûतग[ त आ दे श
Order u/s.254(1)of the Income-tax Act,1961(Act)
PER RAJENDRA, AM
Cross appeals have been filed against the order dated 12.10.2007 of the CIT(A)-XXVII,Mumbai. Assessing Officer (AO) has raised the following grounds of appeal:
ITA No. 390/Mum/20081."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the amount of Rs. 43,70,435/- in respect of suppressed sale of oil claimed to have been recovered from the ship by the Assessing Officer.
2 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
2.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the amount of Rs. 3,04,55,578/- in respect of suppressed sale of various spare items claimed to have been recovered from the ship by the A.O.
3.On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deleting amount of Rs. 15,39,977/- related to wastage and recovery from the ship.
3.1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting amount of Rs. 1,75,15,601/- in respect of non ferrous metal claimed to have been recovered from the ship as per the A.O."
3.2."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting amount of Rs. 15,00,000/- in respect of sale of main engine claimed to have been recovered from the ship as per the A.O."
3.3."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting amount of Rs. 40,00,000/- in respect of sale of cranes claimed to have been recovered from the ship as per the A.O."
3.4."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting amount of Rs. 36,00,000/- in respect of generator claimed to have been recovered from the ship as per the A.O."
3.5."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restriciting addition on account of electrical cable to Rs. 1,76,000/-as against Rs. 14,00,000/- made by the A.O."
ITA No. 7522/Mum/2007Assessee-company has raised below-mentioned grounds of appeal:
1.On the facts & circumstances of the case,the CIT(A) has erred in not deleting the full estimated addition of Rs.4 Lacs on account of realizable value of three Anchors by neglecting the sale proceeds of scrapes of Iron & Steel and other Materials and restricting the addition to Rs. 3 lacs.
2.On the facts & circumstances of the case, the CIT(A) has erred in not allowing relief of Rs. 5 Lacs on account of furnitures and other wood being the difference in selling value by not considering the uses of the said furnitures and wood over a long period and their diminution value.
3.On the facts & circumstances of the case, the CIT(A) has erred in not allowing relief of Rs. 1,76,000 on account of electrical cables and wires by neglecting the nature of the Item on scarping, uses after scraping and scrape sale proceeds shown in the books of accounts.
4.Your appellant craves the right to alter, addition or deletion of Grounds of Appeal at any time.
As the grounds are inter-related, so for sake of convenience a common order is being passed.
ITA No. 390/Mum/20082.Assessee-company,engaged in the business of ship-breaking, filed its return of income on 01. 11.2004 declaring taxable income at Rs. 23,79,409/-.Assessment was finalised by the AO on 01.12.2006 determining the total income of the assessee at Rs. 3.74 Crores. During the assessment proceedings,AO found that assessee had purchased three ships for demolition. Out of three ships assessee dismantled two ships completely whereas the third was dismantled partly.AO called for the details of sales of items obtained from the ship as well as the scrap generated from dismantling. After examining the details filed by the assessee-company,he held that many items;which were received by the assessee along with the ships;had not been reflected in the sales in the same quantity/nomenclature.He directed the assessee to explain the discrepancy and issued a show cause 3 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
notice asking the assessee as to why said items should not be treated as sale out of books of accounts.He further noticed that in working the quantities of closing stock the assessee estimated the wastage but same was not worked out on the basis of each ship dismantled.He held that from the bills of entry it was clear that the assessee had got various items along with the ships and same had not been shown in the books of accounts.AO made addition of Rs. 43.7 lacs in respect of suppression sale of oil recovered from the two ships and of Rs. 3.04 Crores with regard to undisclosed sale of various scrap items.The details of disallowance,made by the AO,in respect of certain items is as under:
Sr. Item Description Estimated Quantity Estimated Sale Basis of estimation No. Value Rs.
1 Scrap Loss 148 MT 15,39,777 Lowest purchase priced
(mixed scrap) [9459.32]+1-%assessee
10405.25
2 Non-Ferrous Metal 124,743 MT 1,75,15,601.23 [140413.5] [Average
sale rate for non ferrous
metals in sale bills
3 Main Engine 3 No. 15,00,000 5,00,000 each
4 Cranes 17 No. 40,00,000 4x2 +1x4 + 1x5 + 1x8 +
4x2.25 + 6x1 assessee
8+4+5+8+9+6
40,00,00
5 Generator Sets 9 No. 36,00,000 4,00,000 each
[average price]
6 Anchor 40 MT 4,00,000 10,000 per ton
7 Furniture & Other 5,00,000 Difference in rates
Wood shown
8 Electric Cables/Wires 10 MT 14,00,000 140
TOTAL 3,04,55,578
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, that while accounting for sale of oil (per barrel) AO mentioned the narration furniture instead of furnace oil,that oil was also required for operating equipments like cranes, that home consumption by the assessee in respect of oil could not be ignored, that assessee has sold 224 MT furnace oils,that details of sale of oil was available in the paper book,that details supplied by the assessee contained bill number, date of bill, parties' names, description of oil, quantity, unit and value of oil sold.
2.3.Before us,Departmental Representative (DR) relied upon the order of the AO.Authorised Representative submitted that the AO had committed mistake while passing the assessment order, that out of 301 MT oil, 224 MT oil was sold by the assessee and information about the sale of the oil was made available to the AO,that balance 76 MT oil was used by the assessee. He referred to page no. 22 to 24 of the paper book.
2.4.We have heard the rival submissions and perused the material before us.We find that while passing the order AO had not considered the details of oil sold,as pointed out by the FAA.Page no.1 of annexure-2 of the assessment order speaks about the item sold by the assessee company.We find 4 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
that he has mentioned the sale of oil sold (in barrel),but in the narration he has mentioned furniture in place of furnace oil.FAA has verified the sale bills along with the details of purchasers and quantity of oil sold.In these circumstances, we are of the opinion that order of the FAA does not need any interference from our side.
Ground No.1 is decided against the AO.
3.Next effective ground of appeal is about deletion of an addition amounting to Rs. 3.04 Crores. During the assessment proceedings,AO had made addition on account of wastage and recovery from ship (Rs.15.39 lacs),sale of non ferrous metal recovered from the ships (Rs.1.75 Crores), sale of main engine (Rs.15 lacs), sale of craps (Rs. 40 lacs), sale of generator (Rs. 36 lacs) and sale of electrical cables(Rs. 12.24 lacs).Additions made by the AO were challenged by the assessee before the FAA.He deleted most of the additions,but confirmed the additions in part.AO is aggrieved by the deletion or part deletion, whereas assessee has filed appeal against the confirmation of the additions made. Ground no 2 of the AO is of general nature.Grounds no.3to3.5 filed by the AO deal with various deleted additions. Ground no.1to 3 filed by the assesseeare about confirmation of additions by the FAA.
3.1.During the assessment proceedings, AO held that the shortage,wastage and non-recovery in the case of assessee company was 1% more than the accepted norms, that the wastage in the case of assessee was 12.5%, that recovery shown by the assessee was 87.5%. He was the opinion that recovery should have been more than 87.5%.Therefore,he made an addition of 148 MT in respect of shortage in recovery.He estimated lowest purchase price at Rs. 9459.32 per MT and added 10% margin to it.Finally,he made an addition of Rs. 15,39,977 (148 MT x 10,40,525 Rs.). 3.1.a.After considering the submissions of the assessee and the assessment order, FAA held that there was no material available on record to show that the assessee had diverted any part of recovery outside the books of accounts,that the yield reported by the assessee was as per the recogn
-ised norms of ship breaking industry,that wastage up to 15-20% was accepted. He took notice of the decisions delivered by the Tribunal in the cases of Anupama Steel Ltd. ITA No.2949/ Mum/2004 dated 12.09.2007),Harayana Steel Co. (ITA No. 1861/Mum/1998 dated 26.07.2004). 3.1.b.Before us,Departmental Representative (DR) supported the order of the AO.AR submitted that report of Ferrous Scrap Committee,Govt. of India had expressed their opinion that recovery in particular ship could be even up to 85% LDT, that AO had made the addition without any basis. 3.1.c.We have heard the rival submissions and perused the material before us.We find that AO has not brought anything on record to show that recovery was less by 1%. FAA has followed the orders of the Mumbai Tribunal where wastage up to 15% has been accepted. The Committee set up by the Govt. of India has also accepted the fact that wastage could be had 15%. In these circumstances, we are of the opinion that without bringing anything concrete on record AO had made the addition. In these circumstances,we have upheld the order of the FAA.
Ground no.3 is decided against the AO.
3.2.Next ground of appeal is in respect of addition of suppressed sales of non ferrous metal of 124.743 MT,valued at Rs. 1,75,15,601@of Rs.1.40lacs per MT.As per the AO,the assessee had shown sale of 97.987 MT non ferrous metal whereas as per he should have sold 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 5 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
industry established by Government of India as well as report of leading international surveyors. He has also considered the order of the Tribunal in the case of Haryana Steel Company (supra). We find that AO has not taken into consideration sale of 81.925 MT non ferrous metal which was sold by the assessee company and that finds place in Annexure-2 prepared by the AO himself.We find that AO has not brought anything on record to prove that recovery of non ferrous metal by the assessee was more than shown in the books of accounts.Therefore, we are of the opinion that such a huge addition should have been made by the AO without bringing some positive evidence on record.
Upholding the order of the FAA, we decide ground no.3.1 against the AO.
3.3.Next ground of appeal is about sale of main engines amounting to Rs. 15 lacs.While finalising the order,AO has mentioned that the sale of the main engines of the ships;which were heavy machineries;had not been reflected at all by the assessee in its books of accounts.In the appellant proceedings,FAA found that assessee had sold the engines,that Annexure-2 of the assessment order and the description therein given by the AO proved the fact of sale of engines.He deleted the addition made by the AO.
3.3.a.We find that FAA has given categorical finding of fact about the sale of engines based on the annexure prepared by the AO himself. In these circumstances,in our opinion,there is no need to disturb the finding of the FAA.
Ground No. 3.2 is decided against the AO.
3.4.Ground no.3.3. is about sale of Cranes amounting to Rs. 40 lacs.On page 7 of the assessment order,AO has mentioned that no sale of any Cranes had been reflected in the books of the assessee, though the it had received many Cranes in the ships. He estimated that assessee had 17 Cranes on the ships and made an addition of Rs.50 lacs on alleged sale of the Cranes. In the appellant proceedings FAA held that there was no basis for estimating the number of Cranes at 17, that after being used for 20-25 years in salty weather on sea it was not possible to realise/ recover substantial amount from sale of the Cranes,that Cranes had to be sold as scrap of Iron and Steel.
3.4.a.Before us, DR and the AR supported the orders of the AO and the FAA respectively.We find that while making the addition AO has estimated the number of cranes of 17 but has not given any basis for such estimation.He has not mentioned 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.
3.5. Next ground of appeal is in respect of addition of Rs. 36 lacs on account of suppressed sale of 9 generators sets at the average value of Rs. 4 lacs each.AO had held that assessee had not shown the sale of generator sets,available in the ship,in its books of accounts. During the appellant proceedings,FAA held that there were eight generators sets in the ships dismantled by the assessee, that it had accounted for all the generators sets as per the description in Annexure-2 of the assessment order,prepared by the AO, that zerox copy of bills of sale of generators sets was available on records. He directed the AO to delete the addition made in this regard.
3.5.a.After hearing the DR and the AR w are of the opinion that the AO has made addition of Rs. 36 lacs without any basis. The assessee company had sold all the eight generators sets and showed sale value in its books of accounts.
Therefore,upholding the order of the FAA, we decide ground no3.4.against the AO.
3.6.Last Ground of appeal pertains to addition made by the AO,on account of sale of electric cable and wires estimated at 10 MT @ 1,40,000/- per MT. Ground no.3 of the appeal of the assessee is also about the same head.
While finalising the assessment order, AO stated that no sale of electric cable had been shown by the assessee in its books, though lot of such cable was bound to be recovered from the ship, that the 6 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
entire ship was connected electrically and same were served by the electric generators.He made an addition of Rs.14 lacs on account of alleged suppressed sale of cable. In the appellant proceedings,FAA held that the appellant had sold cable in subsequent year but that was only 250 Kg,that some of electrical cables would go along with D.G. Sets, Panel Boards, Electric Switches and Electric Motors,that there were about 15 bills of sale of such articles and accessories connected to electric cables and wires, that ships were connected with electric wire and cables, considering the facts that the assessee had dismantled there ships assessee must have sold more quantity of wire and cable. He estimated addition recovery at 4 MT apart from the sale shown by the assessee company.As the assessee had sold the wires @ 11,000/- ,so, he adopted Rs. 44,000/- per MT as the sale price of cable and wires. He further held that the wires were used and were of different metals, that they could not be valued at the price of metal like Brass/Copper. Finally he upheld the addition amounting to Rs. 1.76 lacs (44,000x4) and deleted the remaining addition i.e. Rs.12.24 lacs.
3.6.a.Before us,DR supported the order of the AO.He further submitted that addition deleted by the FAA was not proper.AR submitted that estimate made by the FAA was on higher side, that whatever cable were recovered were sole and shown in the books of accounts.We have heard the rival submissions and perused the material on record.We find that during the year under consideration assessee had dismantle two ships completely and one ship partially. It is known fact that ships are connected by wires for various purposes and a net of wires and cables run through the ships.Assessee has shown sale of 250 Kgs of cables only.In these circumstances if the FAA has estimated the sale at Rs. 1.76 lacs then,in our opinion,he has acted judicially. Upholding his order, Ground no.3.5 filed by the AO and ground no. 3 of the assessee are decided against them.
As a result, appeal filed by the AO stands dismissed.
ITA No. 7522/Mum/20074.First ground of appeal filed by the assessee pertains to addition of Rs. 4 lacs on account of suppressed sales of 4 Anchors weighing at 40 MT @ Rs. 10,000/- per MT. During the assessment proceedings, AO has held that assessee had not shown sale of any of the Anchors even though assessee had received at least one Anchor with each ship and one additional Anchor with the ship namely M.V. Dongola.
4.1.Assessee preferred an appeal before the FAA.After considering the submissions of the assessee, he held that there were three Anchors and they would definitely have some realisable value. He restricted the addition to Rs. 3 lacs.
4.2.Before us, AR submitted that Anchor had not realizable value.DR supported the order of the AO and FAA.We have heard the rival submissions and perused the material on record. We find that assessee had not challenged the ownership of anchors.We agree with the FAA that anchors would have some realisable value.No ship will take a risk of not having a proper anchor,till it is dismatanled. In our opinion,FAA was very fair in his approach while deciding the appeal filed by the assessee.He has granted partial relief to the assessee and confirmed the addition that appears to be reasonable.Therefore,without disturbing the estimation made by the FAA we decide Ground no. 1 against the assessee.
5.Second ground of appeal is about not allowing relief of Rs. 5 Lacs on account of furnitures and other wood. During the assessment proceedings AO held that normally the furniture in a ship would be in good working condition and it would fetch much better price than the fire wood,but the assessee had shown the sale price of fire wood only.
Assessee preferred an appeal before the FAA.After considering the submissions of the assessee,he held that certain items of the ships would be in good condition,that they would bring better price,that the AO was justified in estimating the value at Rs.5 lacs. 5.1.Before us,AR submitted that estimate made by the FAA was on higher side,that assessee had shown the realised value.DR supported the orders of the FAA.We have heard the rival submissions. It is a fact that some items of furniture would bring better price than the fire-wood.The claim of the 7 ITA No.7522/Mum/2007 Aapee Ship Breakers Pvt. Ltd.
assessee that all the furniture recovered from the ships was sold at throw away price i.e.at the price that fire wood would fetch, goes against the human behavior as well as the established norms of the ship breaking industry.So, dismissing the second ground of appeal filed by the assessee, we confirm the order of the FAA.
6.Last ground of appeal has been dealt by us,in para no.3.6.a.of our order.While deciding the appeal of the AO we have adjudicated the issue of sale of cable and wires against the AO as well as the assessee.
Appeal of the assessee -company is dismissed.
As a result,cross-appeals filed by the AO and the assessee stand dismissed.
पǐरणामःवǾप िनधा[ǐरती कȧ िन.व. कȧ अपीलɅ नामंजूर कȧ जाती हɇ .
Order pronounced in the open court on 07th August,2013.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 7 अगःत को कȧ गई ।
Sd/- Sd/-
एच ्.एल
(एच ् एल ्.कारवा
् कारवा-
कारवा H.L.Karwa) राजेÛि/Rajendra)
(राजे ि
अÚय¢ /PRESIDENT लेखा सदःय /ACCOUNTANT MEMBER
मुंबई/Mumbai,Ǒदनांक/Date: 07th August,2013
SK
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
3. The concerned CIT (A) /संबƨ अपीलीय आयकर आयुƠ, 4. The concerned CIT /संबƨ आयकर आयुƠ
5. DR "H" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध सी खंडपीठ,आ.अ.Ûयाया.मुंबई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai