CRYSTAL QUINONE PVT. LTD.,AHMEDABAD vs. THE DY. CIT, CIRCLE-1(1)(2), AHMEDABAD

The assessee has also raised the following additional ground of appeal challenging the validity of reopening of assessment u/s 147 of the Act:-

1 The assessee has raised the aforesaid additional grounds, which involve purely legal issues arising from facts already on record. The Ld. AR submitted that such additional grounds deserve to be admitted, for which he placed reliance on the decision of the Hon’ble Supreme Court in National Thermal Asst.Year : 2009-10 - 3– already available on record. Respectfully following the decision of the Hon’ble Supreme Court in NTPC Ltd. (supra), the additional ground raised by the assessee is admitted for adjudication.

The brief facts of the case are that the assessee is a Private Limited Company, engaged in the business of manufacturing chemicals. The return of income was filed declaring income of Rs.1,58,94,385/- on the total turnover of Rs.31,27,35,054/-. The books of account of the assessee are duly audited u/s 44AB of the Act. The assessment was subsequently reopened u/s 147 of the Act based on information received from Investigation Wing that Reynolds Petro Chem Ltd was involved in providing accommodation entries and inflation of purchases. During reassessment, the Assessing Officer made additions of Rs.4,50,000/- towards commission paid to Reynolds Petro Chem Ltd and Rs.90,00,000/- towards alleged inflated/bogus purchases, thus making a total addition of Rs.94,50,000/-.

1 Asst.Year : 2009-10 - 4–

1 On merits, the Ld. AR submitted that the commission payment of Rs.4,50,000/- is duly supported by documentary evidence such as ledger accounts, confirmations, TDS certificates, invoices and stock records and no defect has been pointed out in the books of account.

2 With regard to the addition of Rs.90,00,000/-, it was submitted that no show-cause notice was issued before making the addition and the Assessing Officer has made the addition by applying a 5% commission rate without any actual purchases to support such calculation. It was further submitted that the assessee has not made any purchases from Reynolds Petro Chem Ltd., but from Ipca Laboratories Ltd. which are duly supported by evidences. It was also contended that the additions are based solely on statements of third parties recorded behind the back of the assessee and no opportunity of cross- examination was provided. It was emphasized that none of the statements relied upon contain any reference to the assessee or its transactions.

The Ld. DR, on the other hand, relied upon the orders of the lower authorities and submitted that the additions are based on material gathered during survey and investigation.

We have heard the rival submissions and perused the material available on record. We have also examined the reasons recorded for reopening as well as the assessment and appellate orders. The reasons recorded for reopening of assessment dated 08.07.2016 are as under:-

This is for your information and record.”

1 From the reasons recorded, it is seen that the reopening is based on information received from the Investigation Wing regarding survey conducted in the case of Reynolds Petro Chem Ltd. and general statements recorded therein. However, the reasons do not demonstrate any independent application of mind by the Assessing Officer nor establish any specific nexus between the alleged material and escapement of income in the hands of the assessee. Further, it is evident that no proper opportunity was granted to the assessee to file objections after supply of reasons and no speaking order disposing of objections has been passed. In these circumstances, the reassessment proceedings are liable to be held as invalid.

2 Even on merits, we find that the assessee has placed on record substantial documentary evidence to establish the genuineness of commission payment of Rs.4,50,000/-, including ledger accounts, confirmations, TDS deduction certificates, service tax payment details and supporting invoices Asst.Year : 2009-10 - 6– relating to purchases from Ipca Laboratories Ltd. The payments have been made through banking channels and no defect has been pointed out in the books of account maintained by the assessee.

3 With regard to the addition of Rs.90,00,000/-, we find that no specific show cause notice was issued to the assessee proposing such addition. It is also an undisputed fact that the assessee has not made any purchase from Reynolds Petro Chem Ltd and it is its purchases from Ipca Laboratories Ltd, which are supported by bills, stock records, excise documents and VAT records. We also find merit in the contention of the assessee that the entire addition is substantially based on statements of third parties recorded during survey proceedings, without providing the assessee an effective opportunity of cross- examination. It is also noted that none of the statements specifically refer to the assessee or any transaction entered into by it. In absence of such linkage, reliance on such statements cannot form the sole basis of addition, particularly when the assessee has produced cogent documentary evidence supporting its transactions.

4 In view of the foregoing discussion, we are of the considered opinion that the reassessment proceedings are unsustainable in law and the additions made on merits are also not sustainable in law or on facts. Accordingly, the impugned order of the Ld. CIT(A) is set aside and the additions made by the Assessing Officer are directed to be deleted.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 07.04.2026 (SUCHITRA R. KAMBLE) VICE-PRESIDENT Ahmedabad; Dated 07.04.2026 **btk Asst.Year : 2009-10 - 7–