Sagar International Pvt Ltd, Delhi V. ITO Ward 7(2), New Delhi

ITA 2456/DEL/2019

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 2164 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 20-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Document seized; Accommodation entries; Competent authority; Assessment record; Reason to believe; Documents seized; Reassessment proceedings
• Section: 250; 292BB; 131

Judgement Text

SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 1 OF 18 , , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . .. . . .. . ./ ././ ./ I.T.A NO.2456/DEL/2019 / ASSESSMENT YEAR: 2006-07 SAGAR INTERNATIONAL PVT. LTD., FB/81, EAST MOHAN CO-OP, INDL, ESTATE, EXTN., BADARPUR, DELHI 110044. [PAN: AAACS 3043 E] V S . THE INCOME TAX OFFICER, WARD-7(2), NEW DELHI. / APPELLANT !' /RESPONDENT /ASSESSEE BY SHRI S .K. GUPTA CA /REVENUE BY SHRI S.S.R ANA CIT - DR / DATE OF HEARING: 04 . 11 .2019 $' /PRONOUNCEMENT ON: 0 6 . 1 1 .2019 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-8, NEW DE LHI DATED 14.01.2019 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 TO 5 RELATES TO REASSESSMENT PROCEEDING S U/S.147 AND ISSUE OF NOTICE U/S.148 OF THE ACT WITH OUT SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 2 OF 18 APPLICATION OF MIND ON THE MATERIAL PROVIDED BY THE INVESTIGATION WING OF THE DEPARTMENT AND GIVING MEC HANICAL APPROVAL OF 151(2) OF THE ACT WITH PROPER SATISFACT ION AND REASONS AND COMPETENT AUTHORITY. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING ALUMINUM I N GOODS FROM ALLUMINIUM SCRAP. THE ASSESSING OFFICER(AO) H AD RECEIVED AN INFORMATION FROM ACIT, CENTRAL CIRCLE-1 0, NEW DELHI THAT THE ASSESSEE WAS BENEFICIARY OF ACCOMMOD ATION ENTRIES PROVIDED BY SHRI RAKESH GUPTA, SHRI VISHESH GUPTA, SHRI NAVNEET JAIN AND SHRI VAIBHAV JAIN THROUGH BOG US ENTRIES VIDE THE CONCERNS NAMELY M/S.SHREE BANKEY B IHARI TRADING CO., M/S.VISHU TRADIPNG CO., AND M/S. SHRE E SHYAM TRADING CO., AMOUNTING OF RS.50,67,260/-. THE AO H AS SCRUTINIZED THE AUDITED ACCOUNTS OF THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION AND FOUND THAT THE ASSESSEE HAD DISCLOSED THESE TRANSACTIONS BUT THE FACT THAT THE ASSESSEE C OMPANY OBTAINED ACCOMMODATION ENTRIES FROM THE AFORESAID T HREE PARTIES CONTROLLED BY SHRI RAKESH GUPTA, SHRI VISHE SH GUPTA, SHRI NAVNEET JAIN AND SHRI VAIBHAV WAS NOT DISCLOSE D. SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 3 OF 18 THEREFORE, THE AO HAD REASON TO BELIEVE THAT THE TA XABLE INCOME OF RS.50,67,260/- REPRESENTED BY THE TRANSACTIONS H AS ESCAPED ASSESSMENT DUE TO FAILURE OF THE ASSESSEE TO DISCLO SE MATERIAL FACTS TRULY AND FULLY NECESSARY FOR TO MAKE ASSESSM ENT FOR A.Y. 2006-07. ACCORDINGLY, THE AO HAD ISSUED A NOTICE U /S.148 ON 30.03.2013 WHICH WERE DULY SERVED UPON THE APPELLAN T. THE ASSESSEE VIDE LETTER DATED 25.04.2014 SUBMITTED BEF ORE THE AO THAT ORIGINAL RETURN OF INCOME FILED ON 15.11.2007 MAY BE TREATED AS FILED IN RESPONSE TO NOTICE U/S.148 OF T HE ACT. THEREAFTER, A COPY OF REASONS RECORDED FOR RE-OPENI NG OF THE CASE WAS PROVIDED TO THE ASSESSEE. THE ASSESSEE FI LED ITS OBJECTIONS AGAINST REOPENING OF CASE WHICH WERE STA TED TO BE DISPOSED OFF BY THE AO VIDE ORDER DATED 19.03.2014. SINCE THE ASSESSEE DID NOT FILE NECESSARY MATERIAL IN FORM RE BUTTAL OF FACTS BROUGHT ON RECORD BY THE AO, THE AO HAS MADE ADDITION OF RS.53,58,9548/- AND IN RESPECT OF AFORESAID THRE E PARTIES AND ALSO IN RESPECT OF M/S.OM AGENCIES. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BE FORE THE LEARNED CIT(A) CHALLENGING THE REASSESSMENT PRO CEEDINGS ON THE GROUND OF NON-APPLICATION OF MIND BY AO AS H E ACTED ON SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 4 OF 18 THE INFORMATION PROVIDED BY THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-10, NEW DELHI. HOWEVER, THE LE ARNED CIT(A) OBSERVED THAT THE AO HAS GIVEN COMPLETE DETAILS OF PURCHASE ON TRANSACTION IN REASONS RECORDED AND THEREFORE, IT W AS HELD THAT THE AO HAS INDEPENDENTLY APPLIED HIS MIND ON THE IN FORMATION PROVIDED BY THE OTHER AUTHORITY. FURTHER, AT THE S TAGE OF RECORDING REASONS, NO FINAL FINDINGS IS REQUIRED TO BE GIVEN AND ONLY PRIMA-FACIE BELIEF IS REQUIRED TO BE REACHED B Y THE ASSESSING AUTHORITY. THE AO WAS CORRECT IN INITIAT ING REASSERT PROCEEDINGS U/S.147 OF THE ACT ON THE BASIS OF INFO RMATION PROVIDED BY THE OTHER AUTHORITY. THE LEARNED CIT(A ) ALSO RELIED ON THE DECISION OF RAYMONDS WOOLEN MILLS LTD., VS. ITO 236 ITR 4 (SC) AND DECISION OF JURISDICTIONAL HONBLE DELHI HIGH COURT IN THE CASE OF PARAMOUNT COMMUNICATION LTD., VS. PC IT 392 ITR 444 (DELHI) WHEREIN IT WAS HELD THAT INFORMATIO N BY THE INVESTIGATION WING OR OTHER AUTHORITY IS VALID MATE RIAL FOR INITIATING REASSESSMENT PROCEEDINGS. THIS DECISION OF THE HONBLE DELHI HIGH COURT HAS BEEN APPROVED BY THE H ONBLE SUPREME COURT IN 250 TAXMANN 100 (SC). THE LD.CIT( A) FURTHER OBSERVED THAT SINCE THE ASSESSEE HAS PARTIC IPATED IN THE SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 5 OF 18 ASSESSMENT PROCEEDINGS WHICH GOES TO PROVE THAT THE ASSESSEE HAD EFFECTIVE KNOWLEDGE OF INITIATION OF REASSESSME NT PROCEEDINGS AND THEREFORE RAISING THE GROUND OF NON -SERVICE OF NOTICE AS APPELLATE STAGE ON THE BASIS OF SOME TECH NICAL ERROR IN THE ADDRESS PAN IS AFTERTHOUGHT, ACCORDINGLY THE RE OPENING OF ASSESSMENT WAS UPHELD. 5. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEF ORE THIS TRIBUNAL ON THE ABOVE AFORESAID GROUND. THE LD. CO UNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT NOTICE U/S.14 8 OF THE ACT [PB-32] HAS BEEN ISSUED ON THE PAN: AAICS0816R WHIC H IS ALLOTTED TO A DIFFERENT ENTITY SITUATED IN THE STAT E OF MAHARASHTRA WITH REGISTERED AT VARDHA THAT COMPANY REGISTRATION NO.145024 WITH DATE OF INCORPORATION O F 12.03.2014 WITH DIFFERENT SET OF DIRECTORS OF WHICH ADDRESS IS MENTIONED AS FB/81, EAST MOHAN CO-OP INDUSTRIAL EST ATE, EXTENSION, BADARPUR, DELHI WHEREAS THE ASSESSEES P AN IS AAACS3043E IS WITH ADDRESS AS BF/B-1, MOHAN CO-OPER ATIVE INDUSTRIAL ESTATE, MATHURA ROAD, BADARPUR, NEW DELH I. THEREFORE, THE NOTICE U/S.148 DATED 30.03.2013 HAS BEEN ISSUED ON INCORRECT ADDRESS OF THE APPELLANT, WHICH SHOWS NON- SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 6 OF 18 APPLICATION OF MIND OF THE AO. FURTHER, AS PER DIS CUSSION IN PARA 9 AT PAGE 3 OF THE ASSESSMENT ORDER WHICH IS E VIDENT THAT THE PHOTO COPIES OF THE STATEMENT OF THE CONCERNED PARTIES AND SEIZED DOCUMENTS GATHERED DURING PROCEEDINGS U/S.15 3A / 153C WERE PROVIDED BY THE ACIT, CENTRAL CIRCLE-10, NEW DELHI ON 14.03.2014. THEREFORE, THE MATERIAL ON WHICH TH E AO FORMED HIS BELIEF WAS NOT AVAILABLE AT THE TIME OF RECORDING OF REASONS. THE LEARNED COUNSEL PLACED RELIANCE IN TH E CASE OF UNIQUE METAL INDUSTRIES VS. INCOME TAX OFFICER IN I TA NO. 1372/DEL/2015 DATED 28.10.2015 OF ITAT DELHI AND SU BMITTED THAT THE DOCUMENTS OBTAINED BY THE AO DURING THE AS SESSMENT PROCEEDINGS DEMONSTRATE THAT THERE WAS NO INFORMATI ON WITH THE AO EXCEPT LETTER ISSUED FROM THE ACIT, CENTRAL CIRCLE-10, NEW DELHI. THEREFORE, THE REASSESSMENT MAY BE QUAS HED IN THE LIGHT OF DECISION OF UNIQUE METAL INDUSTRIES (SUPRA ). THE LEARNED COUNSEL FURTHER PLACED RELIANCE FROM THE DE CISION IN THE CASE OF TARUN METAL CO., VS. ITO, WARD-39(3), N EW DELHI, ITA NO.407/DEL/2016 DATED 30.11.2016 IN WHICH SAME VERY PARTIES WERE INVOLVED OF WHICH REASSESSMENT PROCEED INGS SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 7 OF 18 U/S.148 WERE QUASHED FOLLOWING THE DECISION IN THE CASE OF UNIQUE METAL INDUSTRIES(SUPRA). 6. PER CONTRA, THE LD.DEPARTMENTAL REPRESENTATIVE(DR) SUBMITTED THAT AS PER PROVISIONS OF SECTION 292B TH E TYPOGRAPHICAL ERROR IN THE NOTICE U/S.148 IS NOT MA TERIAL GROUND FOR QUASHING THE PROCEEDINGS INITIATED IN RE OPENING OF ASSESSMENT. THE LD.DR FURTHER SUBMITTED THAT AS PE R PROVISIONS OF SECTION 292BB WHERE THE ASSESSEE HAS PARTICIPATED IN THE ASSESSMENT PROCEEDINGS WHICH GO ES TO PROVE THAT THE ASSESSEE HAD EFFECTIVE KNOWLEDGE OF INITIA TION OF REASSESSMENT PROCEEDINGS. THEREFORE, ANY MATERIAL DEFECT OF NOTICE BEING VAGUE, NON-SPECIFIC ARE SAVED BY THE P ROVISIONS OF SAID SECTION. THE LD.DR, ON MERITS SUBMITTED THAT THE AO HAS GIVEN FINDINGS THAT THE ASSESSEE HAS INDULGED IN TA KING ACCOMMODATION ENTRIES FROM THE AFORESAID IMPUGNED G ROUP OF CONCERNS WHICH WERE ADMITTED TO BE ACCOMMODATION EN TRY IN THE CASE OF UNIQUE METAL INDUSTRIES(SUPRA) AND TARU N METAL CO., ARE DISTINGUISHABLE ON FACTS AS IN THESE CASES THE TRIBUNAL WAS PRESUMING THAT THE MATERIAL WAS NOT AVAILABLE A T THE TIME OF RECORDING OF REASONS WHEREAS IN THE INSTANT CASE THE AO HAS SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 8 OF 18 DULY VERIFIED THE MATERIAL INFORMATION RECEIVED BY HIM WITH THE AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFO RE, THESE DECISIONS ARE NOT APPLICABLE IN THE PRESENT CASE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE NOT ICE U/S.148 WAS ISSUED ON 30.03.2013 IN THE NAME OF THE ASSESSE E AT THE ADDRESS OF FB/81, EAST MOHAN CO-OP. INDUSTRIAL ESTA TE, BADARPUR, DELHI. HOWEVER, THERE IS TYPOGRAPHICAL E RROR IN GIVING THE ADDRESS AS FB/81 INSTEAD OF BF/B-1 AND M ENTIONING OF PAN. HOWEVER, IT IS THE FACT THAT THE NOTICE U/ S.148 WAS DULY RECEIVED BY THE ASSESSEE AND THE ASSESSEE VIDE LETTER DATED 07.05.2013 [PB-33] HAS ACKNOWLEDGED THE RECEIPT OF NOTICE U/S.148 OF THE ACT TAKING SOME OBJECTION REGARDING MENTIONING INCORRECT PAN ADDRESS. FURTHER, THE ASSESSEE VIDE LETTER DATED 25.04.2014 SUBMITTED BEFORE THE AO THAT THE ORIGINA L RETURN OF INCOME FILED ON 15.11.2007 MAY BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.148. THE OBJECTION S FILED BY THE ASSESSEE WERE ALSO DISPOSED OFF BY THE AO VIDE SEPA RATE ORDER. THUS, WHERE THE CONTENT OF THE NOTICE ARE CORRECT A ND WHICH HAS BEEN ISSUED IN THE CORRECT CONTEXT THEN TYPOGRA PHICAL ERROR SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 9 OF 18 IN ADDRESS OF PAN DOES NOT HAVE MATERIAL IMPACT AS PER PROVISIONS OF SECTION 292B OF THE ACT. WE, FURTHER FIND THAT THE ASSESSEE HAS DULY RECEIVED THE NOTICE U/S.148 OF TH E ACT AND DULY PARTICIPATED IN THE ASSESSMENT PROCEEDINGS AND ALSO STATED THAT THE ORIGINAL RETURN FILED BY IT MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148, THEREFORE ANY DEFECT IN THE NOTICE PRESUMED TO HAVE BEEN VALIDLY SERVED AS PER PROVISIONS OF SECTION 292BB OF THE ACT. WITH REGAR D TO CONTENTION OF THE ASSESSEE THAT THE AO HAS FAILED T O APPLY HIS MIND AND NOTICE HAS BEEN ISSUED WITHOUT APPLICATION OF MIND, WE FIND THAT THE AO WAS IN POSSESSION OF THE INFORM ATION FROM THE ACIT, CENTRAL CIRCLE-10, NEW DELHI WHICH STATED THAT THE PARTIES UNDER CONSIDERATION FROM WHOM THE ASSESSEE HAS SHOWN TRANSACTIONS WERE ONLY ACCOMMODATION ENTRY PR OVIDER, WHICH WAS ADMITTED IN THEIR STATEMENT RECORDED U/S. 131 OF THE ACT. WE, FURTHER NOTE FROM THE REASONS RECORDED AT PARA 2, PAGE 36 THAT THE AO HAS CATEGORICALLY MENTIONED THA T HE HAS SCRUTINIZED THE AUDITED ACCOUNTS FOR THE ASSESSMENT YEAR ENDING MARCH 2006 WHICH SHOWS THAT THE ASSESSEE HAS DISCLOSED THESE TRANSACTIONS BUT THE FACT THAT THE ASSESSEE SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 10 OF 18 COMPANY HAS OBTAINED ACCOMMODATION ENTRIES FROM THE ABOVE MENTIONED THREE ENTITIES CONTROLLED BY SHRI RAKESH GUPTA, SHRI VISHESH GUPTA, SHRI NAVNEET JAIN AND SHRI VAIBHAV J AIN WAS NOT DISCLOSED. THE ENTRY PROVIDER ENTRIES DID NOT HAVE ANY GENUINE BUSINESS ACTIVITY AS ADMITTED BEFORE ACIT, CENTRAL CIRCLE-10, NEW DELHI, THEREFORE, THE AO HAD REASON TO BELIEVE THAT BY THE TAXABLE INCOME OF RS.50,67,260/- REPRES ENTED THE TRANSACTIONS WITH THE ABOVE CITED ENTITIES ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE COMPANY TO DISCLOSE MATERIAL FACTS TRULY AND FULLY NECESSARY TO MAKE AS SESSMENT FOR A.Y. 2006-07. THUS, WE FIND THAT THE AO HAS DULY A PPLIED HIS MIND AND VERIFIED THE INFORMATION FROM THE AUDITED ACCOUNTS OF THE ASSESSEE. THEREFORE, THE CONTENTION OF THE LD. COUNSEL THAT THE NOTICE U/S.148 HAS BEEN ISSUED WITHOUT APPLICAT ION OF MIND DOES NOT HOLD WATER. FURTHER, THE DECISION RELIED IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA) AND TARUN METAL CO. , (SUPRA) ARE ALSO DISTINGUISHABLE ON FACTS AS IN THESE CASES , THE AO HAS NOT EXAMINED THE INFORMATION WITH REFERENCE TO BOOK S OF ACCOUNTS AND RETURN OF INCOME OF THE ASSESSEE. THE REFORE, NOTICE U/S.148 IN THOSE CASES ISSUED WITHOUT APPLIC ATION OF SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 11 OF 18 MIND WHEREAS IN THE INSTANT CASE THE AO HAS DULY AP PLIED HIS MIND AND OBTAINED NECESSARY APPROVAL AS PER PROVISI ONS OF THE ACT. WE, FURTHER NOTE THAT WHILE RECORDING REASONS , IT IS THE PRIMA-FACIE BELIEF WHICH IS TO BE FORMED AS HELD BY HONBLE SUPREME COURT IN THE CASE OF RAYMOND WOLLEN MILLS L TD., VS. ITO 236 ITR 4 (SC) WHEREIN IN WAS HELD THAT THE AO IS NOT CONCLUSIVELY PROVED THE ESCAPEMENT OF INCOME TO ASS UME JURISDICTION U/S.147 OF THE ACT, HE HAS TO ONLY FRAM E PRIMA- FACIE BELIEF. FURTHER, THE HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF PARAMOUNT COMMUNICATION LTD., VS. PCIT 392 ITR 444 (DELHI) HAS HELD THAT INFORMATION BY TH E INVESTIGATION WING OR OTHER AUTHORITY IS VALID MATE RIAL FOR INITIATING ASSESSMENT PROCEEDINGS. THIS DECISION O F HONBLE DELHI HIGH COURT HAS BEEN APPROVED BY THE HONBLE S UPREME COURT IN THE CASE 250 TAXMANN 100 (SC). IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE RE OPENING ASSESSMENT IS VALID IN THIS CASE, ACCORDINGLY THE G ROUND NO.1 TO 5 TAKEN BY THE ASSESSEE ARE THEREFORE DISMISSED. 8. GROUND NO.6 RELATES TO CONFIRMING ADDITION OF RS.12,25,610/- BEING DIFFERENCE OF AVERAGE RATE PUR CHASES FROM SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 12 OF 18 ALLEGED BOGUS PARTIES WITH AVERAGE RATE OF PURCHASE S FROM OTHER PARTIES IGNORING THE FACT THAT THE SALES MADE BY TH E APPELLANT HAS NOT BEEN DOUBTED BY THE AO OR LD.CIT(A). 9. BRIEF FACTS AS EMERGED FROM THE ASSESSMENT RECORD A ND APPELLATE ORDER ARE THAT THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES / BOGUS PURCHASES BILLS FROM M/S.SHREE BANKEY BIHARI TRADING CO.,; M/S.VISHU TRA DING CO.,; M/S.SHREE SHYAM TRADING CO., AND M/S.OM AGENC IES AMOUNTING RS.53,58,954/- WHICH WERE ADMITTED BY THE ENTRY PROVIDER IN THEIR STATEMENT BEFORE THE ACIT, CENTRA L CIRCLE-10, NEW DELHI THAT THEY HAVE PROVIDED BOGUS PURCHASE ACCOMMODATION ENTRIES FROM THEIR AFORESAID CONCERNS . THEREFORE, THE AO CONCLUDED THAT THE PURCHASE SHOWN BY THE ASSESSEE COMPANY FROM THE AFORESAID CONCERNS WERE B OGUS. ACCORDINGLY, THE AO MADE THE ADDITION OF RS.53,58,9 54/- ON ABOVE ACCOUNTS. 10. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BE FORE LD.CIT(A) WHEREIN IT WAS CONTENDED THAT THE AFORESA ID PURCHASES WERE DULY ACCOUNTED IN THE BOOKS OF ACCOU NTS AND SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 13 OF 18 SHOWN IN THE STOCK OF REGISTER. THE ASSESSEE HAS D ECLARED TURNOVER OF RS.81.90 LAKHS AND FILED COP Y OF TRADING AND PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WERE FILE D, IT WAS REFLECTED ON THE RETURN OF INCOME. THE ASSESSEE HA S ALSO PRODUCED BOOKS OF ACCOUNTS, THE AUDITED ACCOUNTS. THE ASSESSEE PURCHASED RAW MATERIAL OF 99075 KG OF ALLU MINIUM SCRAP DURING THE YEAR. THE ASSESSEE HAS WAS HAVING OPENING STOCK OF 13,284 KG WHICH WAS USED FOR MANUFACTURING OF ALLUMINIUM INGOTS. DURING THE YEAR 10,5447 KG SCRA P WAS CONSUMED TO PRODUCE ALLUMINIUM SILLY OF 93216 KG AN D BY PRODUCT (IRON AND DROSS) OF 14,085 KG. THEREFORE, THE LD.CIT(A) WAS OF THE VIEW THAT APPELLANT HAD MADE THE PURCHAS ES OF ALLUMINIUM SCRAP WHICH SHOWN TO HAVE BEEN PURCHASED FROM PARTIES WHICH ARE BOGUS OR FICTITIOUS. THEREFORE, THE LD.CIT(A) HAS INCLINED TO ACCEPT THE PURCHASES BUT THE AMOUNT ADOPTED TO PROFIT AND LOSS ACCOUNT ON ACCOUNT OF SUCH PURCH ASES WAS REWORKED OUT BY APPLYING AVERAGE RATE OF PURCHASE I N THE NAME OF BOGUS PARTIES I.E. RS.77.89 PER KG WHEREAS THE A VERAGE RATE OR PURCHASE FROM OTHER PARTIES OF RS.60.08 PER KG A ND THUS THERE WAS OVERSTATEMENT OF PURCHASES OF RS.12,25,61 0/-. SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 14 OF 18 ACCORDINGLY, THE ADDITION OF RS.12,25,610/- WAS UPH ELD AND BALANCE ADDITION OF RS.41,33,344/- WAS DELETED. 11. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEF ORE THIS TRIBUNAL. THE LEARNED COUNSEL SUBMITTED THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED. THE ASSESSEE HAS SHOWN PURCHASES IN TERMS OF QUANTITY. THE ASSESSEE HAS S HOWN OPENING STOCK, CONSUMPTION OF STOCK AND MATERIAL PR ODUCED DURING THE YEAR UNDER CONSIDERATION WHICH HAS BEEN DULY REFLECTED IN THE STOCK REGISTER. THUS, THE QUANTIT Y OF PURCHASE ARE TALLIED. FURTHER THE AO AND LD.CIT(A) HAS NOT DOUBTED THE SALES MADE BY THE ASSESSEE. THEREFORE, THE LD.CIT( A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION ON ACCOUNT OF A VERAGE RATE OF PURCHASE FROM THE ACCOMMODATION AND THIRD PARTY WITHOUT REJECTING BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMIT TED THAT THE ASSESSEE HAS DISCLOSED GROSS PROFIT @4.82% ON TOTAL TURNOVER OF RS.81.90 LAKHS IN COMPARISON TO PRECEDING YEARS OF GROSS PROFIT RATE OF 1.92%, THEREFORE THE GROSS PROFIT SH OWN BY THE ASSESSEE IS HIGHER THAN THE PREVIOUS YEAR [PB-101]. THE LD.COUNSEL FURTHER PLACED RELIANCE IN THE CASE OF U NIQUE METAL INDUSTRIES LTD., (SUPRA) TARUN METAL CO., (SUPRA) W HEREIN THE SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 15 OF 18 ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES OF AFOR ESAID PARTIES WERE DELETED. 12. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE AO FOR DELETI NG THE ADDITION OF ENTIRE BOGUS PURCHASES FROM THE AFORESA ID PARTIES. THE LD.DR FURTHER PLACED RELIANCE IN THE CASE OF N. K.PROTEIN LTD., VS. DCIT 389 ITR 541 (GUJ) SUBMITTED THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF 100% BOGUS PURCHASES . IT WAS FURTHER SUBMITTED THAT SLP OF N.K.PROTEIN HAS ALSO DISMISSED IN SLP(C) NO.963/2017 DATED 16.01.2017. 13. IN REJOINDER TO ABOVE, THE LD.COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE DECISION OF N.K.PROTEIN IS DISTI NGUISHABLE ON THE FACTS THAT IN THE SAID CASE A SEARCH WAS CONDUC TED LEADING TO SEIZING RECOVERY OF CHEQUES, VOUCHERS OF NUMBER OF CONCERNS ALONG WITH BOOKS, BLANK PURCHASE BILLS, BOOKS, LETT ER HEADS FROM SEARCH, THUS, THERE WAS SUPPRESSION OF PROFIT WHICH IS NOT IN THE CASE OF ASSESSEE WHERE THE ASSESSEE HAS SHOW N AT HIGHER GROSS PROFIT OF 4.82% AS COMPARED TO LAST YEAR GROS S PROFIT OF 1.92%. SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 16 OF 18 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASS ESSEE HAS MADE PURCHASES OF SCRAP OF 53.58 LAKHS FROM THE AFO RESAID FOUR PARTIES, HOWEVER, THE PARTIES HAVE ADMITTED IN THEI R STATEMENTS THAT THEY HAVE ISSUED BOGUS PURCHASE BILLS. THEREF ORE, GENUINENESS OF THE PURCHASES WERE NOT PROVED. WE, FURTHER FIND THAT THE ASSESSEE HAS SUBMITTED COPIES OF PURC HASE BILLS ISSUED BY THE AFORESAID PARTIES AND PAYMENT IS MADE BY THE ACCOUNT PAYEE CHEQUES. THIS SHOWS THAT THE PURCHAS ES HAVE BEEN MADE, MAY NOT BE FROM THE PARTY FROM WHOM PURC HASE BILLS HAVE BEEN OBTAINED. THE ONLY POSSIBILITY IS THEREFORE, IS THAT THE ASSESSEE MIGHT HAVE INFLATED THE PURCHASES AS SALES HAS NOT BEEN DOUBTED BY THE AO. WE, FURTHER FIND T HAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND D ETAILS OF CLOSING STOCK PURCHASES CONSUMING AND CLOSING STOCK HAS BEEN DULY FILED. THE AO HAS ADDED THE ENTIRE BOGUS PURC HASES WHEREAS THE LD.CIT(A) HAS REDUCED THE SAME BY WORKI NG OUT THE AVERAGE RATE OR PURCHASES AS COMPARED TO OTHER PART IES. HOWEVER, WE ARE OF THE CONSIDERED OPINION THAT IT I S NOT JUST OR REASONABLE TO CALCULATE THE AVERAGE RATE OF PURCHAS ES. WE, SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 17 OF 18 FURTHER FIND THAT THEIR SALES ARE NOT DOUBTED AND T HERE CANNOT BE ANY SALES WITHOUT MAKING PURCHASES. WE, FURTHER FIND THAT THE DECISION OF N.K.PROTEIN (SUPRA) RELIED BY THE D R IS DISTINGUISHABLE ON THE FACTS ON THE GROUND THAT IN THAT CASE A SEARCH HAS TAKEN PLACE WHEREIN SEIZURE AND RECOVERY BLANK SIGNED CHEQUES, VOUCHERS OF NUMBER OF CONCERNS ALON G WITH BOOKS, BLANK PURCHASE BILLS, BOOKS, SEARCHED PERSON S WERE SEIZED IN THE CASE OF ASSESSEE, THE ASSESSEE IS FUR NISHED A COPIES OF PURCHASE BILLS, PAYMENT MADE BY ACCOUNT P AYEE AND SHOWN SALES OF RS.81 LAKHS. THEREFORE, WE ARE OF T HE CONSIDERED OPINION THAT IT WOULD BE FAIR AND JUST TO APPLY 5% GROSS PROFIT RATE ON THE UNVERIFIABLE PURCHASES IN THE LIGHT OF DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF MAYANK DIAMONDS [TAX APPEAL NO.200 OF 2003 DATED 17.11.201 4] WHEREIN 5% GROSS PROFIT UNVERIFIABLE PURCHASE WERE HELD TO BE REASONABLE. THEREFORE, IN THE LIGHT OF ABOVE SUCH FACTS, THE ADDITION OF RS.53,58,954/- IS RESTRICTED TO 5% WHIC H IS IN COMMENSURATE WITH THE GROSS PROFIT RATE DISCLOSED B Y THE ASSESSEE AT 4.82%, ACCORDINGLY THE ADDITION OF RS.2 ,67,948/- [5% OF 53,58,854/-] IS SUSTAINED AND BALANCE ADDITI ON OF SAGAR INTERNATIONAL PVT. LTD., VS. ITO, WARD-7(2), NEW DELHI,/ITA NO.2456/DEL/2019 FOR A.Y. 2006-07 PAGE 18 OF 18 RS.9,57,662/- IS DELETED, THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 16. ORDER PRONOUNCED IN THE OPEN COURT ON 06-11-2019. SD/- SD/- (AMIT SHUKLA) (O.P.MEENA) ( (( ( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER) / NEW DELHI , DATED : 6 TH NOVEMBER , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, NEW DELHI