SHRI RATNESH METAL INDUSTRIES PRIVATE LIMITED,,AHMEDABAD vs. DCIT, CIRCLE-3(1)(2),, AHMEDABAD

First we take the appeal of the assessee for the Asstt.Year 2009- 10. In this appeal, the assessee has raised the following two grounds: “i) That the reassessment proceedings is bad in law and therefore the order passed by the ld.AO be quashed and the returned income be accepted in toto.

As regards first ground regarding validity of reassessment proceedings, and additional issue raised by the assessee for not supplying of reasons for reopening of the assessment, the ld.counsel for the assessee submitted that for passing an order under section 147 recording of reasons under section 148 and communicating the same to the party concern is mandatory. The assessee is entitled to be supplied with the reasons in case he wants to challenge the validity of notice issued under section 148 of the Act. In the present case, the assessee was not given a copy of reasons recorded for reopening of the assessment. During the hearing on 25.1.2021, the ld. Sr. DR had expressed doubt about the veracity of assessee’s contentions that the assessee has not provided copy of reasons for reopening of the assessment under section 147 of the Income Tax Act, 1961. During the course of appellate hearing before us both the ld. representatives asked for obtaining report from Assessing Officer as a counter verification regarding supplying of reasons for reopening of the assessment in this case. In this regard, Office of Addl. Commissioner of Income-Tax (Sr.DR)(ITAT)-1(1), Ahmedabad vide letter dated 11.02.2021 intimated that the department has supplied reasons for reopening of the assessment to the assessee and also enclosed copies of DCIT Circle 3(1)(2) letters dated 28/04/2015 issued to the assessee vide which reasons for reopening the cases supplied for all three years under appeals, and therefore, the contention of the assessee that the reassessment is bad in law in the absence of supply of reasons for reopening assessment, is factually incorrect. 2

After going through the contentions of the both the parties and material placed on record by the ld. Sr. DR showing proof of having sent copies of reasons for reassessment proceedings to the assessee, we are of the view that there is no merit in the contention of the assessee that reason for reopening was not furnished to him. Since it is evident from the material placed on record from the assessment record that assessee has been supplied reasons for reopening the assessment therefore the judicial pronouncements referred by the assessee of Hon’ble Court of Bombay in the case of CIT Vs. IDBI Ltd. vide Tax Appeal No. 494 of 20014 and decision of ITAT Pune vide ITA No. 492/Pune/2018 are distinguishable from the facts of the case of the assessee and not applicable to the case of the assessee. In the light of the above circumstances, we do not find any justification of the contention of the assessee that no reasons for reopening of the assessment under section 147 was furnished to the assessee, and therefore, we reject this ground of appeal.

As regards second ground of appeal, brief facts of the case are that the assessee company is engaged in manufacturing and trading of hot-rolled steel, ingot, bright bar, fasteners etc. It has filed its return of income on 30.9.2009 declaring total income at Rs.1,34,40,680/-, which was processed under section 143(1) of the Act. An information has been gathered by the Department from DGCEI vide letter dated 24.11.2014 that goods worth Rs.1,77,37,760/- were delivered through M/s.Shakti Freight Carriers, Ahmedabad to various dealers secretly without any invoices during the financial year 2008-09. The assessee has not reflected the same and not offered the same to tax in its return 3

Aggrieved assessee preferred appeal before the ld.first appellate authority. Before theld.CIT(A) the assessee reiterated its submissions, the assessee has paid excise on the basis of stock valuation arrived by the DGCEI to buy peace, and the issue was challenged before the adjudicated authority. However, it was observed by the ld.CIT(A), the assessee has not supplied any finding of the adjudicating authority in the Excise department. The ld.CIT(A) has also recorded a finding that the AO has rectified the mistake of quantum of taking the gross profit @19.02% and has passed an order under section 154 by taking the gross profit at 9.70% instead of 19.02%, and this rectification order resulted into reduction in addition of Rs.17,20,563/- instead of Rs.33,73,722/- as made by the AO in the original assessment order. 5

Before us, the ld. counsel for the assessee reiterated the submissions as were made before the Revenue authorities, while, the ld. DR supported orders of the Revenue authorities.

We have considered rival submissions and gone through the record carefully. We find that the during the appellate proceedings before the CIT(A), the assessee has been given as many as eleven opportunities starting from 12.09.2016 to 6.9.2017, but no compliance has been made on the part of the assessee for disposal of its appellate proceedings. Therefore, the ld. CIT(A) found no option but to dispose of the appeal after considering material available on records. The dispute before us is against addition of Rs.33,73,722/- on account of alleged quantum of sales without invoices based on the information supplied by the DGCEI. This addition was challenged before the ld. first appellate authority. The ld. first appellate authority, in his final conclusion recorded a finding that during the appellate proceedings the appellant has submitted that the AO has rectified the mistake of quantum by taking gross profit @19.02% and has passed a rectification order under section 154 of the Act by taking the gross 6

In the result, appeal for the assessment year 2009-10 is dismissed.

Now we take the appeal for the Asstt.Year 2010-11. The grounds in this appeal read as under: 1. That the reassessment proceedings is bad in law and therefore the order passed by the learned AO is be quashed and the returned income be accepted in toto. 2. That the learned Commissioner of Income Tax(Appeals) has erred in law and facts by confirming addition of Gross Profit of Rs.50,15,649/-and therefore the learned AO should be directed to delete the addition. 3. That the learned Commissioner of Income Tax(Appeals) has erred in law and facts by confirming the addition of Rs.26,25,000/- and therefore the learned AO should be directed to delete the said addition while computing the total income. 4. That the appellant craves liberty to add, amend, alter and delete any grounds of appeal before the final hearing.

Similarly, as regards addition on account of suppressed sales in the form of sales without invoices are concerned, the facts and circumstances in this year also similar to the asstt.Year 2009-10 except variation in the amount of quantum of addition. Therefore, for the reasons discussed in ground no.2 of the appeal for the Asstt.Year 2009-10, the present ground no.2 in the appeal for the Asstt.Year 2010-11 also stands dismissed.

Now we take ground no.3 of the assesee’s appeal. In the ground no.3, the assessee is aggrieved by the action of the CIT(A) in confirming addition of Rs.26,25,000/-.

Brief facts of the case are that during the course of assessment proceedings, an information was received from the office of DCIT, Cent.Cir.1(4), Ahmedabad dated 16.10.2015 wherein it was mentioned that a search under section 132 of the Act was conducted in the case of M/s.Vitale Bio Science Ltd., Ahmedabad. Director of the company, Shri Lalit Kantilal Rathod in his statement stated that the company is in the business of providing accommodation entries where cash or cheques received and cash or cheques were paid to other 8

We have considered rival submissions and gone through the material available on record. Dispute before us, whether addition of Rs.26,25,000/- made by the AO and confirmed by the ld.CIT(A) on account of alleged sham transaction between the assessee and the M/s.Vitale Bio Science Ltd. are justifiable or not. It is the case of the Revenue during the course of search proceedings conducted at premises of M/s.Sarang Chemicals Ltd., it revealed to the AO that M/s.Vitale Bio Science Ltd., was a paper company and engaged in providing accommodation entry. The assessee-company received a cheque of Rs.26,25,000/- in the garb of share capital from M/s.Vitale Bio Science Ltd. and directors of both the companies admitted in a statement given under section 131 that they were entry providers giving accommodation entries after receiving cash. Assessee furnished PAN of subscriber-company, share application forms, board resolutions, copy of bank statement, etc. However the explanation adduced by assessee with regard to the creditworthiness of lender company and genuineness of transactions was not acceptable for the reasons that there was a categorical statement by both the directors to the effect that they provided accommodation entries to the assessee company. For this, the ld.CIT(A) referred to statement recorded under section 131 on 1.5.2013 and answers given to question no.2, 5 and 6, in which they explained the modus operandi of the transaction and how the accommodation entries are given. Assessee has not disputed transaction between the assessee and the M/s. Vitale Bio Science Ltd. 11

In the result, appeal of the assessee for 2010-11 is dismissed.

Now we take the appeal for assessment year 2011-12. In this appeal, the assessee has raised following grounds of appeal:- “1. That the reassessment proceedings is bad in law and therefore the order passed by the learned AO be quashed and the returned income be accepted in toto. 2. That the learned Commissioner of Income Tax (Appeals) has erred in law and facts by confirming the addition of Gross Profit of Rs. 30,20,466/- and therefore the learned AO should be directed to delete the said addition. 3. That the learned Commissioner of Income Tax(Appeals)has erred in law and facts by confirming the disallowance of foreign commission u/s 40(a)(i) of Rs.36,98,579/- and therefore the learned AO should be directed to allow the said expense.”

As regards first ground challenging validity of reopening of the assessment is concerned, the issue is similar to the issue raised in Asstt. Year 2009-10 in ground no.1. We have dealt with the same hereinabove and rejected contentions of the assessee and dismissed the

Similarly, as regards addition on account of suppressed sales in the form of sales without invoices are concerned, the facts and circumstances in this year also similar to the asstt.Year 2009-10 except variation in the amount of quantum of addition. Therefore, for the reasons discussed in ground no.2 of the appeal for the Asstt.Year 2009-10, the present ground no.2 in the appeal for the Asstt.Year 2011-12 also stands dismissed.

Now, we take the ground no. 3 of the assessee’s appeal. In the ground no. 3 the assessee is aggrieved by the action of ld. CIT(A) in confirming the addition of Rs. 36,98,579/-.

The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that assessee has paid commission of Rs. 36,98,579/- to the following parties:- Sr. No. Name Amount Rs. 1. Across Y Aluminus Repersentaction(Spain) 58,824/- 1. Amrak Ltd.( British Virgin Island) 9,01,596/- 3. Ana Patrica Milan LopezfColumbia) 2,91,278/- 4. Esteem Intemational(U.A.E.) 2,46,90 1/- 5. Euoropian Mold and Form (RIEGEL) 25,270/- 6. Halm Raya Co. (Indonasia) 1 ,7 7,425/- 7. Jamesley Consultants 38,744/- 13

The Assessing Officer stated that assessee has not deducted any tax as per provisions of section 40(a)(i) on the amount of Rs. 36,98,579/-. On query, the assessee explained that all these foreign parties had operated in their country, no part of their income was accrued or arising in India and amount of commission was not received in India by them or on their behalf in India. It was also submitted that foreign parties were not having any business connection in India and provision of section 9(1) of the Income Tax Act were not applicable to this case. No income is deemed to accrue or arise in India. However, the Assessing Officer has not accepted the submission of the assessee on the ground that assessee had not furnished the form no. 15CA. Consequently, the Assessing Officer has disallowed the amount of Rs. 36,98,579/- as per provision of section 40(a)(i) of the act for not furnishing form no. 15CA and 15CB.

Aggrieved assessee has taken the matter before the ld. CIT(A). The ld. CIT(A) reiterating the facts reported by the Assessing Officer, the ld. CIT(A) has dismissed the appeal of the assessee.

Now we take the appeal for assessment year 2013-14. The grounds in this appeal read as follows:- “1. That the learned Commissioner of Income Tax(Appeals)has erred in law and facts by confirming the addition of Rs.2,79,660/-.being the difference of income declared in Profit & Loss Account and income shown in 26AS and therefore the learned AO should be directed to delete the said addition in full. 2- That the learned Commissioner of Income Tax(Appeals) has erred in law and facts by not deleting the addition of Rs.69,06,808/-,being the difference of income declared in Profit & Loss Account and income shown in 26AS and therefore the learned AO should be directed to delete the said addition in full.”

Ground Nos. 1 and 2 in this appeal of the assessee are interconnected to the same issue pertaining to difference of income shown in the 26AS therefore for the sake of convenience, these two grounds of appeal of the assessee are adjudicated together as under:-

The fact in brief is that during the course of assessment proceedings, the Assessing Officer has noticed that third parties have deduced tax on various payments to the assessee. On verification of the detail, the Assessing Officer observed that assessee has shown less amount as its income than the amount on which TDS has been deduced by the parties. Consequently, the difference amount to the amount of Rs. 71,86,468/- was treated by the Assessing Officer as suppressed income and added to the total income of the assessee.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has restricted the addition to the extent of Rs. 2,79,660/- only and remanded the addition of Rs. 69,06,808/- to the file of Assessing Officer for verification of the claim of the assessee that these incomes were already shown in the F.Y. 2011-12. 17

Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer observed that assessee has received various payments on which the third parties have deducted tax at source. However, the assessee has not shown the complete receipt in its P & L Account therefore difference of Rs. 71,86,468/- was added to the total income of the assessee. During the course of appellate proceedings before the ld. CIT(A), the assessee company has claimed that it has received an amount of Rs. 69,06,808/- from Hindustan Dorr Oliver Ltd. on which the said company has deduced tax at source during F.Y. 2012-13. However, the assessee has already considered the said amount as its income in F.Y. 2011-12. After considering the submission of the assessee the ld. CIT(A) has restored the issue pertaining to the amount of Rs. 69,06,808/- to the file of the Assessing Officer with direction that if assessee has already offered the same amount in F.Y. 2011-12 then the same should be deleted. Therefore, the ld. CIT(A) has restricted the addition only to the extent of Rs. 2,79,660/- which was remained unexplained. After perusal of the aforesaid facts and findings of the ld. CIT(A) we consider that ld. CIT(A) has rightly restored the issue to the extent of Rs. 69,06,808/- to the file of Assessing Officer as per the claim made by the assessee for verification as the same was shown as income for F.Y. 2011-12 with direction to delete the same if it is found correctly reported by the assessee. In respect of remaining amount of Rs. 2,79,660/- the assessee has neither explained before the lower authorities nor furnished any explanation during the course of appellate proceedings before us, therefore, we do not find any infirmity in the decision of ld. CIT(A). Considering the above, we do 18

In the result, the appeal of the assessee is partly allowed for statistical purpose.

In the combined result, appeal ITA 50/Ahd/2018 & 51/Ahd/2018 are dismissed and appeal ITA 52/Ahd/2018 & 53/Ahd/2018 are partly allowed for statistical purposes. Order pronounced in the Court on 07April, 2021 at Ahmedabad.