Nayar Metal Company, New Delhi V. ITO, New Delhi

ITA 1374/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6209 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 31-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reassessment proceedings
• Section: 40A(3); 153A; 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SMT. BEENA A PILLAI, JM ITA NO. 1374/DEL/2015 ASSESSMENT YEAR: 2006-07 NAYAR METAL COMPANY A-28, KIRTI NAGAR, NEW DELHI. AAAFN3549F VS ITO WARD 39(3) NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SH. P. DAM KANUNJ A, SR. DR ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH CHADHA, CA DATE OF HEARING : 21.03.2016 DATE OF PRONOUNCEMENT : 31.03.2016 ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINS T THE ORDER OF THE LD. CIT(A)-XX, NEW DELHI VIDE HIS ORDER DATE D 22/12/2014 FOR A.Y. 2006-07 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LD. CIT(A) IS BAD, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF THE ASSESSEE THAT THE INITIATION OF T HE REASSESSMENT PROCEEDINGS AND THE REASSESSMENT ORDER ARE BAD BOTH ON FACTS AND IN LAW AND LIABLE TO BE QUASH ED AS THE STATUTORY CONDITIONS AND PROCEDURE PRESCRIBED U NDER THE STATUTE HAVE NOT BEEN COMPLIED WITH. 2 3. (I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, C IT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE LD. ASSESSING OFFICER ARE BAD IN THE EYE OF LAW AS THE REASONS RECORDED FOR THE ISSU E OF NOTICE U/S 148 ARE BAD IN THE EYE OF LAW AND ARE CO NTRARY TO THE FACTS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CI T(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CON TENTION OF THE ASSESSEE THAT THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BAD AND LIABLE TO BE QUASHED A S THE SAME HAS BEEN REOPENED ON THE BASIS OF THE REASONS WHICH ARE VAGUE AND HAS BEEN RECORDED WITHOUT APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE REJECTING OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY THE ASSESSING OFFICER, DESPITE THE FACT THAT THE ASSESS EE HAS BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS AS PER LA W. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF AN AMOUNT OF RS. 8,70,461/- ON ACCOUNT OF BOGUS PURCHASES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF 20% OF SUCH PURCHASES, WITHOUT THERE BEING ANY BASI S FOR THE SAME. 7. (I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THAT THE FIRMS M/S.VISHNU TRADING COMPANY, M/S SHREE SHY AM TRADING COMPANY, M/S OM AGENCIES & M/S SHREE BANKEY BIHARI TRADING CO. ARE NOT ENGAGED IN THE ACTUAL BU SINESS IGNORING THE FACT THAT DURING THE COURSE OF THE SEA RCH SUBSTANTIAL INVENTORY IN RESPECT OF THE MATERIAL BE ING PURCHASED BY THE ASSESSEE WERE FOUND WHICH CONFIRM THE FACT THAT THIS FIRM WAS DOING ACTUAL BUSINESS. (II)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTING THAT THE INFERENCE DRAWN BY THE ASSESSING OFFICER MERELY ON THE 3 BASIS OF A STATEMENT THAT THESE FIRMS ARE NOT IN AC TUAL BUSINESS IS BASELESS AND CONTRARY TO THE FACTS ON R ECORD. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF THE ASSESSEE IN IGNORING THE FACT THA T THERE BEING A COMPLETE TALLY OF THE QUANTITY PURCHASED AN D SOLD THE ALLEGATION THAT THE ASSESSEE HAS NOT MADE PURCH ASES CANNOT BE SUSTAINED. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN CONFIRMI NG THE ADDITION TO THE EXTENT OF 20% OF SUCH PURCHASES REJ ECTING THE MATERIAL AND EVIDENCES BROUGHT ON RECORD BY THE ASS ESSEE TO SHOW THAT THE PURCHASES WERE MADE IN REGULAR COU RSE OF THE BUSINESS AND MATERIAL SO PURCHASED WAS SOLD IN THE REGULAR COURSE OF BUSINESS. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTIN G THE CONTENTION OF THE ASSESSEE THAT THE ADDITION SO MAD E ON THE BASIS OF MATERIAL COLLECTED AT THE BACK OF THE ASSE SSEE IS BAD IN LAW & LIABLE TO BE DELETED. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTIN G THE CONTENTION OF THE ASESSEE THAT THE ADDITION MADE BY THE LD. ASSESSING OFFICER IS UNTENABLE IN THE EYE OF LAW HA VING BEEN MADE WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE PERSON ON THE BASIS OF WHOSE STATEMENT THE ALLEGATI ONS HAVE BEEN MADE AGAINST THE ASSESSEE AND WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE. 12. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALT ER ANY OF THE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE AS RECORDED BY THE LD. A SSESSING OFFICER ARE AS UNDER: THE ASSESSEE HAD NOT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS REOPENED ON AN I NFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE 10, JHANDELW ALAN EXTN., ON 4 THE ALLEGATION THAT THE ASSESSEE HAD MADE BOGUS PUR CHASES. THE ASSESSMENT WAS COMPLETED BY THE LD. ASSESSING OFFIC ER BY MAKING AN ADDITION OF RS. 43,52,304/- TREATING THE ENTIRE PURCHASES MADE BY THE ASSESSEE FROM M/S SHREE BANKEY BIHARI TRADIN G COMPANY, M/S. OM AGENCIES AND M/S SHREE SYAM TRADING COMPANY TO BE ACCOMMODATION ENTRIES. 3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER, THE ASSESSEE WENT INTO APPEAL BEFORE THE LD. CIT(A). T HE LD. CIT(A) UPHELD THE VALIDITY OF THE REASSESSMENT BUT REDUCED THE ADDITION TO 20% OF THE PURCHASES BEING RS.8,70,461/-. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US NOW. 5. THE GROUNDS TAKEN BEFORE US BY THE ASSESSEE, REL ATES TO THE VALIDITY OF THE REASSESSMENT AS WELL AS THE SUSTENA NCE OF THE ADDITION TO AN EXTENT OF RS. 8,70,461/-. 5.1. AT THE OUTSET, THE LD. AR SUBMITTED THAT, THIS TRIBUNAL IN THE CASE OF UNIQUE METAL INDUSTRIES VS. ITO IN ITA NO. 1372/DEL/2015, VIDE DATED 28/03/2015, RADHEY SHYAM & CO. VS. ITO I N ITA NO. 1429/DEL/2015 VIDE ORDER DATED 30.11.2015, PUNJAB M ETAL STORE VS. ITO IN ITA NO. 1512/DEL/2015 VIDE ORDER DATED 0 2.12.2015, KRISHAN LAL GAMBHIR & SONS VS. ITO IN ITA NO. 1376/ DEL/2015 VIDE ORDER DATED02.12.2015 HAS DECIDED THE ISSUE. THE LD. AR SUBMITTED THAT THE ASSESSMENT IN THE CASE OF UNIQUE METAL, RADHEY SHYAM, PUNJAB METALS AND KRISHAN LAL GAMBHIR (SUPRA ) WAS 5 REOPENED, ON THE SAME ALLEGATION AND THE FACTS OF T HE CASE ARE IDENTICAL, AS A NUMBER OF ASSESSMENTS WERE REOPENED BY THE SAME ASSESSING OFFICER, ON THE BASIS OF THE SAME SET OFF INFORMATION. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS REC ORDED SIMILAR REASONS IN ALL THE CASES. THE LD. AR HAS SUBMITTED THAT IN THE CASE OF UNIQUE METAL (SUPRA) THIS TRIBUNAL HAS HELD THE REOPENING TO BE BAD IN LAW. 5.2. THE LD. AR HAS ALSO PRODUCED BEFORE US THE ORD ERS OF THIS TRIBUNAL IN THE CASE OF RADHESHYAM, PUNJAB METALS A ND KRISHAN LAL GAMBHIR(SUPRA), WHEREIN THIS TRIBUNAL HAS CONSI DERED A SIMILAR AND IDENTICAL ISSUE, AND HELD THE REASSESSMENT TO B E BAD IN LAW. 5.3. IT IS SUBMITTED THAT IN THE REASONS RECORDED, THE ASSESSING OFFICER HAS SIMPLY NARRATED THE LETTER RECEIVED BY IT FROM CIT CENTRAL-II, NEW DELHI WHEREBY THERE IS AN ALLEGATIO N THAT CERTAIN PERSON HAVE PROVIDED ACCOMMODATION ENTRIES. IT IS F URTHER CONTENDED THAT IT IS ON THE BASIS OF A LIST FORWARD ED BY CIT CENTRAL- II, NEW DELHI, THE ASSESSING OFFICER HAS STATED THA T THE FOLLOWING ACCOMMODATION ENTRIES HAVE BEEN TAKEN BY THE ASSESS EE; S.NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WHOM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1. VISHNU TRADING CO. M/S. NAYAR METAL COMPANY RS.17,79,173 2. SHREE BANKEY BIHARI M/S. NAYAR METAL COMPANY RS.13,77,212 3. SHREE SHYAM TRADING M/S. NAYAR METAL COMPANY RS.8,00,948 4. OM AGENCIES M/S. NAYAR METAL COMPANY RS.3,94,979 6 TOTAL AMOUNT OF ENTRIES RS. 43,52,304 6. ON THE CONTRARY THE LD. DR, SUBMITTED THAT IN TH IS CASE INFORMATION HAS BEEN RECEIVED AFTER THE ASSESSEES RETURN WAS ACCEPTED UNDER SECTION 143 (1). IN THE INFORMATION PROVIDED BY CIT, CENTRAL-II, NEW DELHI, THERE IS A CLEAR ALLEGATION THAT THE PERSONS MENTIONED THEREIN HAVE PROVIDED ACCOMMODATION ENTRI ES. SINCE THE NAME OF THE ASSESSEE APPEARS IN THE LIST OF ACCOMMO DATION ENTRIES THE ASSESSING OFFICER WAS JUSTIFIED AND RECORDING R EASONS AND REOPENING THE ASSESSMENT. IT WAS SUBMITTED THAT AT THE TIME OF REOPENING OF THE ASSESSMENT, ONLY A PRIMA FACIE VIE W HAS TO BE TAKEN AND THERE NEED NOT BE ANY CONCLUSIVE EVIDENCE S. THE LD. DR FURTHER SUBMITTED THAT NAME OF THE ASSESSEE WAS APP EARING IN THE LIST OF THE ACCOMMODATION ENTRIES PROVIDED AND HENC E ASSESSING OFFICER WAS WELL WITHIN HIS POWER TO REOPEN THE ASS ESSMENT. THE LD. NTR ALSO SUBMITTED THAT CIT(A) WAS JUSTIFIED IN REJ ECTING THIS GROUND OF THE ASSESSING. IN SUPPORT THEREOF THE LD. AND D ARE PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VERSUS NOVA PROMOTERS & FINLEASE PVT.LTD., REPORTED IN_______________ 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE DOCUMENTS PLACED ON RECORD. IT IS NOTED THAT T HE ASSESSMENT HAS BEEN REOPENED BY THE LD. ASSESSING OFFICER BY R ECORDING THE FOLLOWING REASONS: 7 REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF M/S KRISHAN LAL GAMBHIR & SONS FOR THE ASSESSMENT YEAR 2006-07 A LETTER BEARING F.NO. ADDL.CIT/(HQ)/(COORD.)/ACCOMMODATION ENTRY/2012- 13/15016 DATED 26.03.2013 WAS RECEIVED FROM THE OFF ICE OF THE CHIEF COMMISSIONER OF I.TAX, DELHI-1, NEW DE LHI THEREIN FORWARDING LETTER BEARING F.NO. CIT(C)-II/2 012- 13/3898 DATED 19.03.2013 RECEIVED FROM THE COMMISSI ONER OF I.TAX, CENTRAL-II, NEW DELHI ALONG WITH A CD CON TAINING THE DETAILS OF ACCOMMODATION ENTRIES PROVIDED BY SH . RAKESH GUPTA & SH. VISHESH GUPTA & SH. NAVNEET JAIN & SH. VAIBHAV JAIN AND DIRECTING THIS OFFICE TO TAKE NECESSARY ACTION AS PER SECTION 148 IN RESPECT OF ENTRIES PER TAINING TO A.Y. 2006-07, WHICH IS TIME BARRING ON 31.03.2013. THE INFORMATION PROVIDED BY THE CIT, CENTRAL-II, NE W DELHI VIDE HIS LETTER DATED 19.03.2013 READS AS UNDER: 1. KINDLY FIND ENCLOSED HEREWITH LETTER DATED 13.0 3.2013 OF ACIT, CENTRAL CIRCLE-10 DULY FORWARDED BY THE AD DL. CIT, CENTRAL RANGE-IV, ALONG WITH ITS ENCLOSURES ON THE SUBJECT MENTIONED ABOVE. 2. THE ASSESSMENT OF SEARCH CASES OF SH. RAK ESH GUPTA, SH. VISHESH GUPTA, SH. NAVNEET JAIN & SH. VAIBHAV J AIN ARE UNDER PROCESS WITH THE ACIT, CENTRAL CIRCLE-10. DURING THE ASSESSMENT PROCEEDINGS U/S 153A IN THE AFORESAI D CASES, DETAILS REGARDING ACCOMMODATION ENTRIES GIVE N BY THE ABOVE ENTRY PROVIDERS HAS BEEN OBTAINED BY THE ASSESSING OFFICER. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENT S HAS BEEN OBTAINED FROM SH. RAKESH GUPTA AND SH. VISHESH GUPT A. HARD COPY OF THE LIST IS ENCLOSED AS ANNEXURE A, DU LY SIGNED BY SH. VISHES GUPTA. THE LIST GIVEN THE NAM E OF THE FIRM WHICH HAS PROVIDED THE ACCOMMODATION ENTRY ALO NG WITH THE NAME AND ADDRESS OF THE RECIPIENTS OF ACCOMMODATION ENTRY. 4. SH. NAVNEET JAIN & SH. VAIBHAV JAIN HAS P ROVIDED ACCOMMODATION ENTRY THROUGH THIRTY SEVEN PAPER ENTI TIES. THE LIST OF THE FIRMS GIVING ACCOMMODATION ENTRY IS ENCLOSED AS ANNEXURE-B. THE LIST OF ACCOMMODATION ENTRY REC IPIENTS, 8 HAS BEEN OBTAINED FROM SH. NAVENEET JAIN & SH. VAIB HAV JAIN. IT DOES NOT GIVE YEAR WISE BIFURCATION. HAR D COPY OF THE LIST IS ENCLOSED AS ANNEXURE-C, DULY SIGNED BY SH. VAIBHAV JAIN. THUS, THE FIRMS MENTION IN THE LIST B HAVE PROVIDED ACCOMMODATION ENTRIES TO THE FIRMS MENTION ED IN LIST C. 5. THE SOFT COPY OF THE INFORMATION IN RESP ECT TO ANNEXURE A, B & C IS ALSO ENCLOSED. 6. THE INFORMATION OF ACCOMMODATION ENTRY INC LUDES A.Y. 2006-07 ALSO, WHICH IS A TIME BARING YEAR FOR TAKIN G ACTION U/S 148. 7. THIS INFORMATION IS FORWARDED TO YOU FOR E ARLY DISSEMINATION TO VARIOUS FIELD OFFICES IN DELHI. ON EXAMINING THE LIST OF ACCOMMODATION ENTRIES PROV IDED BY SHRI RAKESH GUPTA & SHRI VISHESH GUPTA AND SHRI NAV NEET JAIN & SHRI VAIBHAV JAIN PERTAINING TO A.Y. 2006-07 . IT IS NOTICED THAT THE FOLLOWING ACCOMMODATION ENTRIES HA VE BEEN TAKEN BY THE ASSESSEE NAMELY M/S NAYAR METAL COMPAN Y:- S.NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WHOM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1. VISHNU TRADING CO. M/S. NAYAR METAL COMPANY RS.17,79,173 2. SHREE BANKEY BIHARI M/S. NAYAR METAL COMPANY RS.13,77,212 3. SHREE SHYAM TRADING M/S. NAYAR METAL COMPANY RS.8,00,948 4. OM AGENCIES M/S. NAYAR METAL COMPANY RS.3,94,979 TOTAL AMOUNT OF ENTRIES RS. 43,52,304 SINCE SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JAIN DURING THE COURSE O F ASSESSMENT PROCEEDINGS U/S 153A OF I.T. ACT HAVE AD MITTED THAT THEY HAVE GIVEN ACCOMMODATION ENTRIES TO THE P ARTIES WHOSE LISTS HAVE BEEN PROVIDED BY THEM TO THE ACIT, CENTRAL CIRCLE-10, NEW DELHI, THEREFORE, IT IS FAIR TO CONC LUDE THAT M/S KRISHAN LAL GAMBHIR & SONS, WHOSE NAME IS APPEARING IN THE SAID LIST, HAS TAKEN ACCOMMODATION ENTRIES FROM SHRI RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JA IN & SH. VAIBHAV JAIN PERTAINING TO A.Y. 2006-07. ALSO THE DETAILS OF INCOME TAX RETURN FILED BY M/ S. NAYAR METAL COMPANY FOR A.Y. 2006-07 AND PROCESSING DONE U/S 143(1) OF I.TAX ACT THEREOF WERE TAKEN OUT FROM ITD SYSTEM. FURTHER, NO SCRUTINY ASSESSMENT WAS DONE IN A.Y. 20 06-07. 9 IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME CHARGEABLE TO TAX OF M/S. NAYAR METAL COMPANY AMOUN TING TO RS. 43,52,304/- FOR THE F.Y. 2005-06 RELEVANT TO A.Y. 2006- 07 HAS ESCAPED ASSESSMENT AND IT IS A FIT CASE FOR INITIATION OF PROCEEDINGS U/S 147 OF THE ACT. PROPOSAL IN THE PRESCRIBED FORM FOR THE AY 2 006-07 (F.Y. 2005-06) IS SUBMITTED HEREWITH FOR KIND CONSIDERATI ON AND NECESSARY APPROVAL U/S 151(2) OF THE I.T. ACT, 1961 AS THE SAME IS GETTING BARRED BY LIMITATION ON 31/03/2013. IF APPROVED, NOTICE U/S 148 OF THE ACT MAY BE ISSUED. SD/- (PAWAN KUMAR VASHIST) INCOME TAX OFFICER WARD 39(3), NEW DELHI JOINT CIT, RANGE-39, N.DELHI FOR THE REASONS RECORDED ABOVE, IT IS A FIT CASE FO R ISSUANCE OF NOTICE U/S.148. HENCE NECESSARY APPROVAL ASPER S ECTION 151(2) IF THE I.T.ACT IS HEREBY GIVEN FOR REOPENING THE CASE FOR A.Y.2006-07 7.1. IT IS OBSERVED THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30/10/2006 DECLARING AN INCOME OF RS. 15,930 THE SAME WAS PROCESSED UNDER SECTION 143 (1) OF IT ACT DATED 02. 03. 2007 AT THE DECLARED INCOME LATER ON, INFORMATION WAS RECEIVED BY ASSESSING OFFICER WIDE LETTER DATED 13. 03. 2013, FORWARDED B Y CIT, CENTRAL-II, NEW DELHI AND CCIT, NEW DELHI-1 WIDE LETTERS DATED 19.03.2013 AND 26.03.2013, RESPECTIVELY PROVIDING A CD WHEREIN THE LIST OF PARTIES TO WHOM BOGUS PURCHASES/ACCOMMODATION ENTRI ES PROVIDED BY SH. RAKESH GUPTA, SHREE VISHESH GUPTA SH. NAVNEE T JAIN AND SH. VAIBHAV JAIN WAS APPEARING. THE LD.AO RECORDS A T PAGE 2 PARA 1 OF ASSESSMENT ORDER THAT, AFTER GOING THROUGH THE COMPLETE LIST AND IDENTIFYING THE PARTIES WHOSE TERRITORIAL JURIS DICTION LIES WITH THIS BOARD, THIS OFFICE, AFTER PROPERLY RECORDING THE FO LLOWING REASONS FOR 10 FORMING THE BELIEF THAT THE INCOME HAS ESCAPED ASSE SSMENT IN THE CASE OF M/S. NAYAR METAL COMPANY AND TAKING ADMINIS TRATIVE APPROVAL FROM THE JOINT CIT, RANGE-39, NEW DELHI GR ANTED ON 28. 03. 2013, THE ASSESSMENT OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 WAS REOPENED AS PER SECTION 147 OF THE IT ACT. 7.2. IT IS OBSERVED FROM THE ORDER PASSED BY THE AS SESSING OFFICER, WHEREBY THE ASSESSING OFFICER HIMSELF HAS STATED TH AT HE WAS NOT HAVING THE COPY OF THE STATEMENT AND OTHER INFORMAT ION AT THE TIME OF RECORDING REASONS, WHICH WAS IMPORTANT FOR HIM T O APPLY HIS MIND, WHILE FORMING BELIEF OF INCOME ESCAPING ASSES SMENT. IN THIS REGARD, THE ASSESSING OFFICER HIMSELF RECORDS IN PA RAGRAPH 3 ON PAGE 5 OF THE ASSESSMENT ORDER, THAT POST REOPENING OF T HE ASSESSMENT, HE HAD CONVERSATIONS WITH THE ACIT, CENTRAL CIRCLE- 10, NEW DELHI AND HAS SENT VARIOUS LETTERS DATED 23.07. 2013 TO 24.12.2013, ASKING FOR BASIC INFORMATION WHICH INCLUDED COPIES OF STATEMENT RECORDED REGARDING THE ALLEGED ACCOMMODATION ENTRIE S AGAINST THE ASSESSEE. 7.3. THE LD. ASSESSING OFFICER IN PARAGRAPH 4 FURTH ER RECORDS THAT, HE RECEIVED THE SUPPORTING DOCUMENTS WIDE LETTER DA TED 27. 12. 2013 FROM THE OFFICE OF ACIT, CENTRAL CIRCLE-10, NE W DELHI. THESE FACTS CLEARLY DEMONSTRATE THAT NO INFORMATION WAS W ITHIN THE KNOWLEDGE OF THE ASSESSING OFFICER EXCEPT FOR THE L ETTER RECEIVED FROM CIT, CENTRAL-II, NEW DELHI, ON THE BASIS OF WHICH T HE ASSESSING OFFICER REOPENED THE ASSESSMENT, WITHOUT THEIR BEIN G ANY VALID EVIDENCE AND WITHOUT APPLICATION OF MIND. THE OBSER VATIONS MADE 11 BY THE ASSESSING OFFICER IN PARAGRAPH 3 OF THE ASSE SSMENT ORDER SHOWS THAT IT WAS ON 27.12.2013, THAT THE LD.AO HAS RECEIVED THE DOCUMENTS/DETAILS, ON THE BASIS OF WHICH HE COULD H AVE APPLIED HIS MIND IN ARRIVING AT THE CONCLUSION AS TO WHETHER AN Y INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THESE RELEVANT DETAILS WERE NOT AVAILABLE WITH THE LD.AO AT THE TIME OF ISSUANCE OF NOTICE U/S.148 OF THE ACT. HE HAS MERELY ON THE BASIS OF A LIST THE REASONS WERE RECORDED FOR I SSUANCE OF NOTICE. 7.4. IN OUR VIEW, THE ASSESSING OFFICER OUGHT TO HA VE CONSIDERED THE FACTS OF THE ASSESSEES CASE WITH THAT OF THE INFOR MATION RECEIVED, AND THEN AFTER APPLYING HIS MIND, SHOULD HAVE RECOR DED THE REASONS. THE REASONS TO BELIEVE HAS TO BE THAT OF T HE ASSESSING OFFICER AND FURTHER THERE HAS TO BE APPLICATION OF MIND BY THE ASSESSING OFFICER. RECORDING OF REASONS TO BELIEVE, DOES NOT MEAN THAT THE ASSESSING OFFICER HAS TO FINALLY ASCERTAIN THE FACT THAT INCOME HAS ESCAPED ASSESSMENT, BUT IT MEAN THAT THE ASSESSING OFFICER IS REQUIRED TO EXAMINE THE FACTS ON THE BAS IS OF THE INFORMATION AND SATISFY HIMSELF THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT AS HELD BY NOVA PROMOTERS(SUPRA). IN THE PRESENT CASE, ON GOING THROUGH THE REASONS, IT IS QUITE EVIDENT T HAT THE ASSESSING OFFICER HAS SIMPLY MENTIONED THE ALLEGED ACCOMMODAT ION ENTRIES IN THE REASONS RECORDED, EVEN WITHOUT SPECIFYING THE N ATURE OF SUCH ACCOMMODATION ENTRIES. THIS SHOWS THAT THE ASSESSIN G OFFICER HAS MADE NO EFFORTS TO LOOK INTO THE RETURN OF THE ASSE SSEE, WHICH WAS AVAILABLE WITH HIM. 12 7.5. IT IS A SETTLED POSITION OF LAW THAT THERE MUS T BE MATERIAL FOR INFORMATION OF A BELIEF THAT INCOME HAS ESCAPED ASS ESSMENT. FURTHER REASONS REFERRED TO MUST DISCLOSE PROCESS O F REASONING BY WHICH THE ASSESSING OFFICER HOLDS REASONS TO BELIEV E. THERE MUST BE NEXUS BETWEEN SUCH MATERIAL AND BELIEF AND MOST IMP ORTANTLY THE REASONS REFERRED TO, MUST SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER. HONBLE SUPREME COURT AND VARIOUS HIGH COU RTS HAVE HELD THAT THE VALIDITY OF THE INITIATION OF THE REASSESS MENT PROCEEDINGS ARE TO BE JUDGED WITH REFERENCE TO MATERIAL AVAILAB LE WITH THE ASSESSING OFFICER, AT THE TIME OF ISSUANCE OF NOTIC E UNDER SECTION 148. IN THE PRESENT CASE, IT IS VERY MUCH EVIDENT F ROM THE ASSESSMENT ORDER ITSELF THAT THE ASSESSING OFFICER WAS HAVING NOTHING EXCEPT THE LIST PROVIDED BY THE CIT CENTRAL -II, NEW DELHI. HE WAS NOT HAVING THE COPIES OF THE STATEMENT, ASSESSM ENT ORDERS AND OTHER DETAILS WHICH COULD ENABLE HIM TO APPLY HIS M IND AND FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN FACT THESE INFORMATION WAS NOT THERE WITH THE ASSESSING OFFICE R TILL 27.12.2013. THUS IN OUR VIEW THIS IS A CLEAR CASE OF TOTAL NON- APPLICATION OF MIND BY THE ASSESSING OFFICER. 7.6. WE FOUND THE ISSUE REGARDING THE VALIDITY OF T HE REASSESSMENT IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF UNIQUE METAL (SUPRA), SHREE RADHESHYAM & COMPANY(SU PRA), PUNJAB METALS(SUPRA) AND KRISHAN LAL GAMBHIR (SUPR A), WHEREIN THE ASSESSING OFFICER HAD INITIATED SIMILAR PROCEED INGS BY RECORDING THE SAME STEREOTYPE REASONS AND THE PARTY FROM WHOM THE ASSESSEE THEREIN, HAD MADE PURCHASES, WERE ALSO SAME, AS IN THE CASE OF THE 13 PRESENT ASSESSEE. THIS TRIBUNAL, VIDE ORDERS DATED 28/01/2015, 30/11/2015 AND 02.12.2015, HAS QUASHED THE REASSESS MENT PROCEEDINGS AS INVALID DUE TO NON APPLICATION OF MI ND BY THE ASSESSING OFFICER. 7.7. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION S OF THIS TRIBUNAL IN THE CASE OF UNIQUE METAL (SUPRA), SHREE RADHESHY AM AND COMPANY (SUPRA), PUNJAB METALS(SUPRA) AND KRISHAN L AL GAMBHIR(SUPRA), WE QUASH THE REASSESSMENT PROCEEDIN GS. 8. NOW COMING TO THE SUSTENANCE OF THE ADDITION BY THE LD. CIT(A) TO AN EXTENT OF 20% OF THE PURCHASES MADE BY THE ASSES SEE, WE NOTE THAT THE TRIBUNAL, VIDE ITS ORDER DATED 30/11/2015 IN THE CASE OF SHREE RADHESHYAM & COMPANY (SUPRA) HAVE DELETED SIM ILAR ADDITION. THE TRIBUNAL IN THE CASE OF SHREE RADHESH YAM & COMPANY (SUPRA), HAS FOLLOWED THE FINDINGS GIVEN IN THE ORDER DATED 28/11/2015 IN THE CASE OF UNIQUE METAL INDUSTRIES ( SUPRA). THIS TRIBUNAL HAS OBSERVED AS UNDER: 7. NOW COMING TO THE MERIT ABOUT THE SUSTE NANCE OF THE ADDITION BY THE CIT(A) @ 20% OF THE PURCHASES MADE BY THE ASSESSEE FROM SHRI BANKEY BIHARI TRADING CO., AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROUGH THE ORDER OF THE TRIBUNAL, I NOTED THAT THIS TRIBUNAL VIDE IT S ORDER DATED 28.10.2015 IN THE CASE OF UNIQUE METAL INDUST RIES (SUPRA), DELETED SIMILAR ADDITION BY OBSERVING IN P ARA 27 AS UNDER: 27. AS REGARDS THE ADDITION OF 20% SUSTAIN ED BY THE LD. CIT(A) I AM OF THE VIEW THAT SINCE PURCHASES ARE NO T BOGUS THE ADDITION ON THIS ACCOUNT CANNOT BE SUSTAINED. EVEN OTHERWISE THE ADDITION OF 20% ON THE FACTS AND CIRCUMSTANCES IS APPARENTLY TOO HIGH. THE LD. CIT( A) HAVING 14 HELD THAT TAX HAS TO BE LEVIED ON REAL INCOME AND T HE PROFIT CANNOT BE ASCERTAINED WITHOUT DEDUCTING THE COST OF PURCHASES FROM THE SALES AS OTHERWISE IT AMOUNT TO LEVY OF TAX ON GROSS RECEIPT, SHE OUGHT TO HAVE APPLIED PR OFIT RATE IN THIS NATURE OF TRADE. ESTIMATING PROFIT @ 20% BY T AKING INTO CONSIDERATION THE OR VISIONS OF SECTION 40A(3) WILL NOT LEAD TO DETERMINATION OF CORRECT REAL INCOME. SECTION 40A( 3) IS MEANT FOR A DIFFERENT PURPOSE WHEN THE ASSESSEE HAS MADE PURCHASES IN CASH. THIS PROVISION CANNOT BE APPLIE D IN SUCH CASES. ONCE THE PURCHASES ARE HELD TO BE BOGUS THE N THE TRADING RESULTS DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED AND RIGHT COURSE IN SUCH CASE IS TO REJECT BOOKS OF ACCOUNTS AND PROFIT HAS TO BE ESTIMATED BY APPLYING A COMPARATIVE PROFIT RATE IN THE SAME TRADE. THOUGH THERE CAN BE A LITTLE GUESS WORK IN ESTIMATING PROFIT RATE BU T SUCH PROFIT RATE CANNOT BE PUNITIVE. 8.1. LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE O RDER OF CIT(A) AS WELL AS THAT OF THE ASSESSING OFFICER, COULD NOT BR ING TO OUR KNOWLEDGE ANY COGENT MATERIAL OR EVIDENCE WHICH MAY COMPEL US NOT TO FOLLOW THE DECISION OF THIS BENCH IN ITA NO. 1372/DEL/2015 (SUPRA) AND ITA NO. 1429/DEL/2015(SUPRA). SO FAR A S THE RELIANCE PLACED BY LD.DR ON THE DECISION OF HONBLE JURISDIC TIONAL HIGH COURT IN CASE OF THE NOVA PROMOTERS(SUPRA), THE FAC TS WERE DIFFERENT. IN THE CASE OF NOVA PROMOTERS(SUPRA), THE ASSESSING OFFICER POSSESSED ALL NECESSARY DOCUMENTS AND INFORMATION A T THE TIME OF ISSUANCE OF NOTICE U/S.148 OF THE ACT, WHICH IS NOT AT ALL THERE IN CASE OF THE PRESENT ASSESSEE. 9. WE THEREFORE, RESPECTFULLY FOLLOWING THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA), SHR EE RADHESHYAM & COMPANY (SUPRA) PUNJAB METALS(SUPRA) AND KRISHAN LAL GAMBHIR 15 (SUPRA), DELETE THE ADDITION AS SUSTAINED BY THE LD . CIT(A) AMOUNTING TO RS.8,70,461/-. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.03. 2016 SD/- SD/- (G.D. AGRAWAL) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31.03.2016 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 16 1. DRAFT DICTATED ON 30.03.2016 2. DRAFT PLACED BEFORE AUTHOR 30.03.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.