I.T.O. Ward 1 (1) Ludhiana Vs. M/s Arora Alloys Ltd.,Near Phase VII Focal Point, Ludhiana
July, 11th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH "A" CHANDIGARH
BEFORE SHRI T.R. SOOD, AM AND Ms. SUSHMA CHOWLA, JM
ITA No. 519/Chd/2012
Assessment Year: 2006-07
I.T.O. Ward 5(1), Chandigarh V M/s Awagaman Cargo Carriers
Plot No. 20, Transport Area
Sector 26, Chandigarh
AACCA 9985 B
Appellant by: Shri Manjit Singh
Respondent by: Shri Naresh Singla
Date of hearing: 27.06.2012
Date of Pronouncement: 06.07.2012
PER T.R. SOOD, A.M
In this appeal the revenue has raised the following effective ground:
"On the facts and circumstances of the case and in law, the ld. CIT(A) has
erred in deleting the addition of Rs. 13,85,000/- made by the Assessing Officer
on account of claim of excess diesel consumption."
2. After hearing both the parties we find that during assessment
proceedings the Assessing Officer noticed that the assessee was running a
transport business and operating eight trucks between Chandigarh and Pune.
He noticed that 320 trips were taken by the assessee and distance between
Chandigarh and Pune is 1750 Kms, therefore, total Kilometers covered were
5,60,000 Kms. Taking average of 4 Kms per litre, diesel consumption was
computed at 1,40,000 litre and by applying rate of Rs. 30/- total consumption
was computed at Rs. 42.00 lakhs where as the assessee had claimed
consumption of fuel at Rs. 60.00 lakhs . On a query the assessee submitted
the detailed reply vide letter dated 31.12.2009 in which the reasons for claiming
of fuel expenses were submitted as under:-
1 Difference in the rates taken for calculations at Rs. 30.00 per litres
by your goodself. The rate of Diesel varies State-wise. It ranged
from 31.36 to Rs. 38.74 state wise during the year under
assessment. Proof of the same are enclosed herewith your kind
2 Average mileage taken for calculation is 4 km/litres by your
goodself. The mileage also varies as per the conditions. Date of
purchase, load etc. of the Lorries/Truck. It varies from 3.25 to
3.40 km/litres. Copies of the RC has already been submitted with
your office. Moreover, sometimes the truck has to stand idle
(Start Mode) at Check Post/Tool Tax for around 1-2 hours. There
are around 18-20 check post and 55-60 Toll Tax during the Trip.
3 Total running kilometers taken are 3,500 per round trip by
goodself. The running kilometers are taken by your goodself are
on city-to city basis. Our client premises are not in heart of the
cities. Our lorries have to move around 100-125 Kms to take/give
delivery at client's premises due to by pass entries. Goods have
to be lifted from their godowns/other industries. Sometimes, the
trucks may have to take longer routes due to Traffic. No entry and
other unavoidable circumstances.
3. The Assessing Officer did not find force in these submissions. He also
noted that average price of diesel in Chandigarh was Rs. 30/- to Rs. 32/- and
the assessee had purchased about 60% diesel in Chandigarh itself and
therefore, average rate of diesel was applied at Rs. 31/-. On this basis the
excess claim was worked out as under:
"The assessee has stated in his above referred reply that truck has to
run 100 kms extra to make delivery. The assessee plea is not
acceptable as the total length of a city may not be 25 kms. Hence 25
Kms extra mileage is added to the total mileage of per trip. The
assessee has made 160 trips up down and on average of 1775 Kms.
Hence total kilometer comes to 5,68,000. As per average of 4 Kms per
litre diesel consumption comes to 1,42,000 litres. Half of it charged on
average of Rs. 31 per litre and half of it charged at Rs. 33 per litre. The
total consumption comes to 71000 X 31 = 22,01,000/- and 71,000 X 34 =
24,14,000/-. Total comes to Rs. 46,15,000/-. Difference between Rs.
46,15,000/- and Rs. 60 lakhs i.e. Rs. 13,85,000/- is added to the income
of the assessee. As assessee needs only diesel of Rs. 46,15,000/- as
per above discussion and remaining amount of Rs. 13,85,000/- claimed
on diesel expenses is disallowed and added to the income of the
assessee. Hence an addition of Rs. 13,85,000/- is made to the income
of the assessee."
4. On appeal the submissions made before the Assessing Officer were
reiterated. It was further emphasized that apart from distance between
Chandigarh and Pune, generally a truck has to run further a distance of 100
Kms within the cities for loading and unloading of the goods.
5. The ld. CIT(A) found force in the submissions and deleted the addition
vide para 2.3 which is as under:-
"I have considered the submission of the Ld. counsel. The Assessing Officer
has made his own calculation in this case without considering the reply of the
appellant. The appellant had duly explained in the assessment proceedings
that the rate of diesel varies between Rs. 31.36 to Rs. 38.74 per litre. It is not
understood as to how the Assessing Officer has applied rate of Rs. 31 per litre
for half distance and Rs. 33 for the other half. There is substantial force in the
argument of the Ld. counsel that the vehicles have to move 100 to 125 Kms to
give delivery at the client's premises due to bye-pass entries. Thus, it was not
proper for the Assessing Officer to adopt fixed distance, particularly for a town
like Pune, which is located in 450 Sq. Km of area. The Assessing Officer was
also not right in taken average mileage of 4 Km per litre without taking into
account age and condition of truck. Also, the diesel consumed some times is
high due to slow movement and waiting at Nakas due to unavoidable
circumstances. The Assessing Officer has made the addition by calculating the
expenses of diesel in extremely ideal situations and without looking into the
actual distance covered and the mileage without any substantial evidence in his
possession. The Assessing Officer has nowhere pointed out, if the appellant
had not maintained proper documentary evidence regarding consumption of
diesel. In view of this discussion, it is held that the Assessing Officer was not
right in making the addition of Rs. 13,85,000/- out of approximately Rs.
60,00,000/- claimed as diesel expenses and hence the same is deleted.
Grounds of appeal No. 1 & 2 are allowed."
6. Before us, the ld. DR for the revenue strongly supported the order of the
Assessing Officer and submitted that the assessee had filed return declaring
only Rs. 52,688/- for eight trucks which was much below even compared to
presumptive tax for each Truck prescribed u/s 44AE. He also submitted that
average rate of diesel was worked out on the basis of diesel rate prevailing in
Chandigarh from where the assessee had purchased maximum diesel.
7. On the other hand, the ld. counsel of the assessee submitted that
average of 4 Kms per litre of diesel assumed by the Assessing Officer is not
correct because generally fuel average was 3.25 Kms per litre. He also
submitted that apart from distance between two cities, sometimes the trucks
have to travel further distance within the cities for loading and unloading the
goods. The trucks have also to run for going to workshop and getting fuel
which also takes fuel consumption.
8. We have heard the rival submissions carefully and find force in the
submissions of the ld. DR for the revenue. The Assessing Officer had adopted
a rate of diesel as prevailing in Chandigarh and since the maximum diesel was
purchased in Chandigarh therefore, it cannot be questioned how the Assessing
Officer has adopted the value at Rs. 31/-. Though this value seems to be of
little lower side. However, it remains a fact that the assessee had declared a
profit at Rs. 52,682/- which is very low. Though we appreciate the argument
that the trucks have to travel extra distance for loading and unloading the
goods, for going to the workshop and getting the fuel etc. Therefore,
considering the overall facts and circumstances of the case it was proposed
that an estimated addition of Rs. 1,50,000/- would meet the ends of justice.
This proposal was accepted by the ld. counsel of the assessee. Accordingly we
set aside the order of the ld. CIT(A) and direct the Assessing Officer to make an
addition of only Rs. 1,50,000/- towards the excess claim of diesel.
9. In the result, appeal filed by the revenue is partly allowed.
Order pronounced on 06.07. 2012
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/ The DR