TaxTMI 
TaxTMI 
2024 (1) TMI 485
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....the following grounds of appeals: "1. On the facts and circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in re-opening the assessment u/s 147 of the Act and issuing notice u/s 148 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in sustaining addition of Rs. 2,70,37,530/- on account of alleged 7.5% G.P. calculated on total alleged purchase without appreciating the facts of the case in its entirely and evidence brought in at the time of assessment proceedings. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition on the basis of total alleged purchase inclusive of VAT, GST and other taxes. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the a....
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....ing the course of the hearing of the appeal on the basis of submission to be made on the facts and in the circumstances of the case and in law, the Ld. CIT(A)-4, Surat ought to have upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that the AO may be restored to the above extent" 3. Brief facts of the case are that assessee is a Limited Company, engaged in the business of chemical manufacturing, leather chemicals, agrochemicals, oil field chemicals and dispersing agents for dyeing and textile chemicals. The assessee filed its return of income for assessment year 2018-19 on 31.10.2018 declaring income of Rs. 10.87crores. A search action under section 132 was carried out on assessee group on 18.11.2021. During search action various incriminating documents in the form of digital data were found and seized as per Annexuire-A-1 to A-17 by search team. Consequent upon said search action, case was centralized on 22.06.2022. The assessing officer after taking approval of competent authority reopened the case of assessee under section 147. The assessing officer passed order under section 148A on 31.03.202....
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....icer at page-87 of assessment order. In the assessment order, SVNIT reported that assessee's input / output ratio of material consumed about the finished goods were theoretically correct subject to the process normally employed by the assessee-company. It was also reported that while verifying the process they have ignored minor variance up to +/- 2%, which was usually in the chemical industries. The Assessing Officer on the basis of entries on such excel sheets issued show cause notice as to why total bogus purchase of Rs. 36.05 crores should not be disallowed and added back to the income of assessee. The assessee furnished its reply on 16.03.2023. The contents of assessee's reply is recorded in para-9.1 to 9.5 of assessment order. In reply the assessee submitted that all the details of purchase, consumption, sales and closing stock were properly maintained. The Assessing Officer conducted investigation based on enquiries with the suppliers and none of suppliers found to be non-suppliers or bogus. All quantitative details of purchase, sale and consumptions were matching. The details were provided to SVNIT and confirmed this trend of assessee. The gross profit consistently incr....
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....verified. The documents furnished by assessee were not found defective. The Assessing Officer obtained report from SVNIT, who confirmed quantities consumed, such fact is accepted by Assessing Officer. The assessee furnished copy of invoices and invoices showing Goods and Service Tax (GST). The payments were made to suppliers through banking channel. Even if the contention of Assessing Officer is accepted than GST on purchase at18% shall be added to purchase expenses and consequently leads to reduction of gross profit, which is not the case. The assessee has shown higher gross profit. 6. The Ld.CIT(A) on considering the material placed before him, in the form of assessment record, assessment order and submission of assessee held that purchase cannot be treated as bogus if they are supported by bills, payments were made by account payee cheque, transactions were confirmed by suppliers, purchase consideration has not come back to the assessee as corresponding sales are accepted by suppliers as accounted for purchase made by assessee. The assessee has furnished quantitative details for reconciliation and gross profit rate is comparable to earlier years is higher, in fact gross profi....
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.... in the sales are not the whole proceed itself to be treated as "income" when assessee incurring cost in acquired goods, which had been sold by assessee. On the basis of aforesaid observation, the Ld. CIT(A) noted that assessee has paid excise, VAT of17.5/ GST of 18%, the benefit of assessee would have got to the tune of 7.5%. The assessee has already offered gross profit of 6.68% and if 7.5% of such purchase is added the resultantly gross profit would be 9.44% which would be appropriate for the chemical industry having turnover about Rs. 350 crores. Accordingly, the Ld. CIT(A) sustained the addition to the extent of 7.5% of Rs. 36.55 crores thereby granted relief to the extent of Rs. 6.03 crores (9.01 - 2.70) and allowed part relief to assessee. Further aggrieved both the parties have filed their cross-appeal before the Tribunal. The assessee has challenged the action in sustaining addition to the extent of 7.5% of impugned purchase whereas the Revenue has challenged the validity of order of Ld.CIT(A) in sustaining the addition to the extent of 7.5% only. 8. We have heard the submission of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Commissioner of Income Tax....
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....ndependent agency i.e., SVNIT, which is an independent State Government Institution. The independent institution i.e., SVNIT supported the case of assessee and no adverse remark was reported, rather such report supports the case of assessee. The Ld.AR for the assessee submits that gross profit of assessee was comparatively increased to the last years GP. The assessee has filed return of income much before the date of search conducted. The Assessing Officer has not given details about the investigation or enquiry conducted under section 131 and /or under section 133(6) of the Act, wherein all suppliers have confirmed their supplies and Sunil Patel in his affidavit by extracted in a statement during the search proceedings as clarified that he was under pressure and has no experience of working in manufacturing industry and made a statement under misconception of cash discounting on purchase; and no evidence of investment from outside books were found. The Ld. AR for the assessee submits that once the quantitative details were completely matched in and no discrepancy in stock register were found and independent institution supported the case of assessee about consumption that no addit....
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....tkumar Kapadia Tax Appeal No.691 of 2017 (Guj), * Tejus Rohitkumar Kapadia Vs ACIT ITA No.2095/Ahd/2010, * CIT Vs Nangalia Fabrics (P.) Ltd [2013] 40 taxmann.com 206 (Guj), * Ramesh Kumar & Co. Vs ACIT (ITA No.2959/Mum/2014 (ITAT Mumbai) * DCIT Vs Mahendra Ambalal Patel Tax Appeal No.462 of 1999 (Guj) 12. On the other hand, Ld. CIT-DR for the Revenue vehemently defended the order of Assessing Officer and submits that during the assessment sufficient evidence was found regarding inflated purchase shown by assessee. The inflated purchase is supported by the statement of employees of assessee. The Director of assessee and staff / employee retracted from their statements. The statements retracted is not in a proper form, retraction is in a summary minor, which has been recorded by Assessing Officer at pages 84 and 85 of the assessment order. Though, it was a case of 100% disallowance of purchase, yet the Assessing Officer on a very reasonable basis disallowed only 25% of purchase on the basis of decision of Hon'ble jurisdictional High Curt in the case of Vijay Proteins Ltd. vs. CIT (2015). The Ld. CIT-DR for the Revenue submits that addition made ....