Wastage of Oil due to Diesel and Petrol Tank breakage: ITAT deletes Disallowance as reasons for Wastage properly provided [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune deleted disallowance as reasons for wastage properly provided on wastage of oil due to Diesel and Petrol tank breakage.

The assessee, M/s. Mohammad Bhai Esufali & Sons is a dealer in Petrol and Diesel, running a Petrol pump. During the course of assessment proceedings, the Assessing Officer (AO) observed that the wastage/evaporation claimed by the assessee was on 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 Diesel and Petrol tank breakage. Not satisfied, the AO applied the standards fixed by the oil companies for wastage/ evaporation and computed the excess wastage, which translated into an addition of Rs.5,69,927/-.

The CIT(A) affirmed the assessment order. Aggrieved thereby, the assessee has approached the Tribunal.

R S Syal, Vice President, observed that “The assessee agave separate reasons for the excess wastage, being, breakage of diesel and petrol tank. In my considered opinion, though the general standards of evaporation/breakage given by the oil companies apply as a rule but they are not without exception. Where the assessee demonstrates specific reasons for excess wastage/evaporation, such reasons cannot be thrown to the dustbin. They need to be examined on case to 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. Considering the fact that 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 of Rs.5,69,927/- is, directed to be deleted.”

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