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I.T.O. Ward 1 (1) Ludhiana Vs. M/s Arora Alloys Ltd.,Near Phase VII Focal Point, Ludhiana
July, 11th 2012


                             ITA No. 519/Chd/2012
                           Assessment Year: 2006-07

I.T.O. Ward 5(1), Chandigarh      V      M/s Awagaman Cargo Carriers
                                         Pvt Ltd
                                         Plot No. 20, Transport Area
                                         Sector 26, Chandigarh
                                         AACCA 9985 B
(Appellant)                              (Respondent)

              Appellant by:        Shri Manjit Singh
              Respondent by:       Shri Naresh Singla

              Date of hearing:              27.06.2012
              Date of Pronouncement:         06.07.2012



      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

           Sd/-                                                   Sd/-
     (SUSHMA CHOWLA)                                          (T.R. SOOD)
     JUDICIAL MEMBER                                      ACCOUNTANT MEMBER

Dated:     06.07.2012


Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/ The DR
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