Metal India, Delhi V. ITO, New Delhi

ITA 2862/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4321 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU MUKHARJEE
• Assessee Lawyers: ASHISH GOEL
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination; Question of law; Tangible material; Accommodation entries
• Section: 40A(3); 143(3); 142(1)

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2862/DEL/2016 A.Y. 2006-07 METAL INDIA VS. ITO, WARD 39(2), 4953, SADAR BAZAR, NEW DELHI DELHI 110 006 (PAN: AAFFM6863Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH GOE L, CA DEPARTMENT BY : SMT. RANU MUKHARJEE, SR. DR. O R D E R PER H.S. SIDHU, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 18.3.2016 OF THE LD. CIT(A)-20, NEW DELHI RELEVANT TO ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT AN ORIGINAL RET URN OF INCOME FOR THE AY 2006-07 WAS FILED BY THE ASSESSEE DECLARING TOTAL INCOM E OF RS. 4,42,610/- AND THE SAME WAS PROCESSED UNDER SECTION 143 (1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). LATER, A LETT ER DATED 26.3.2013 WAS RECEIVED FROM THE OFFICE OF THE CHIEF COMMISSIONER OF I NCOME TAX, DELHI-I, NEW DELHI THEREIN FORWARDING LETTER DATED 19.3.2013 RECEIVED FROM THE COMMISSIONER OF INCOME TAX, CENTRAL 2 II, NEW DELHI AL ONGWITH CD 2 CONTAINING THE DETAILS OF THE ACCOMMODATION ENTRIES PROV IDED BY SH. RAKESH GUPTA, SH. VISHESH GUPTA, SH. NAVNEET JAIN AND SH. V AIBHAV JAIN WAS APPEARING. AFTER GOING THROUGH THE COMPLETE LIST AND INDENTIFYING THE PARTIES AND AFTER RECORDING THE REASONS, THE AO MADE AN ADDITI ON OF RS.79,86,868/- ON ACCOUNT OF BOGUS PURCHASE AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 84,29,480/- U/S. 143(3)/147 OF THE I.T. ACT, 19 61 VIDE HIS ORDER DATED 06.03.2014. AGAINST THE ORDER OF THE AO, THE A SSESSEE CAME IN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORD ER DATED. 18.03.2016 NOT ONLY DISMISSED THE APPEAL OF THE ASSESSEE BUT ALSO ENHA NCED THE ADDITION MADE BY THE AO OF RS. 79,86,868/- TO RS. 99, 78,004/- WHICH INCLUDES ENHANCEMENT OF RS. 3,93,705/-ON ACCOUNT OF COMMISS ION PAID ON OBTAINING THE ACCOMMODATION ENTRIES AND ENHANCEMENT OF 20% OF THE PURCHASES OF RS. 15,97,431/- ON ACCOUNT OF UNDERSTATEMENT OF THE PROFIT FOR THE SAME. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL CHALLENGING THE REOPENIN G OF THE ASSESSMENT AS WELL AS THE ADDITIONS SUSTAINED/MADE BY THE CIT(A). THE SAID APPEAL CAME UP FOR HEARING BEFORE THIS TRIBUNAL. THE ITAT VIDE O RDER DATED 25.5.2017 HELD THAT REOPENING OF THE ASSESSMENT WAS BAD IN LAW. SI NCE THE REOPENING WAS HELD TO BE BAD IN LAW, THE ITAT DID NOT ADJUDICAT E UPON THE OTHER GROUNDS RAISED BY THE ASSESSEE ON THE MERIT OF THE ADDITI ON. THE REVENUE FILED APPEAL BEFORE THE HONBLE HIGH COURT OF DELHI A GAINST THE ORDER DATED 25 TH MAY, 2017 PASSED BY THE ITAT. THE HONBLE COURT VIDE ITS ORDER DT. 07.02.2018 HELD THAT THE REASSESSMENT IN THIS CASE WAS VAL IDLY REOPENED AND ACCORDINGLY REVERSED THE ORDER OF THE ITAT ON THE ISSUE OF THE REOPENING AND DIRECTED THE ITAT TO EXAMINE THE MERIT S OF THE ASSESSEES APPEAL. THE RELEVANT FINDINGS OF THE HONBLE HIGH COUR T ARE AS UNDER: THIS COURT IS OF THE OPINION THAT THE REASSESSMENT IN TH IS CASE WAS VALIDLY BASED ON FRESH MATERIAL IN THE FORM OF INFORM ATION RECEIVED BY THE CONCERNED AUTHORITIES DURING THE COURSE OF SEARCH 3 ASSESSMENT AND DISCLOSURES MADE. THEY WOULD FIT THE DESCRIP TION OF TANGIBLE MATERIAL UNAVAILABLE WITH THE REVENUE AT THE TIME THE ORIGINAL ASSESSMENT WAS COMPLETED. FURTHERMORE, IN THE P RESENT CASE, THE ORIGINAL ASSESSMENT WAS NOT COMPLETED UNDER SECTIO N 143(3) OF THE ACT, RATHER, MERELY FRAMED UNDER SECTIO N 142(1) OF THE ACT. HAVING REGARD TO THESE FACTS, THE IMPUGNED ORD ER IS CLEARLY UNTENABLE AND SET ASIDE. THE ITAT IS DIRECTED TO EXAMINE THE MERITS OF THE RESPONDENT/ASSESSEES APPEAL AND DECIDE IT IN ACCORDANCE WIT H LAW AFTER HEARING COUNSEL FOR THE PARTIES. THE PARTIES ARE DIRECTED TO BE PRESENT BEFORE THE ITAT ON 26.02.2018 FOR FURTHER DIRECTIONS/APPROPRIATE QUERY. THE QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAIN ST THE RESPONDENT-ASSESSEE. THE APPEAL IS ALLOWED IN THE ABOVE TERMS. REGISTRY IS DIRECTED TO COMMUNICATE THE ORDER DIRECTLY T O THE REGISTRAR OF THE ITAT, DELHI BENCH C, NEW DELHI. OR DER DASTI TO THE PARTIES AS WELL. 3. ACCORDINGLY, THIS APPEAL HAS BEEN FIXED TO DECIDE THE ISSUE ON MERIT. THE GROUNDS TAKEN BY THE ASSESSEE ON MERIT ARE AS UNDER: 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AD DITION OF AN AMOUNT OF RS.79,86,868/- ON ACCOUNT OF BOGUS PURCHASES. 5. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING THAT THE FIRMS M/S VISHNU TRADING COMPANY, M/S SHREE SHYAM TRADING COMPANY, M/S OM AGENCIES AND M/S SHREE BANKEYBIHARI T RADING CO. ARE NOT ENGAGED IN ACTUAL BUSINESS, IGNORING THE FACT THAT DURING THE COURSE OF SEARCH ON THESE FIRMS SUBSTANTIAL INV ENTORY IN RESPECT OF THE MATERIAL BEING PURCHASED BY THE ASSESSEE WA S FOUND, WHICH CONFIRMS THE FACT THAT THESE FIRMS WERE DOIN G ACTUAL BUSINESS. 4 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARN ED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THAT T HE INFERENCE DRAWN BY THE AO MERELY ON THE BASIS OF A STATEMENT THA T THESE FIRMS ARE NOT IN ACTUAL BUSINESS IS BASELESS AND CONTRARY TO THE FACTS ON RECORD. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CI T(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CON TENTION OF THE ASSESSEE IN IGNORING THE FACT THAT THE QUANTITY PURCH ASED AND SOLD BEING COMPLETELY TALLYING, THE ALLEGATION THAT T HE ASSESSEE HAS NOT MADE PURCHASES CANNOT BE SUSTAINED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CI T(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING THE A DDITION ON ACCOUNT OF BOGUS PURCHASES, REJECTING THE MATERIAL AND EV IDENCES BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE PURCH ASES AND SALES WERE MADE IN THE REGULAR COURSE OF BUSINESS. 8. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN ENHANCING THE ADDITION MADE BY THE AO BY AN AMOUNT OF RS.3,93,705/- ON ACCOU NT OF COMMISSION PAID IN CASH ON THE ALLEGED BOGUS PURCHASES. (II) THAT THE LEARNED CIT(A) HAS ERRED IN MAKING THE ADDITION BY DISREGARDING THE EXPLANATIONS AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE. 9. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN MAKING AN ADDI TION FOR AN AMOUNT OF RS.15,97,431/- ON ACCOUNT OF THE GP UNDERSTAT ED BY THE ASSESSEE ON THE ALLEGED BOGUS PURCHASES. (II) THAT THE LEARNED CIT(A) HAS ERRED IN MAKING THE ADDITION BY ESTIMATING THE INCOME AT AN ARBITRARY RATE OF 20% OF THE PURCHASES MADE FROM THESE PARTIES, WITHOUT THERE BEING ANY BASIS FOR THE SAME AND BY REJECTING THE EXPLANATIONS OF THE ASSESSEE. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT( A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CON TENTION OF THE ASSESSEE THAT THE ADDITION SO MADE ON THE BASIS OF MAT ERIAL COLLECTED AT THE BACK OF THE ASSESSEE, IS BAD IN LAW AND L IABLE TO BE DELETED. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT( A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CON TENTION OF THE ASSESSEE THAT THE ADDITION MADE BY THE AO IS UNTENA BLE IN THE 5 EYES OF LAW, HAVING BEEN MADE WITHOUT PROVIDING OPPO RTUNITY TO CROSS EXAMINE THE PERSON ON THE BASIS OF WHOSE STATEMENT TH E ALLEGATIONS HAVE BEEN MADE AGAINST THE ASSESSEE AND WITHO UT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 12. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 4. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO IN REGARD TO THE ADDITION OF RS. 79,86,868/- AND HAS FURTHER ENHANCED SAME BY MAKING AN ADDITION OF RS. 15,97,431/- BEING 20% OF THE ABOVE P URCHASES ON THE PRESUMPTION THAT THERE WOULD BE UNDERSTATEMENT OF PRO FIT ON ABOVE PURCHASES. THE CIT(A) HAS FURTHER ADDED A SUM OF RS. 3,93,705/- ON ACCOUNT OF PRESUMPTION THAT ASSESSEE WOULD HAVE PAID SUCH COMMISSION F OR TAKING BOGUS ACCOMMODATION ENTRIES. IT WAS SUBMITTED THAT THE CIT(A) HAS GONE WRONG IN SUSTAINING THE ADDITION AS WELL AS IN ENHANCING THE INCOM E. IT IS A CASE WHERE THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNTS AND HA S MADE THE PURCHASES IN THE NORMAL COURSE. THE LD. AR INVITED ATTEN TION TO THE ASSESSMENT ORDER PASSED BY THE AO TO POINT OUT THAT THE A LLEGATION LEVIED AGAINST THE ASSESSEE ARE UNSUSTAINABLE AND THE ADDITIONS H AVE BEEN MADE BY INDULGING INTO SURMISES AND CONJUNCTURE. IT WAS FURTHER SUBMITTED THAT SIMILAR ADDITIONS WERE MADE BY THE AO ON THE SAME SET OF FACTS F OR THE SAME ASSESSMENT YEAR IN OTHER CASES. THOSE CASES HAVE BEEN SUBJECT MA TTER OF APPEAL BEFORE THE ITAT AND AFTER EXAMINATION OF ALL THE FACTS, THE ITAT HAS DELETED THE ENTIRE ADDITION. THE LD. AR PLACED A LIST OF THE CASES WHERE SIMILAR ISSUES HAVE COME UP BEFORE THE ITAT AND THE ADDITIONS H AVE BEEN DELETED. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE HAS STAT ED THAT THE ISSUES INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY T HE JUDGEMENT OF ITAT DELHI, DATED 28.10.2015 IN THE CASE OF UNIQUE METAL I NDUSTRIES VS ITO IN ITA NO. 1372/DEL/2015 AND OTHERS VARIOUS ORDERS APPLYING T HE SAME RATIO. IN REPLY, THE LD. DR RELIED UPON THE ORDER OF THE AUTH ORITIES BELOW. 6 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED, AND CONSIDE RED THE RELEVANT RECORDS AVAILABLE WITH US SPECIALLY THE IMPUGNED ORDERS P ASSED BY REVENUE AUTHORITIES AND COPY OF THE TRIBUNALS ORDER DATED 28/ 10/2015 PASSED IN THE CASE OF UNIQUE METAL INDUSTRIES VS. ITO IN ITA NO. 1372 /DEL/2015. 5.1 ON PERUSING THE ASSESSMENT ORDER WE NOTE THAT THE ADDITIONS HAVE BEEN MADE ON THE ALLEGATION THAT ASSESSEE HAS MADE BOGUS PURCHA SES FROM THE FOLLOWING CONCERNS: SL. NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WHOM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1 SHREE SHYAM TRADING CO. M/S METAL INDIA RS. 2752583 /- 2 VISHU TRADING CO. M/S METAL INDIA RS. 125268/- 3 SHREE BANKEYBIHARI M/S METAL INDIA RS. 2821468/- 4 OM AGENCIES M/S METAL INDIA RS. 2287549/- TOTAL AMOUNT OF ENTRIES RS. 7986868/- 5.2 THE LD. CIT(A) HAS CONFIRMED THE ORDER OF THE AO AND HAS FURTHER ADDED 20% OF THE PURCHASES I.E. RS. 15,97,431/- AS PROFIT EAR NED ON SUCH PURCHASES A SUM OF RS. 3,93,705/- ON ACCOUNT OF COMMISSION, THE ASSESSE E WOULD HAVE PAID ON SUCH PURCHASES. WE HAVE ALSO PERUSED THE ORDER PA SSED BY THE ITAT IN THE CASE OF UNIQUE METAL INDUSTRIES VS. ITO IN ITA NO. 1 372/DEL/2015 DT. 28 TH OCTOBER, 2015. IN THIS CASE ALSO, THE ISSUE WAS EXACTLY THE SAME. IN FACT, THE NAME OF THE PARTIES FROM WHOM THE ALLEGATION IS OF BO GUS PURCHASES ARE ALSO THE SAME. THE ITAT IN THIS ORDER AFTER EXAMINATION OF ALL THE FACTS HAS DELETED THE ADDITION. THE RELEVANT FINDINGS OF THIS ORDER REA DS AS UNDER: 7 24. NOW THE ISSUE IS WHETHER ON THE FACTS AND CIRCUMSTANCE S OF THE CASE IT CAN BE SAID THAT THE PURCHASES ARE BOGUS. THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE STATEMENT OF S H. RAKESH GUPTA AND SH. VISHESH GUPTA AND SH. NAVEENET J AIN & SH. VAIBHAV JAIN. ADMITTEDLY THESE STATEMENTS WERE REC ORDED AT THE BACK OF THE ASSESSEE. THOUGH THE COPY OF THE SAME WAS PROVIDED TO THE ASSESSEE BUT AN OPPORTUNITY OF CROSS EXAMINATION HAS NOT BEEN ALLOWED TO THE ASSESSEE. THE ASSESSING OFFICER IN THIS REGARD HAS STATED THAT HE HAS IS SUED SUMMONS TO THESE PERSONS REPEATEDLY BUT THESE PERSONS HAVE NOT APPEARED NOR HAS FILED THE DESIRED DETAILS AND DOCU MENTS. IN THE ABSENCE OF THEIR CROSS EXAMINATION AND ALSO IN THE ABSENCE OF FURNISHING DESIRED DETAILS AND THE DOCUMENTS IT WILL NOT BE APPROPRIATE TO SUBSTANTIATE THE ADDITION ON TH E BASIS OF THE STATEMENT. ON EXAMINATION OF FACTS IT ALSO TRANSPIR ES THAT THESE PERSONS WERE IN THE TRADE OF SCRAP, THE SAME BUSINESS IN WHICH THE ASSESSEE IS ENGAGED. A SURVEY WAS CARRIED OUT ON THESE PERSONS AND DURING THE COURSE OF SURVEY IT IS NOT TH E CASE OF THE DEPARTMENT THAT THEY WERE NOT FOUND NOT CARRY ING ON THE SAME BUSINESS. ON THE CONTRARY THERE IS EVIDENCE ON RECORD THAT THESE PERSONS WERE NOT ONLY IN THE BUSINESS OF SCRAP BUT AL SO STOCK OF SCRAP WAS ALSO FOUND WITH THEM. 25. THE DEPARTMENT HAS ALSO MADE ASSESSMENT OF THESE PERSON S IN RESPECT OF THE BUSINESS OF SCRAP CARRIED ON BY THEM. T HE REVENUE IS DOUBTING THE PURCHASES OF THE ASSESSEE ON THE BA SIS THAT THESE PERSONS HAVE MADE A STATEMENT THAT THEY HAV E ISSUED ACCOMMODATION BILLS AND HAVE NOT MADE ACTUAL SALES T O THE ASSESSEE. CAN SUCH STATEMENTS BE TAKEN AT ITS FACE VAL UE? IF THESE PEOPLE WERE ENGAGED IN THE SCRAP TRADE AS CONTENDE D BY THE LEARNED AR THEN THERE IS EVERY POSSIBILITY THAT TH ESE PERSONS WOULD HAVE COLLECTED THE SCRAP FOR WHICH THEY WERE NOT H AVING ANY INVOICES OR SOURCE OF SUPPLY AND HAVE SOLD THE SAME TO THE ASSESSEE AND TO VARIOUS OTHER PARTIES. ON BEING CAUGHT AT WRONG FOOT THESE PERSONS HAVE TAKEN THE DEFENCE THAT THE SALES MADE BY THEM ARE NOT GENUINE AND THEY HAVE ISSUED ACCOMMODAT ION BILLS. IN THE PRESENT CASE THE ASSESSEE HAD MADE PURCHASES AND THERE ARE CORRESPONDING SALES. THESE SALES ARE NOT BEING DOUBTED. IF SALES ARE NOT BEING DOUBTED, THEN OBVIO USLY PURCHASING WOULD BE THERE. NOW THE LEARNED CIT(A) HEL D THAT PURCHASES MADE BY THE ASSESSEE ARE NOT GENUINE AND THE ASSESSEE WOULD HAVE MADE PURCHASES FROM SOME OTHER PERSON. THE CASE OF THE ASSESSEE IS THAT IT HAS MADE PURCHASES FROM THESE VERY PERSONS AND HAVING MADE THE PAYMENT BY ACCO UNT 8 PAYEE CHEQUE AND THERE BEING NOTHING ADVERSE IN THE TRANSACTION, IT IS FOR THE SUPPLIER I.E. SO CALLED PEOPLE TO EXPLAIN THEIR SOURCE OF PURCHASES AND NOT THE ASSESSEE. THE REVENUE IS TRYING TO SHIFT THE ONUS ON THE ASSESSEE BY MAKING PRESUM PTION THAT THE PURCHASES MADE BY IT ARE NOT GENUINE DESPITE ACCEPTING THE SAME. IN MY OPINION SHIFTING OF THIS ONUS AND THE ASSUMPTION BEING MADE THAT THE PURCHASES ARE NOT GENUIN E IN THE PRESENT SET OF FACTS IS NOT CORRECT. THERE WOULD HAVE BEEN SOME LOGIC, HAD THESE PEOPLE WOULD NOT HAVE BEEN IN T HE SAME TRADE AND HAD THERE BEEN SOME OTHER CIRCUMSTANCES LEADIN G TO THE CONCLUSION THAT THE SO CALLED PURCHASES UNDER NO CIRCUMSTANCES CAN BE FROM THESE PERSONS. ADVERSE INFERENCE CANNOT BE DRAWN AGAINST A PERSON MERELY ON THE BASIS OF DOUBT. DOUBT HOWSOEVER STRONG CANNOT PAR-TAKE THE CHARACTER OF LEGAL PROOF. IN THE PRESENT CASES THERE IS A COMPLETE TRAIL OF THE PURCHASES AND SALES SO FAR AS ASSESSEE IS CONCERNED. THE ASSESSEE HAS BEEN ABLE TO CORRELATE EACH TRANSACTION OF PURCHASE WITH SALE AS IS EVIDENT FROM THE SUBMISSION BEFO RE THE LEARNED CIT(A). 26. THERE IS A COMPLETE CO-RELATION BETWEEN THE PURCHASE S AND THE SALES AND THE SAME IS FULLY DOCUMENTED. THUS THE AO AS WELL AS LEANED CIT(A) WAS NOT CORRECT IN DRAWING ADV ERSE INFERENCE AGAINST THE ASSESSEE ON THIS ACCOUNT. IF FURTHER NOTE THAT THE LEANED CIT(A) WHILE GIVING A FINDING THAT T HE PURCHASES ARE BOGUS HAS PLACED MUCH RELIANCE ON THE STATEMENT OF THESE PERSONS. AS DISCUSSED HEREINABOVE THE STATEMENT OF THESE PERSONS CANNOT BE TAKEN ON THE FACT OF IT IN VIEW OF T HE SURROUNDING FACTS. THESE PERSONS WERE DEFINITELY IN THE TRADE. THESE PERSONS HAVE NOT APPEARED BEFORE THE ASSESSING OFFICE R DESPITE REPEATED SUMMONS BEING ISSUED. HAD THESE PER SONS WERE CLEAN AND WANTED TO STAND BY THEIR STATEMENT GIVE N BEFORE THE ASSESSING OFFICER AND THE AFFIDAVIT FILED, THERE WAS NO REASONS FOR THESE PERSONS TO NOT TO APPEAR AND TO STAND BY THEIR STATEMENT. I AM ALSO OF THE VIEW THAT THE CIT(A) WAS NOT JUSTIFIED IN DRAWING ADVERSE INFERENCE ON THE BASIS OF T HE TRANSPORTATION. AS RIGHTLY POINTED BY THE LEARNED A R THAT THESE WERE LOCAL MOVEMENTS. THE PURCHASES AND SALES WERE WITHIN THE WALLED CITY OF DELHI WERE THE TRANSPORTATION IS BY MANUAL DRIVEN CARTS AND THE CHARGES FOR THE SAME ARE DEBITED UN DER THE HEAD CARTAGE. FURTHER WHEN SALES ARE ACCEPTED AS GENUINE , THEN DEFINITELY THE TRANSACTIONS HAVE OCCURRED AND MOVEM ENTS OF GOODS HAVE TAKEN PLACE. IT IS ALSO NOT THE CASE OF TH E LEARNED CIT(A) THAT TRANSACTIONS HAS NOT HAPPENED. THUS TRANSACT ION ON 9 SUCH FACTS CANNOT BE A BASIS TO DRAW ADVERSE INFERENCE AGAI NST THE ASSESSEE. I FURTHER NOTE THAT THE LEARNED CIT(A) H AS UPHELD THE ALLEGATION OF THE ASSES SING OFFICER OF THE BOGUS PUR CHASES BY MAKING AN OBSERVATION THAT THE APPELLANTS DEALIN G WITH THESE PARTIES IS NOT FREE FROM ANY DOUBT. IT IS A SETTL ED LAW THAT DOUBT CANNOT BE A BASIS FOR SUSTAINING THE ALLEGATION. ON THE CONTRARY THE ASSESSEE HAD LEAD SUFFICIENT EVIDENCES IN SUPPO RT OF ITS PURCHASES WHICH THE ASSESSING OFFICER IN MY VIEW HAS NOT BEEN ABLE TO REBUT. ACCORDINGLY I AM OF THE VIEW THA T IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE SAID THAT T HE PURCHASES MADE BY THE ASSESSEE ARE BOGUS. 27. AS REGARDS THE ADDITIONOF20% SUSTAINED BY THE LEARN ED CIT(A) I AM OF THE VIEW THAT SINCE PURCHASES ARE NOT BO GUS THE ADDITION ON THIS ACCOUNT CANNOT BE SUSTAINED. EVEN OTHE RWISE 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 CANNOT BE ASCERTAINED WITHOUT DEDUCTING THE COST OF PURCHASES FROM TH E SALES AS OTHERWISE IT AMOUNT TO LEVY OF TAX ON GROSS RECEI PT, 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 DETE RMINATION OF CORRECT REAL INCOME. SECTION 40A(3) IS MEANT FOR A DIFFE RENT PURPOSE WHEN THE ASSESSEE HAS MADE PURCHASES IN CASH. THIS PROVISION CANNOT BE APPLIED IN SUCH CASES. ONCE THE PURCHASE S ARE HELD TO BE BOGUS THEN THE TRADING RESULTS DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED AND RIGHT COURSE IN SUCH CASE IS T O 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 R ATE BUT SUCH PROFIT RATE CANNOT BE PUNITIVE. 28. IN VIEW OF THE ABOVE, THE ADDITION SUSTAINED BY THE LEARNED CIT(A) IS DIRECTED TO BE DELETED AND GROUNDS NO. 4 TO 11 ARE ALLOWED 5.3 THE ABOVE ORDER HAS BEEN FOLLOWED IN THE FOLLOWING CA SES: UNIQUE METAL INDUSTRIES VS ITO ITA NO. 1372/DEL/2015 D ATED. 28.10.2015 M/S RADHEYSHYAM& CO. VS ITO, ITA NO.1429/DEL/2015, DA TED 30.11.2015, SMC-1 BENCH-DELHI ITAT 10 M/S KISHANLALGAMBHIR& SONS VS ITO, ITA NO.1516/DEL/201 5, DATED 02.12.2015, F BENCH-DELHI ITAT M/S PUNJAB METAL STORE VS ITO, ITA NO.1512/DEL/2015, DATED .2.12.2015, F BENCH-DELHI ITAT M/S KAKKARBARTAN STORE VS ITO, ITA NO. 1380/DEL/2015 DATED. 23.3.2016 M/S KRISHANLAL& SONS VS ITO, ITA NO. 1379/DEL/2015 DATE D. 23.3.2016 M/S LAXMIDHATUBHANDARVS ITO, ITA NO. 1369/DEL/2015 DA TED. 23.3.2016 M/S KARSHNI METAL STORE VS ITO, ITA NO. 1365/DEL/2015 DATED. 23.3.2016 M/S KASHMIR METALS VS ITO, ITA NO. 1366/DEL/2015 DATED . 23.3.2016 M/S BHARDWAJ METAL (INDIA) VS ITO, ITA NO. 1370/DEL/2 015 DATED. 23.3.2016 M/S NAYAR METAL CO. VS ITO ITA NO. 1374/DEL/2015 DATE D. 31/03/2016 5.4 THE FACTS OF THE PRESENT CASE ARE EXACTLY IDENTICAL T O THE FACTS OF THE ABOVE CASES DECIDED BY THE ITAT. THE LD. DR DURING THE COURSE OF THE HEARING ALSO COULD NOT BRING TO OUR NOTICE ANY MATERIAL EVIDEN CE OR FACTS WHICH COULD LEAD US TO NOT TO FOLLOW THE DECISION OF THE COORDINAT E BENCHES OF THE TRIBUNAL. WE THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF TR IBUNAL IN THE ABOVE CASES AND ACCORDINGLY WE HOLD THAT THE ADDITION MADE BY TH E AO AND THE ENHANCEMENT MADE BY THE LD. CIT(A) ARE UNSUSTAINABLE A ND ACCORDINGLY WE 11 DIRECT THE AO TO DELETE THE ENTIRE ADDITIONS. ACCORDIN GLY, GROUND NO. 4 TO 11 ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED ON 31-10-2018. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:31/10/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR , ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES