M/s. Sunrise Tooling Systems Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 3136/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65992 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 03-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Bogus purchase; Rejection of books of accounts; Principle of natural justice; Retraction
• Section: 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A .NO.-3136/DEL/2010 ASSESSMENT YEAR - 2006-07 SUNRISE TOOLING SYSTEMS PVT. LTD. VS ITO, 29/7, SHAKTI NAGAR, WARD-9(3), NEW DELHI-110007 NEW DELHI PAN-AADCS9992D (APPELLANT) (RESPONDENT) APPELLANT BY: SH. VED JAIN & SMT. RANO JAIN, CAS RESPONDENT BY: DR. PRABHA KANT, SR. DR. APPEAL HEARD ON-03.09.2012 ORDER PRO NOUNCED ON-30.11.2012 ORDER PER I.C.SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX APPEALS [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ORDER PASSED UNDER SECTION 147, READ WITH SECTION 148, IGNORING THE FACT THAT THE SAME WAS BAD IN THE EYE OF LAW AS THE CONDITION AND PROCEDURE PRESCRIBED UNDER THE STATUE HAVE NOT BEEN SATISFIED AND COMPLIED WITH. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE T HAT THE REASSESSMENT I.T.A .NO.-3136/DEL/2010 2 PROCEEDINGS INITIATED BY THE LEARNED A.O ARE BAD BO TH IN THE EYE OF LAW AND ON FACTS. (III) THAT THE NOTICE ISSUED UNDER SECTION 148 OF T HE ACT IS BAD BOTH IN THE EYE OF THE LAW AND ON FACTS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF R S.43,34,496/- MADE BY AO. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF T HE ASSESSEE THAT THE ABOVE SAID ADDITION HAS BEEN MADE BY AO BY ARBITRAR Y REJECTING THE MATERIAL & EVIDENCES BROUGHT ON RECORD BY THE ASSES SEE TO SHOW THAT THE PURCHASES WERE MADE IN REGULAR COURSE OF THE BU SINESS AND MATERIAL SO PURCHASED WAS UTILIZED WHOLLY AND EXCLU SIVELY IN THE REGULAR COURSE OF BUSINESS OF THE ASSESSEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF T HE APPELLANT THAT THE ADDITION TO THE TRADING ACCOUNT BY ADDING PURCHASES WITHOUT REJECTION OF BOOKS OF ACCOUNTS IS UNSUSTAINABLE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF T HE APPELLANT THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF A STATE MENT WHICH STANDS RETRACTED WITHOUT ANY CORROBORATION. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE A BOVE-SAID ADDITIONS ARE UNTENABLE IN THE EYE OF LAW, HAVING BEEN MADE O N THE BASIS OF THE MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WITH OUT PROVIDING COPY OF THE SAME & PROVIDING OPPORTUNITY TO REBUT THE SA ME. I.T.A .NO.-3136/DEL/2010 3 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE A BOVE ADDITION IS UNTENABLE IN THE EYE OF LAW, HAVING BEEN MADE WITHO UT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE PERSON ON THE BASI S OF WHOSE STATEMENT THE ALLEGATIONS HAVE BEEN MADE AGAINST T HE APPELLANT AND WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE. 2. AT THE OUTSET OF HEARING, LD. AR SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PURSUE GROUND NOS-1-2 OF THE APPEAL QUESTIONING THE VALIDITY OF INITIATION OF RE- OPENING PROCEEDINGS U/S 148 OF THE ACT AND ASSESSME NT FRAMED IN FURTHERANCE THERETO U/S 147 OF THE ACT. LD. DR DID NOT OBJECT THE REQUEST OF THE LD. AR. THE GROUND NOS-1 & 2 ARE ACCORDINGLY REJECTED AS WITHDR AWN. GROUND NOS.-3-8 3. THE ISSUES RAISED IN THESE GROUNDS IS TO WHETHER THE AUTHORITIES BELOW ARE JUSTIFIED IN MAKING AND SUSTAINING THE ADDITION OF RS. 43,34,496/- MADE ON ACCOUNT OF BOOKS PURCHASES FROM SHREE LAXMI INDUSTRIAL CORP ORATION. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY EN GAGED IN THE BUSINESS OF MANUFACTURE AND SALES OF ALL TYPES OF CUTTING TOOLS , FIRM TOOLS, AUTOMATE PARTS, PRE- CISON COMPONENTS HAD CLAIMED TO HAVE MADE PURCHASES WORTH RS.43,34,496/- FROM SHREE LAXMI INDUSTRIAL CORPORATION. A SURVEY U/S 1 33A OF THE ACT WAS CONDUCTED AT PREMISES OF ASSESSEE AT FARIDABAD ON 03.01.2008 HAVING REGISTERED OFFICE AT 29/7, SHAKTI NAGAR, DELHI. I.T.A .NO.-3136/DEL/2010 4 4. THE SURVEY WAS IN-CONSEQUENCE OF THE INFORMATION RECEIVED BY THE DEPARTMENT REGARDING THE BOGUS BILLING RACKET WHICH WAS UNEARTHED RECENTLY IN FARIDABAD. IT WAS FOUND THAT THERE WERE A NUMBER O F CONCERNS WHICH WERE DOING THE BUSINESS OF BOGUS BILLING WITHOUT ANY ACTUAL BU SINESS. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE COMPANY HAD PURCHASED BOGUS BILLS FROM SHREE LAXMI INDUSTRIAL CORPORATION IN THE FINANCIAL YEAR UNDER CONSIDERATION WORTH RS.43,34,495/. THIS FACT WAS ACCEPTED BY THE DIREC TOR OF COMPANY, SH. D.K.JAIN IN HIS STATEMENTS RECORDED. IT WAS STATED THAT CHE QUES WERE ISSUED IN THE NAME OF SHREE LAXMI INDUSTRIAL CORPORATION FOR SEEKING BOGU S BILLS WITHOUT MATERIAL AND SUBSEQUENTLY CASH WAS RECEIVED BACK AFTER PAYING SO ME COMMISSION. TOTAL CASH AMOUNTING TO RS.40,16,000/- WAS SURRENDERED AS ADDI TIONAL UNDISCLOSED INCOME OF THE COMPANY FOR THE FY RELEVANT TO THE AY 2006-07 U NDER CONSIDERATION. THE RE- OPENING PROCEEDINGS WERE INITIATED AND NOTICE U/S 1 48 OF THE ACT WAS ISSUED. IN RESPONSE THERETO, THE ASSESSEE FILED RETURN OF INCO ME DECLARING NIL INCOME WHICH WAS ORIGINALLY FILED ON 10.11.2006. THE AO ON THE BASIS OF STATEMENT OF SH. D.K.JAIN I.E DIRECTOR OF THE ASSESSEE COMPANY AND O N THE BASIS OF THE STATEMENTS OF SH. NITIN AGGARWAL, A PARTNER OF SHREE LAXMI INDUST RIAL CORPORATION RECORDED ON 14.11.2007 BY ADIT(INV.), HAS HELD THAT THE CLAIMED PURCHASES WORTH RS. 43,34,495/- FROM SHREE LAXMI INDUSTRIAL CORPORATION WAS NOT GENUINE AS THE SAME WAS CLAIMED ON THE BASIS OF BOGUS BILLS ONLY TO INF LATE THE PURCHASES. THE LD. CIT(A) HAS UPHELD THE SAME. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A .NO.-3136/DEL/2010 5 5. IN SUPPORT OF THE GROUNDS, LD. AR SUBMITTED THAT TH E AO HAS MADE ADDITION IN QUESTION BY REJECTING THE MATERIAL AND EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE IN SUPPORT OF THE CLAIMED PURCHASES MADE I N REGULAR COURSE OF THE BUSINESS AND MERELY ON THE BASIS OF STATEMENTS OF THE ABOVE TWO PERSONS AND THAT TOO WITHOUT REJECTING THE BOOKS OF ACCOUNTS MAINTAINED AND PRODUCED BY THE ASSESSEE. THEY HAVE ALSO FAILED TO APPRECIATE THE CONTENTION OF THE ASSESSEE THAT NO SUCH ADDITION COULD BE MADE MERELY ON THE BASIS OF A STA TEMENT WHICH STOOD RETRACTED. LD AR SUBMITTED FURTHER THAT THE STATEMENTS OF SH. NITIN AGGARWAL, A PARTNER OF SHREE LAXMI INDUSTRIAL CORPORATION RECORDED ON 14.1 1.2007 HAS BEEN RELIED UPON WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE TO CR OSS-EXAMINE HIM, ON THE BASIS THAT THERE WAS NO NECESSITY OF GIVING OPPORTUNITY T O THE ASSESSEE TO CROSS-EXAMINE SH. NITIN AGGARWAL. LD. AR REFERRED COPIES OF DOCU MENTS MADE AVAILABLE AT DIFFERENT PAGES OF THE PAPER BOOK AND SUBMITTED THA T THERE WERE SUFFICIENT MATERIAL AVAILABLE ON RECORD TO SUPPORT THE GENUINENESS OF T HE CLAIMED PURCHASES MADE FROM SHREE LAXMI INDUSTRIAL CORPORATION. HE REFERRED PA GES NOS-1-244 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE IN THIS REGARD . THESE ARE THE COPIES OF AUDITED BALANCE SHEET, PROFIT & LOSS A/C, INVENTORY OF STOC K DURING SURVEY PROCEEDINGS, LETTER DATED 21.02.2008 FILED BEFORE ADIT(INV.) STA TING THE CIRCUMSTANCES IN WHICH THE STATEMENTS WERE RECORDED, A REPLY FROM ADIT(INV .) REASONS RECORDED FOR RE- OPENING, LETTER FILED BEFORE AO ON 31.10.2008 GIVIN G COMPARISON OF GP RATIO, LETTER DATED 28.11.2008 BEFORE AO, LETTER DATED 12.12.2008 FILED BEFORE THE AO WITH I.T.A .NO.-3136/DEL/2010 6 SALES-TAX DOCUMENTS OF SHREE LAXMI INDUSTRIAL CORPO RATION, CONFIRMED COPY OF ACCOUNTS IN THE BOOKS OF SHREE LAXMI INDUSTRIAL COR PORATION AND PURCHASE BILLS, STOCK REGISTER, STATEMENTS OF SH. D.K.JAIN RECORDED ON OATH DURING THE ASSESSMENT PROCEEDINGS, BANK STATEMENT OF SHREE LAXMI INDUSTRI AL CORPORATION AND SUBMISSION FILED BEFORE THE LD. CIT(A). LD. AR SUB MITTED FURTHER THAT DURING THE YEAR, PURCHASES WERE ALSO MADE FROM STEEL AUTHORITY OF INDIA LTD. (SAIL). ALL THE PURCHASES WERE MADE THROUGH CHEQUES. THE SALES MAD E HAVE NOT BEEN DOUBTED. THE ASSESSEE HAD ALSO FURNISHED SUFFICIENT EVIDENCE FOR THE SUPPLY OF GOODS BY SHREE LAXMI INDUSTRIAL CORPORATION TO THE ASSESSEE. UNDER THESE CIRCUMSTANCES, THE AO WITHOUT EXAMINING THE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIMED PURCHASES HAS SIMPLY RELIED ON THE STATEMEN TS OF ABOVE TWO PERSONS TO MAKE THE ADDITION ON ACCOUNT OF BOOKS PURCHASES. T HE ASSESSEE HAD FURNISHED ALL THE PRIMARY EVIDENCE BEFORE OA IN SUPPORT OF THE CL AIMED PURCHASES AND THE AO HAS MADE THE ADDITION IN QUESTION WITHOUT REJECTING THE SAME. LD. AR PLACED RELIANCE ON DECISION IN THE CASE OF CIT VS S.KHADER KHAN SON 214 CTR 589 (MADRAS). 6. LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HE POINTED OUT THAT STATEMENTS WERE RECORDE D ON OATH AND RETRACTION AFTER ONE AND HALF MONTH THEREAFTER BY THE ASSESSEE IS NO THING BUT AN AFTER THOUGHT ONLY. HE REFERRED FOLLOWING DECISIONS IN SUPPORT :- (I) WORKS OF ART (P) LTD. VS. ACIT 65 ITD 40 (JAIPUR) I.T.A .NO.-3136/DEL/2010 7 (II) AMRIT LAL BHAGWAN DAS SONI VS. ACIT 59 TTJ 418 (AHM EDABAD) (III) RAVINDRA D.TRIVEDI VS. CIT 215 CTR 313 (RAJASTHAN) (IV) P.R.METRANI VS. CIT 287 ITR 209 (SC) (V) HIRA SINGH COMPANY VS. CIT 230 ITR 791 (HP) 7. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE AUTHORITIES BELOW HAVE DENIED THE CLAIMED PURCHASES WORTH RS.43,34,496/- S TATED TO HAVE BEEN PURCHASED FROM SHREE LAXMI INDUSTRIAL CORPORATION WITHOUT REJ ECTING BOOKS OF ACCOUNTS OR THE DOCUMENTS FILED IN SUPPORT OF DOUBTING THE SALE S DECLARED BY THE ASSESSEE. UNDISPOSEDLY, THE AUTHORITIES BELOW HAVE NOT EXAMIN ED THE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIMED PURCHASES FROM S HREE LAXMI INDUSTRIAL CORPORATION AND HELD THE CLAIMED PURCHASES AS BOGUS ON THE BASIS OF THE STATEMENT OF SH. D.K.JAIN, DIRECTOR OF THE COMPANY RECORDED D URING THE COURSE OF SURVEY AND OF SH. NITIN AGGARWAL, PARTNER OF SHREE LAXMI INDUS TRIAL CORPORATION BEFORE THE ADIT(INV.). THE SAID STATEMENTS OF SH.D.K.JAIN WER E RETRACTED BY THE ASSESSEE VIDE LETTER DATED 21.02.2008 (PAGE NO-30 OF THE PAP ER BOOK) ALLEGING THAT THE SURRENDER GOT DONE UNDER THREAT AND PRESSURE AND, T HEREFORE, IT WAS WITHDRAWN. IT HAS BEEN STATED THEREUNDER THAT SURVEY OPERATION WA S CONDUCTED IN THE MORNING OF 03.01.2008 AND WAS CONCLUDED ON 04.01.2008 AT 3.00 AM. THE STATEMENTS OF SH.D.K.JAIN WAS RECORDED AT ABOUT 1.30 AM. SH.D.K .JAIN DOES NOT REMEMBER AS TO WHAT WAS RECORDED SINCE COPY OF SUCH STATEMENT W AS NOT PROVIDED. AT PAGE NO 1-20 OF THE PAPER BOOK HAS BEEN PLACED COPY OF AUDI TED BALANCE SHEET AND PROFIT & LOSS A/C. AT PAGE NO 14 HAS BEEN MADE AVAILABLE T HE MANUFACTURING AND TRADING I.T.A .NO.-3136/DEL/2010 8 AND PROFIT & LOSS A/C FOR THE YEAR. AT PAGE NO-34 I.E PART OF THE LETTER DATED 31.10.2008 OF THE ASSESSEE ADDRESS TO THE AO HAS BE EN STATED THAT THE COMPANY HAS MAINTAINED BOOKS OF ACCOUNTS INCLUDING CASH BOOK L EDGER, STOCK REGISTERED BOTH FOR RAW-MATERIALS AS WELL AS FOR FINISHED GOODS. A T PAGE NO-35 HAS BEEN STATED THAT PHOTOCOPY OF ACCOUNT ALONG WITH PURCHASE VOUCHERS W ERE ENCLOSED AND THAT THE PAYMENTS HAVE BEEN MADE BY A/C PAYEE CHEQUES WHICH ARE VERIFIABLE FROM THE BOOKS OF ACCOUNTS. AT PAGE NO-38 OF THE PAPER BOOK HAS BEEN MADE AVAILABLE COMPARABLE CHART OF GP RATIO AS UNDER :- COMPARED OF GP RATIOS ASSESSMENT YEAR GROSS PROFIT G.P.RATE 2004-05 4554764.44 25.74% 2005-06 5014234.10 25.67% 2006-07 5396621.56 27.67% 8. AT PAGE NOS.-39 TO 45, A COPY OF LETTER DATED 28 .02.2008 BY THE ASSESSEE TO THE AO HAS BEEN MADE AVAILABLE. IN THIS LETTER AT PAGE NO-40, IT WAS POINTED OUT TO THE AO THAT NO STATEMENT CAN BE RECORDED ON OATH DU RING THE COURSE OF SURVEY U/S 133A OF THE ACT AND SUCH STATEMENTS HAS NO EVIDENTI ARY VALUE. IT HAS BEEN FURTHER POINTED OUT THAT THE ASSESSEE HAS ALREADY RETRACTED SUCH STATEMENTS WHEN IT WAS SUBMITTED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. AT PAGE NO-46 HAS BEEN PLACED COPY OF LETTER DATED 12.12.2008 OF THE ASSESSEE ADDRESSED TO THE AO ENCLOSING THE SALES-TAX RETURN AS FILED BY SHREE LA XMI INDUSTRIAL CORPORATION FOR THE FY UNDER CONSIDERATION BEFORE THE SALES-TAX AUT HORITIES SHOWING THAT PURCHASES REFLECTED IN THE ACCOUNT OF ASSESSEE FROM THE FIRM STOOD DECLARED BY THE ABOVE FIRM I.T.A .NO.-3136/DEL/2010 9 IN THE SALES-TAX RETURN. IN OTHER WORDS, THEY HAD SHOWN THE SALES TO THE ASSESSEE COMPANY. THE SAID GOODS SUPPLIED BY THEM TO THE AS SESSEE HAVE BEEN UTILIZED BY THE ASSESSEE COMPANY IN THE REGULAR COURSE OF MANUF ACTURE OF VARIOUS TOOLS, DYES, CUTTING TOOLS ETC. SUBMITTED BY THE ASSESSEE. AT P AGE NO-47 -112 HAVE BEEN PLACED THE SALES TAX DOCUMENTS OF SHREE LAXMI INDUSTRIAL C ORPORATION, AT PAGE NO-113-131 HAS BEEN PLACED CONFIRMED COPY OF ACCOUNTS IN THE B OOKS OF SHREE LAXMI INDUSTRIAL CORPORATION WITH PURCHASE BILLS. AT PAGES NO-132-1 76 HAS BEEN MADE AVAILABLE A COPY OF STOCK REGISTERED AND AT PAGE NOS-187-230 OF THE PAPER BOOK HAS BEEN MADE AVAILABLE A COPY OF BANK STATEMENTS OF SHREE LAXMI INDUSTRIAL CORPORATION. THE COPIES OF THESE DOCUMENTS HAVE BEEN FURNISHED UNDER THE CERTIFICATE OF THE ASSESSEE THAT THESE DOCUMENTS WERE MADE AVAILABLE BEFORE THE AUTHORITIES BELOW. NONE OF THE AUTHORITIES BELOW HAS COMMENTED UPON THE GENUIN ENESS OF THESE DOCUMENTS OR THE REASONS FOR IGNORING CONSIDERATION OF THESE DOC UMENTS BY THEM WHILE DECIDING THE ISSUE OF GENUINENESS OF THE CLAIMED PURCHASES M ADE FROM SHREE LAXMI INDUSTRIAL CORPORATION. THE OPPORTUNITY OF CROSS-E XAMINING, SH. NITIN AGGARWAL, A PARTNER OF SHREE LAXMI INDUSTRIAL CORPORATION HAS A LSO BEEN DENIED TO THE ASSESSEE ON WRONG BASIS BY THE AUTHORITIES BELOW THAT AN OPP ORTUNITY OF CROSS EXAMINES NEEDS TO BE GIVEN ONLY WHEN THIRD PARTY IS INVOLVED OR A PARTY NOT KNOWN TO THE ASSESSEE OR A HOSTILE WITNESS IS INVOLVED AND FURTH ER THAT THE ONUS FOR CROSS- EXAMINATION DOES NOT LIE WITH THE DEPARTMENT BUT LI ES WITH THE ASSESSEE WHO ALLEGEDLY MADE PURCHASES IN HIS BOOKS OF ACCOUNTS F ROM THE SAID CONCERNS. WE DO I.T.A .NO.-3136/DEL/2010 10 NOT AGREE WITH SUCH FINDING OF THE LD. CIT(A) AS ON US LIES ON THE DEPARTMENT TO ESTABLISH THAT THE CLAIMED PURCHASES WERE NOT GENUI NE SINCE THE ALLEGATION OF BOOKS PURCHASES WAS LEVELED BY THE DEPARTMENT AND PRIMARY EVIDENCE IN THE FORM OF THE RELEVANT DOCUMENTS WERE MADE AVAILABLE BY THE ASSES SEE IN SUPPORT OF THE GENUINENESS OF THE CLAIMED PURCHASES MADE FROM SHRE E LAXMI INDUSTRIAL CORPORATION. THE ONUS TO ESTABLISH THAT THE SAME W ERE BOGUS WAS THUS SHIFTED TO THE DEPARTMENT. IN ANY CASE WHEN SALES DECLARED BY THE ASSESSEE HAVE NOT BEEN DOUBTED, IT WAS NOT PROPER ON THE PART OF THE AO TO DENY THE CLAIMED PURCHASES ON THE BASIS OF WHICH SALES WERE MADE. IN SUCH CIRCUM STANCES, ONLY OPTION IF ANY WAS AVAILABLE WITH THE DEPARTMENT WAS TO ESTIMATE THE I NCOME OF THE ASSESSEE DURING THE YEAR ON THE BASIS OF TRADING RESULT OF EARLIER THRE E YEARS, MADE AVAILABLE AT PAGE NO- 38 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSE E. THE SAME HAS BEEN RE- PRODUCED HEREINABOVE IN THE PRECEDING PARAGRAPH. O N PERUSAL OF WHICH WE FIND THAT DURING THE YEAR, THE ASSESSEE HAS SHOWN BETTER GROSS PROFIT AT A BETTER GP RATE OF 27.67 % IN COMPARISON TO THE GP PROFIT AND GP RA TES OF EARLIER TWO AYS. IN THE AY 2005-06, THE ASSESSEE HAS SHOWN GP RATE ON 25.67 % AND IN AY 2004-05, THE GP RATE SHOWN IS 25.47%. SINCE THE ASSESSEE HAS SH OWN BETTER GP RATE DURING THE YEAR, WE FIND THAT THERE IS NO JUSTIFICATION TO MAK E ADDITION EVEN ON THIS ACCOUNT. WE THUS WHILE SETTING ASIDE THE ORDERS OF THE AUTHO RITIES BELOW ON THE ISSUE DIRECT THE AO TO DELETE THE ADDITION IN QUESTION AT RS.43, 34,496/- MADE BY THE AO ON I.T.A .NO.-3136/DEL/2010 11 ACCOUNT OF THE ALLEGED BOGUS PURCHASES MADE FROM SH REE LAXMI INDUSTRIAL CORPORATION. 9. THE ISSUE IS THUS DECIDED IN FAVOUR OF THE ASSES SEE REGARDING THE VALIDITY OF THE SAID ADDITION. THE GROUND NOS.-3-8 INVOLVING T HE ISSUE ARE THUS ALLOWED. 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2012. SD/- SD/- (SHAMIM YAHYA) (I.C.SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/11/2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI