The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the wastage loss due to diesel and petrol tank breakage.
The two-member bench headed by R.S.Syal (Vice President) has observed that where the assessee demonstrates specific reasons for excess wastage/evaporation, such reasons cannot be thrown to the dustbin. They need to be examined on a case-by-case basis.
"Simply because the wastage/evaporation turned out to be a little higher in comparison with the standards, the authorities cannot make addition de hors examination of the assesse's explicit explanation," the ITAT said.
The appellant/assessee is a dealer in petrol and diesel, running a petrol pump. During the course of assessment proceedings, the Assessing Officer observed that the wastage/evaporation claimed by the assessee was on the higher side vis-à-vis the limits prescribed by the oil companies. On being called upon to explain the reasons, the assessee submitted that more evaporation/wastage occurred because of gasoline and petroleum tank breakage. Not satisfied, the AO applied the standards fixed by the oil companies for wastage and evaporation and computed the excess wastage, which translated into an addition. TheCIT(A) affirmed the assessment order.
The only dispute is about wastage/evaporation claimed by the assessee at 1.23%/0.89%. The figures have emerged from the tabulation made in the order, where the assessee gave a comparative analysis showing that the wastage/shortage in the immediately preceding year was higher at 1.25%/1.12%, which was accepted by the department.
The ITAT noted that the assessee also gave separate reasons for the excess wastage, being the breakage of diesel and petrol tanks. Though the general standards of evaporation and breakage given by the oil companies apply, as a rule, they are not without exception.
"The assessee gave specific reasons in this case for higher wastage vis-à-vis the standards set by the oil companies, which was also lower than that of the immediately preceding year, I am satisfied that there is no reason to sustain such disallowance. The addition ofRs. 5,69,9277 is, ergo, directed to be deleted," the ITAT stated.
Case Title: M/s. Mohammad Bhai Esufali & Sons Versus ITO
Citation: ITA No.131/PUN/2020
Counsel For Appellant: None
Counsel For Respondent: Piyush Kumar Singh Yadav