Base Metal Chemicals Vs ACIT (ITAT Ahmedabad)
Presumptions Rejected- Commercial Reality Wins- ITAT Deletes ₹6.9 Cr Additions, Allows Only ₹5.47 L
Assessee, a partnership firm engaged in manufacturing of organic & inorganic chemicals, filed return declaring income of ₹2,99,67,050. The case was scrutinized u/s 143(3) & AO made multiple additions, assessing income at ₹10.65 crore. CIT(A) confirmed most additions. Assessee appealed to Tribunal.
1. Suppression of Conversion Charges (₹5,47,164):
AO compared conversion charges shown by Assessee (₹3,95,91,805) with GACL ledger (₹4,01,38,969) & treated difference as suppression. Tribunal held that Assessee’s reconciliation was unsubstantiated, rate difference adjustment was unexplained, & TDS pattern did not match. As reconciliation was not confirmed by GACL, addition was upheld.
2. Disallowance u/s 40A(2)(b) – Excess Conversion Charges Paid to Partner (₹13,59,000):
AO held payment to partner @₹6/kg excessive compared to ₹5.10/kg received from GACL. Tribunal accepted Assessee’s argument that actual rate from GACL was ₹5.33/kg after adjustments, and partner was paid higher due to urgent/time-bound work, proximity, lower logistics, capacity utilization & commercial expediency. Also, partner taxed at same rate → revenue neutral. Addition deleted.
3. Alleged Suppression of Sales (₹1,02,59,529):
AO assumed sales to CAPL were under-invoiced by ₹10/kg. Tribunal examined comparative chart & found CAPL rate (₹38.67) was comparable with other parties (₹38.51 to ₹48.30) after considering quantity, specifications, packing, transport & payment terms. No evidence of extra consideration. Addition deleted.
