SMT. MAITREYEE DAS,PURBA MEDINIPUR vs. I.TO WD - 1,HALDIA, HALDIA

Ground No.1 raised by the assessee reads as follows :- “I The learned CIT(A) XXXIII erred in rejecting the claim that the closing stock calls for reduction to the extent of the reduction of purchases due to wrong entry as raised in Ground No. 1 before him; “

The Assessee is an individual. She carries on the business of trading in high speed diesel, petrol, lubricants etc in the name and style of M/s Bargabhima Fuel Centre. For A.Y. 2009-10 the assessee filed return of income declaring total income of Rs.9,91,370/-.

In the course of assessment proceedings u/s.143(3) of the Income Tax Act, 1961 (Act), the Assessing Officer (AO) noticed that in the Trading Account for the year

The AO however did not accept the stand taken by the Assessee. He held that the Assessee failed to properly reconcile the figures in the purchase account. The following were his findings:

Before CIT(A) the assessee reiterated the submissions that were made before the AO. CIT(A) however confirmed the order of AO by observing as follows :- “3.2. I have carefully considered the submission made. The appellant has stated that if there is excess debit of purchase, closing stock would automatically go up by the same amount. However, this is true only in case where complete quantity records are' maintained in respect of purchase, sales and stock and the same are meticulously tallied. On the other hand, if complete quantity records are not maintained, there is every possibility that any excess debit of purchase may not be reflected in the closing stock. This is also in view of the fact that in case of most of the businessmen, closing stock is physically verified at the end of year and valued and the same figure is adopted in the trading account. The detailed exercise of tallying stock with each and every instance of purchase and sale is normally not made. With these considerations in mind, the appellant was asked as to whether the fact of duplication of invoice entry in the stock records and its inclusion in the closing stock can be established by stock statement or any other evidence. Vide order sheet entry dated 08.11.2012, the authorized representative of the appellant expressed inability to do so. He was, nevertheless, given one more opportunity for furnishing such evidence. In the subsequent hearing he has only produced a statement of transactions for the month of October 2008 However, this statement contains only amounts and has no details of quantity. Obviously, from such a statement, it is not possible to ascertain whether the quantity of material purchased vide the invoice under consideration was really taken twice in stock. Also, during the oral discussion, the authorized representative also stated that the duplication in debiting of the invoice was subsequently reversed. It is seen that no such contention was made at the time of assessment. Moreover, had such been the case, it would have no net impact on the amount of purchase debited and thus would not, in any way, explain the discrepancy in purchase pointed out by the assessing officer. Thus, it is clear that the appellant has not been able to substantiate her claim that the excess debiting of purchase of Rs.4,20,818 resulted in a neutralizing entry in closing stock. Therefore, the same cannot be accepted for want of supporting evidence. This ground is accordingly rejected.”

Aggrieved by the order of CIT(A) the assessee has raised ground No.1 before the Tribunal.

We have considered the rival submissions. It is clear from the order of CIT(A) that the assesse was not able to substantiate the fact that by reason of the inflation of purchases there was neutralizing entry whereby there was increase in the value of the closing stock and therefore there cannot be any inference of suppression of income. Even before us no fresh material is brought to our notice to either dislodge the findings of CIT(A) or to come to a conclusion contrary to the one reached by CIT(A). We therefore dismiss ground No.1 raised by the assessee.

Ground Nos. 2,3,4 and 5 raised by the assessee and additional ground raised by the assessee read as follows :- “Il That the Ld. CIT(A) is wrong to reject the claim for Depreciation in respect of the Oil Tanker acquired this year and after performing all necessary formalities factual and legal for its business use and keeping a driver ever ready at the wheel; III That the Ld. CIT(A) is wrong to hold that the Tanker was not ready for instant use for business and he is absolutely wrong in rejecting the Calcutta High Court decision in the case of CIT V Union Carbide(P) Ltd 254 ITR488 referring to some other decisions including the Cal .High Court decision as reported in 206 ITR 682 in the case of CIT V Oriental Coal Co. Ltd.; IV That the Ld' Commissioner is absolutely misguided himself in holding that road tax or insurance premium in respect of the vehicle is a capital and not a revenue expenditure and thereby wrongly refused to allow the deduction; V. The Appellate Commissioner is wrong to reject the Ground No 7 before him taken to accept and declare that the resources against the Depreciation enjoyed by deduction from the revenue actually lies in the business in any form available for the replacement of the asset in question and for that the corresponding credit essentially is attributable to the Capital Account in absence of the Depreciation Reserve Account.” Additional Grounds raised by the Assessee:

The AO however noticed that in respect of the oil tanker owned by the assessee the assessee had declared income of Rs.42,000/- as per the provision of section 44AE of the Act. The AO was of the view that since the income of the assessee was declared u/s 44AE of the Act no deduction allowable under the provision of sections 30 to 38 of the Act could be allowed as laid down in the provision of section 44AE (3) of the Act. AO therefore did not allow the claim of the assessee for deduction of the aforesaid sums.

The assessee claimed before the AO that the declaration of income from oil tanker at Rs.42,000/- u/s44AE of the Act was a mistake committed by the accountant. In this 6

The AO however did not agree with the stand taken by the assessee and was of the view that such a claim without filing a valid revised return of income cannot be entertained. In this regard the AO made reference to the decision of the Hon’ble Supreme Court in the case of Goetze India Limited vs CIT 157 Taxman 1 (SC) wherein it was laid down that the AO cannot entertain any claim by the assessee without a revised return being filed. Without prejudice to the aforesaid conclusion the AO also dealt with the contention of the assessee that the oil tanker in question was ready for use and therefore it has to be construed as actual user of the oil tanker to enable the assessee to claim depreciation. The assessee had in this regard placed reliance on the decision of the Hon’ble Calcutta High Court in the case of CIT vs Union Carbide (P)Ltd 254 ITR 488 (Cal) wherein it was held that if an asset was ready for use depreciation is allowable. The AO however held that the assessee failed to prove that the oil tanker was ready for use though not actually put to use during the previous year. For all the aforesaid reasons the claim of the assessee for deduction on account of road tax, insurance and depreciation was disallowed by the AO.

On appeal by the assessee the CIT(A) agreed to the submissions of the assessee that the income from oil tanker was wrongly declared by the assessee u/s 44AE of the Act. CIT(A) held that the oil tanker in question was not used or even meant to put to use for the purpose of plying, hiring and leasing of the same and was meant for exclusive use by the assessee. The CIT(A) was therefore of the view that interest paid on loans 7

With regard to the claim of the assessee for depreciation of the oil tanker, the CIT(A) held that the assessee failed to establish the oil tanker was kept ready for use. The following were the conclusions drawn by the CIT(A) :- “5.2. I have carefully considered the submission made. The issue of depreciation is being taken up first. The two primary conditions for claiming depreciation are ownership of asset and putting it to use for purpose of business. There is no dispute over the fact that the asset i.e tanker acquired during the year was not actually put to use. However, the contention of the appellant is that it was kept ready for use and therefore depreciation should be allowed in light of decisions cited by her. The appellant was asked to support the contention that the tanker was kepi ready for use by producing evidence. it was informed by the appellant that the tanker was acquired in the month of June 2008 and all formalities like registration etc were duly completed in August 2008. However, the tanker could not be actually used, as before the tanker could be used for bringing oil from Hindustan Petroleum, permission of Hindustan Petroleum was required. The appellant was asked to produce documents in respect of such permission sought by her. In response, a letter dated 05.10.2009 from HPCL addressed to the appellant informing the rates offered and a bank guarantee dated 29.10.2009 was produced. These documents are obviously of a period much after the end of the previous year. No correspondence evidencing that the appellant had requested for permission from HPCL during the year under consideration has been produced. It has been mentioned by the appellant herself, that unless HPCL gives such permission, it is not possible for the appellant to use the tanker for carrying oil. The appellant has not been able to substantiate the claim that permission had been sought during the year and was awaited. Therefore, it cannot be said that the tanker was really ready to be used. Hence-even if one accepts the plea that an assessee can claim depreciation on the assets which are ready to be used (and not actually used) the appellant has not been able to show such readiness to use to support her claim for depreciation. 5.3. Furthermore, without prejudice to the above finding, the legal position on this issue has been examined. The appellant has made her claim relying upon certain decisions cited earlier. One of these decisions viz. Union Carbide Pvt. Ltd. (supra) has been delivered by 8

Aggrieved by the action of CIT(A) in sustaining the disallowance to the deduction of depreciation and not allowing the expenditure of road tax and insurance as revenue expenditure the assessee has raised ground nos. 2 to 5 and the additional grounds before the Tribunal.

We may, at the outset, point out that ground no.5 raised by the assessee and the additional grounds raised by the assessee are general arguments. In fact additional ground no.2 has been decided in favour of the assessee by the CIT(A) and the assessee could not have any grievances whatsoever. As far as additional ground no.1 is concerned the law is well settled that an order of assessment passed u/s 143(3) of the Act will have the effect of superseding the order u/s 143(1) of the Act. The said additional grounds raised by the assessee are therefore found to be without any merit.

As far as the claim of depreciation made by the assessee is concerned the facts with regard to the acquisition of the oil tanking on 03.06.2008 and its registration with the Government authorities and payment of road tax on 26.11.2008 and also payment of insurance on 04.06.2008 is not disputed by the revenue. The revenue has also not disputed the fact that the driver has been employed for whom the salary is paid to ply the oil tanker. In the light of the above facts being admitted, we are of the view that it cannot be said that the vehicle was not ready for use. The CIT(A) has proceeded on the basis that the Hindustan Petroleum Corporation Ltd has to give permission for use of the oil tanker by the assessee for transporting petroleum products and since such permission was not given, it cannot be said that the tanker was kept ready for use. In our view this conclusion of the CIT(A) cannot be sustained. The circumstances viz., absence of permission of HPCL, can at best lead to the conclusion that the assessee was unable to persuade Hindustan Petroleum Corporation Ltd., to give permission for use of the oil tanker for transporting petroleum products. It cannot however be said that the oil tanker was not kept ready to put to use. There was no impediment for use of the oil tanker for transporting petroleum products and this fact is not disputed by the revenue. In the given facts and circumstances of the case we are of the view that the assessee has successfully established that the vehicle in question was ready for use though it was not actually put to use. We therefore are of the view that the claim of the assesee for 10

In the result the appeal of the assessee is partly allowed.