Radhey Shyam & Co., Delhi V. ITO, New Delhi

ITA 1429/DEL/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1792 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 13-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Bogus purchase; Accommodation entries
• Section: 40A(3); 153A; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1 NEW DELHI BEFORE SHRI P.K. BANSAL : ACCOUNTANT MEMBER ITA NO. 1429/DEL/2015 ASSTT. YRS: 2006-07 RADHEY SHYAM & CO., VS. INCOME-TAX OFFICER, PROP. RADHEY SHYAM, WARD-39(3), NEW DELHI. 5645, BASTI HARPHOOL SINGH, SADAR BAZAR, DELHI. PAN: ABHPS 9513 Q ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI VED JAIN FCA RESPONDENT BY : SHRI P. DAM KANUNJNA SR. DR DATE OF HEARING : 13/11/2015. DATE OF ORDER : 30/11/2015. O R D E R THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST THE ORDER OF THE CIT(A) DATED 15/12/2014, PASSED U/S 144 READ WITH S ECTION 147 OF THE INCOME-TAX ACT, 1961, UPHOLDING THE REASSESSMENT ORDER PASSED U/S 148 AND ON MERITS THE CIT(A) REDUCED THE ADDITION TO RS. 94,771/- AS AGAI NST RS. 47,73,855/-, MADE BY THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED THE RETURN DECLARING AN INCOME OF RS. 1,24,182/-, WHICH WAS COMPLETED U/S 1 43(3). SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED ON THE ALLEGATION THAT THE ASSESSEE HAD MADE BOGUS PURCHASES. THE ASSESSMENT WAS COMPLETED BY THE AO B Y MAKING ADDITION OF RS. 4,73,855/-, TREATING THE ENTIRE PURCHASES MADE BY T HE ASSESSEE FROM M/S SHREE BANKEY BIHARI TRADING COMPANY, TO BE THE ACCOMMODAT ION ENTRIES. 2 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). T HE CIT(A) UPHELD THE VALIDITY OF THE REASSESSMENT, BUT REDUCED THE ADDIT ION TO 20% OF THE PURCHASES, AMOUNTING TO RS. 94,771/-. 4. THE ISSUES INVOLVED IN VARIOUS GROUNDS TAKEN BY THE ASSESSEE RELATE TO THE VALIDITY OF THE REASSESSMENT AS WELL AS THE SUSTENA NCE OF THE ADDITION TO THE EXTENT OF 20%. SO FAR AS THE VALIDITY OF THE ASSESSMENT IS CONCERNED, I HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. I NO TED THAT THE ASSESSMENT HAS BEEN REOPENED BY THE AO BY RECORDING THE FOLLOWING REASONS: REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF M/S RADHAY SHYAM & CO. FOR THE ASSES SMENT YEAR 2006-07 A LETTER BEARING F.NO. ADDI.CIT/(HQ)/(COORD.)/ ACCOMMODATION ENTRY/2012-13/15016 DATED 26-03-2013 WAS RECEIVED FROM THE OFFICE OF THE CHIEF COMMISSIONER OF I. TAX, DELHI-I, NEW DELHI THEREIN FORWARDING LETTER BEARIN G F. NO. CIT(C)-1I/2012-13/3898 DATED 19.03.2013 RECEIVED FR OM THE COMMISSIONER OF I. TAX, CENTRAL-II, NEW DELHI ALONG WITH A CD CONTAINING THE DETAILS OF ACCOMMODATION ENTRIES PR OVIDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEE T JAIN & VAIBHAV JAIN AND DIRECTING THIS OFFICE TO TAKE NECE SSARY ACTION AS PER SECTION 148 IN RESPECT OF ENTRIES PERTAININ G 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 :- 'KINDLY FIND ENCLOSED HEREWITH LETTER DATED 13.03.2 013 OF ACIT, CENTRAL CIRCLE-10 DULY FORWARDED BY THE ADDL. CIT, CENTRAL RANGE-IV, ALONG WITH ITS ENC LOSURES ON THE SUBJECT MENTIONED ABOVE. 3 2. THE ASSESSMENT OF SEARCH CASES OF SH. RAKESH GUP TA, SH. VISHESH GUPTA, SH. NAVNEET JAIN & SH. VAIBHAV JAIN ARE UNDER PROCESS WITH THE ACIT, CENTRAL CIRCLE-10. DURING TH E ASSESSMENT PROCEEDINGS U/S 153A IN THE AFORESAID CA SES, DETAILS REGARDING ACCOMMODATION ENTRIES GIVEN BY THE ABOVE ENTRY PROVIDERS HAS BEEN OBTAINED BY THE A.D. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS HAS B EEN OBTAINED FROM SH. RAKESH GUPTA AND SH. VISHESH GUPTA. HARD C OPY OF THE LIST IS ENCLOSED AS ANNEXURE A, DULY SIGNED BY SH. VISHESH GUPTA. THE LIST GIVES THE NAME OF THE FIRM WHICH HAS PROVI DED THE ACCOMMODATION ENTRY ALONG WITH THE NAME AND ADDRESS OF THE RECIPIENTS OF ACCOMMODATION ENTRY. 4. SH. NAVNEET JAIN & SH. VAIBHAV JAIN HAS PROVIDED ACCOMMODATION ENTRY THROUGH THIRTY-SEVEN PAPER ENTI TIES. THE LIST OF THE FIRMS GIVING ACCOMMODATION ENTRY IS ENC LOSED AS ANNEXURE-B. THE LIST OF ACCOMMODATION ENTRY RECIPI ENTS, HAS BEEN OBTAINED FROM SH. NAVENEET JAIN & SH. VAIBHAV JAIN. IT DOES NOT GIVE YEAR WISE BIFURCATION. HARD COPY OF T HE LIST IS ENCLOSED AS ANNEXURE-C, DULY SIGNED BY SH. VAIBHAV JAIN. THUS, THE FIRMS MENTION IN THE LIST 'B' HAVE PROVIDED ACC OMMODATION ENTRIES TO THE FIRMS MENTIONED IN LIST 'C'. 5. THE SOFT COPY OF THE INFORMATION IN RESPECT TO A NNEXURE A, B & C IS ALSO ENCLOSED. 6. THE INFORMATION OF ACCOMMODATION ENTRY INCLUDES A.Y. 2006-07 ALSO, WHICH IS A TIME BARRING YEAR FOR TAKI NG ACTION U/S 148. 7. THIS INFORMATION IS FORWARDED TO YOU FOR EARLY D ISSEMINATION TO VARIOUS FIELD OFFICES IN DELHI (SOFT COPY ALSO E NCLOSED).' ON EXAMINING THE LIST OF ACCOMMODATION ENTRIES PROV IDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEE T JAIN & 4 SH. VAIBHAV JAIN PERTAINING TO A.Y. 2006-07, IT IS NOTICED THAT THE FOLLOWING ACCOMMODATION ENTRIES HAVE BEEN TAKEN BY THE ASSESSEE NAMELY M/S RADHAY SHYAM & CO.:- SL. NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WH OM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1. SHREE BANKEY BIHARI TRADING CO. M/S RADHAY SHYAM & CO. RS. 4,73,855/- TOTAL AMOUNT OF ENTRIES= RS. 4,73,855/- SINCE SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VALBHAV JAIN DURING THE COURSE OF ASSESS MENT PROCEEDINGS U/S 153A OF I. TAX ACT HAVE ADMITTED TH AT THEY HAVE GIVEN ACCOMMODATION ENTRIES TO THE PARTIES WHO SE LISTS HAVE BEEN PROVIDED BY THEM TO THE ACIT, CENTRAL CIR CLE-10, NEW DELHI, THEREFORE, IT IS FAIR TO CONCLUDE THAT M /S RADHAY SHYAM & CO., WHOSE NAME IS APPEARING IN THE SAID LI ST, HAS TAKEN ACCOMMODATION ENTRIES FROM SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JA IN PERTAINING TO AY. 2006-07. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME CHARGEABLE TO TAX OF M/S RADHAY SHYAM & CO. AMOUNTI NG TO RS. 4,73,855/- FOR THE F.Y. 2005-06 RELEVANT TO AY. 2006-07 HAS ESCAPED ASSESSMENT AND IT IS A FIT CASE FOR INI TIATION OF PROCEEDINGS U/S 147 OF THE ACT. PROPOSAL IN THE PRESCRIBED FORM FOR THE AY. 2006-07 (F. Y. 2005-06) IS SUBMITTED HEREWITH FOR KIND CONSIDERATI ON AND NECESSARY APPROVAL U/S 151(2) OF THE I. TAX ACT, 19 61 AS THE SAME IS GETTING BARRED BY LIMITATION ON 31/3/2013. IF APPROVED, NOTICE U/S 148 OF THE ACT MAY BE ISSUE D. SD/- 28.3.2013 (PAWAN KUMAR VASHIST) INCOME TAX OFFICER WARD-39(3), NEW DELHI. 5 5. I FOUND THAT THE ISSUE REGARDING THE VALIDITY OF THE REASSESSMENT IS DULY COVERED BY THE DECISION OF THIS BENCH IN THE CASE O F UNIQUE METAL INDUSTRIES VS. ITO IN ITA NO. 1372/DEL/2015 IN WHICH THIS TRIB UNAL VIDE ITS ORDER DATED 28-1-2015 QUASHED THE REASSESSMENT. I NOTED T HAT IN THAT CASE ALSO SIMILAR TYPE OF REASONS WERE RECORDED, AS REPRODUCE D BELOW: REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF M/S RADHAY SHYAM & CO. FOR THE ASSES SMENT YEAR 2006-07 A LETTER BEARING F.NO. ADDI.CIT/(HQ)/(COORD.)/ ACCOMMODATION ENTRY/2012-13/15016 DATED 26-03-2013 WAS RECEIVED FROM THE OFFICE OF THE CHIEF COMMISSIONER OF I. TAX, DELHI-I, NEW DELHI THEREIN FORWARDING LETTER BEARIN G F. NO. CIT(C)-1I/2012-13/3898 DATED 19.03.2013 RECEIVED FR OM THE COMMISSIONER OF I. TAX, CENTRAL-II, NEW DELHI ALONG WITH A CD CONTAINING THE DETAILS OF ACCOMMODATION ENTRIES PR OVIDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEE T JAIN & VAIBHAV JAIN AND DIRECTING THIS OFFICE TO TAKE NECE SSARY ACTION AS PER SECTION 148 IN RESPECT OF ENTRIES PERTAININ G 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 :- 'KINDLY FIND ENCLOSED HEREWITH LETTER DATED 13.03.2 013 OF ACIT, CENTRAL CIRCLE-10 DULY FORWARDED BY THE ADDL. CIT, CENTRAL RANGE-IV, ALONG WITH ITS ENCLOSURES ON THE SUBJECT MENTIONED ABOVE. 2. THE ASSESSMENT OF SEARCH CASES OF SH. RAKESH GUP TA, SH. VISHESH GUPTA, SH. NAVNEET JAIN & SH. VAIBHAV JAIN ARE UNDER PROCESS WITH THE ACIT, CENTRAL CIRCLE-10. DURING TH E ASSESSMENT PROCEEDINGS U/S 153A IN THE AFORESAID CA SES, DETAILS 6 REGARDING ACCOMMODATION ENTRIES GIVEN BY THE ABOVE ENTRY PROVIDERS HAS BEEN OBTAINED BY THE A.O. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS HAS B EEN OBTAINED FROM SH. RAKESH GUPTA AND SH. VISHESH GUPTA. HARD C OPY OF THE LIST IS ENCLOSED AS ANNEXURE A, DULY SIGNED BY SH. VISHESH GUPTA. THE LIST GIVES THE NAME OF THE FIRM WHICH HA S PROVIDED THE ACCOMMODATION ENTRY ALONG WITH THE NAME AND ADD RESS OF THE RECIPIENTS OF ACCOMMODATION ENTRY. 4. SH. NAVNEET JAIN & SH. VAIBHAV JAIN HAS PROVIDED ACCOMMODATION ENTRY THROUGH THIRTY-SEVEN PAPER ENTI TIES. THE LIST OF THE FIRMS GIVING ACCOMMODATION ENTRY IS ENC LOSED AS ANNEXURE-B. THE LIST OF ACCOMMODATION ENTRY RECIPI ENTS, HAS BEEN OBTAINED FROM SH. NAVENEET JAIN & SH. VAIBHAV JAIN. IT DOES NOT GIVE YEAR WISE BIFURCATION. HARD COPY OF T HE LIST IS ENCLOSED AS ANNEXURE-C, DULY SIGNED BY SH. VAIBHAV JAIN. THUS, THE FIRMS MENTION IN THE LIST 'B' HAVE PROVIDED ACC OMMODATION ENTRIES TO THE FIRMS MENTIONED IN LIST 'C'. 5. THE SOFT COPY OF THE INFORMATION IN RESPECT TO A NNEXURE A, B & C IS ALSO ENCLOSED. 6. THE INFORMATION OF ACCOMMODATION ENTRY INCLUDES A.Y. 2006-07 ALSO, WHICH IS A TIME BARRING YEAR FOR TAKI NG ACTION U/S 148. 7. THIS INFORMATION IS FORWARDED TO YOU FOR EARLY D ISSEMINATION TO VARIOUS FIELD OFFICES IN DELHI (SOFT COPY ALSO E NCLOSED).' ON EXAMINING THE LIST OF ACCOMMODATION ENTRIES PROV IDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEE T JAIN & SH. VAIBHAV JAIN PERTAINING TO A.Y. 2006-07, IT IS NOTICED THAT THE FOLLOWING ACCOMMODATION ENTRIES HAVE BEEN TAKEN BY THE ASSESSEE NAMELY M/S UNIQUE METAL INDUSTRIES:- 7 SL. NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WH OM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1. SHREE SHYAM TRADING CO. M/S UNIQUE METAL INDUSTR IES RS. 2,44,399/- 2. VISHNU TRADING CO. M/S UNIQUE METAL INDUSTRIES RS. 8,12,542/- 3. SHREE BANKEY BIHARI M/S UNIQUE METAL INDUSTRIES RS. 3,28,368/- TOTAL AMOUNT OF ENTRIES= RS. 13,85,309/- SINCE SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VALBHAV JAIN DURING THE COURSE OF ASSESS MENT PROCEEDINGS U/S 153A OF I. TAX ACT HAVE ADMITTED TH AT THEY HAVE GIVEN ACCOMMODATION ENTRIES TO THE PARTIES WHO SE LISTS HAVE BEEN PROVIDED BY THEM TO THE ACIT, CENTRAL CIR CLE-10, NEW DELHI, THEREFORE, IT IS FAIR TO CONCLUDE THAT M /S RADHAY SHYAM & CO., WHOSE NAME IS APPEARING IN THE SAID LI ST, HAS TAKEN ACCOMMODATION ENTRIES FROM SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JA IN PERTAINING TO AY. 2006-07. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME CHARGEABLE TO TAX OF M/S RADHAY SHYAM & CO. AMOUNTI NG TO RS. 4,73,855/- FOR THE F.Y. 2005-06 RELEVANT TO AY. 2006-07 HAS ESCAPED ASSESSMENT AND IT IS A FIT CASE FOR INI TIATION OF PROCEEDINGS U/S 147 OF THE ACT. PROPOSAL IN THE PRESCRIBED FORM FOR THE AY. 2006-07 (F. Y. 2005-06) IS SUBMITTED HEREWITH FOR KIND CONSIDERATI ON AND NECESSARY APPROVAL U/S 151(2) OF THE I. TAX ACT, 19 61 AS THE SAME IS GETTING BARRED BY LIMITATION ON 31/3/2013. IF APPROVED, NOTICE U/S 148 OF THE ACT MAY BE ISSUE D. SD/- 28.3.2013 (PAWAN KUMAR VASHIST) INCOME TAX OFFICER WARD-39(3), NEW DELHI. 8 6. SINCE IN THE CASE OF UNIQUE METAL INDUSTRIES (S UPRA), SIMILAR REASONS WERE RECORDED, AS HAVE BEEN RECORDED IN THE CASE OF THE ASSESSEE AND THE PARTY FROM WHICH THE ASSESSEE MADE THE PURCHASES WERE SHR I BANKEY BIHARI TRADING CO., WHICH IS A PARTY IN THE CASE OF THE ASSESSEE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL DATED 28-1- 2015 IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA), I QUASH THE REASSESSMENT. 7. NOW COMING TO THE MERIT ABOUT THE SUSTENANCE 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 SUBMISS IONS AND GOING THROUGH THE ORDER OF THE TRIBUNAL, I NOTED THAT THIS TRIBUNAL V IDE ITS ORDER DATED 28-10- 2015 IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA ), DELETED SIMILAR ADDITION BY OBSERVING IN PARA 27 AS UNDER: 27. AS REGARDS THE ADDITIONOF20% SUSTAINED BY THE LEARNED 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 LEARNED CIT(A) HAVING HELD THAT TAX HAS TO BE LEVIED ON REAL INCOME AND THE PROFIT CANN OT BE ASCERTAINED WITHOUT DEDUCTING THE COST OF PURCHASES FROM THE SALES AS OTHERWISE IT AMOUNT TO LEVY OF TAX ON GROS S RECEIPT, SHE OUGHT TO HAVE APPLIED' PROFIT RATE IN THIS NATURE O F TRADE. ESTIMATING PROFIT AT THE RATE OF 20% BY TAKING INTO CONSIDERATION THE OR VISIONS OF SECTION 40A(3) WILL NOT LEAD TO D ETERMINATION OF CORRECT REAL INCOME. SECTION 40A(3) IS MEANT FOR A DIFFERENT PURPOSE WHEN THE ASSESSEE HAS MADE PURCHASES IN CA SH. THIS PROVISION CANNOT BE APPLIED IN SUCH CASES. ONCE THE PURCHASES ARE HELD TO BE BOGUS THEN THE TRADING RESULTS DECLA RED BY THE ASSESSEE CANNOT BE ACCEPTED AND RIGHT COURSE IN SU CH CASE IS TO REJECT BOOKS OF ACCOUNTS AND PROFIT HAS TO BE ESTIM ATED BY APPLYING A COMPARATIVE PROFIT RATE IN THE SAME TRAD E. THOUGH 9 THERE CAN BE A LITTLE GUESS WORK IN ESTIMATING PROF IT RATE BUT SUCH PROFIT RATE CANNOT BE PUNITIVE. 8. LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORDE R OF CIT(A) AS WELL AS THAT OF THE AO, BUT COULD NOT BRING TO OUR KNOWL EDGE ANY COGENT MATERIAL OR EVIDENCE WHICH MAY COMPEL US NOT TO FOLLOW THE D ECISION OF THIS BENCH IN ITA NO. 1372/DEL/2015 (SUPRA). I, THEREFORE, RESPEC TFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF UNIQUE ME TAL INDUSTRIES (SUPRA), DELETE THE ADDITION AS SUSTAINED BY THE LD. CIT(A) AMOUNTING TO RS.94,771/-. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30/11/2015. SD/- (P.K. BANSAL ACCOUNTANT MEMBER DATED: 30/11/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.