Punjab Metal Store, Delhi V. ITO ward-63(3), New Delhi

ITA 3819/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7701 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD SHARMA
• Keywords: Bogus purchase; Principle of natural justice; Accommodation entries; Reassessment proceedings
• Section: 69C; 40A(3); 153A; 143(1); 13; 147; 131; 148

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI SMC-2 BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO.3819/DEL/2019 ASSESSMENT YEAR : 2008-09 PUNJAB METAL STORE, 2196/4, BAGICHI RAGUNATH SADAR BAZAR, DELHI-110006. PAN-ACKPN1164A VS ITO, WARD-63(3), NEW DELHI. APPELLANT RESPONDENT APPELLANT BY SH.VED JAIN, ADV. RESPONDENT BY SH.VINOD SHARMA, SR.DR DATE OF HEARING 30.12.2020 DATE OF PRONOUNCEMENT 2 0 . 01.2021 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 11.03.2019 OF LD. CIT(A)-20, NEW DELHI RELATING TO ASSESSMENT YEAR 2008- 09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF METALS SCRAP UNDER THE N AME AND STYLE OF M/S PUNJAB METAL STORE. HE FILED HIS RETURN OF INCOME ON 26.09.2008 DECLARING TOTAL INCOME OF RS.1,56,005/-. INFORMATION WAS REC EIVED FROM LD. ACIT, CENTRAL CIRCLE, JHANDEWALAN EXTN., NEW DELHI THAT T HE ASSESSEE WAS ENGAGED IN OBTAINING ACCOMMODATION ENTRIES OF BOGUS PURCHASES PROVIDED ITA NO.3819/DEL/2019 2 | P A GE BY SH. RAKESH GUPTA, SH.VISHESH GUPTA, SH.VAIBHAV J AIN AND SH. NAVNEET JAIN. THE CASE OF THE ASSESSEE WAS RE-OPENED BY RE CORDING THE FOLLOWING REASONS AND ISSUE OF NOTICE DATED 27.02.2015 U/S 14 8 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT):- A LETTER BEARING F.NO.ADDL.CIT/(HQ)/(COORD.)/ACCOM MODATION ENTRY/2012-13/15016 DATED 26.03.2013 WAS RECEIVED F ROM THE OFFICE OF THE CHIEF COMMISSIONER) OF I.TAX, DELHI-I, NEW D ELHI THEREIN FORWARDING LETTER BEARING F.NO.CIT(C)-II/2012-13/38 98 DATED 19.03.2013 RECEIVED FROM THE COMMISSIONER OF I.TAX, CENTRAL-II, NEW DELHI WITH A CD CONTAINING THE DETAILS OF ACCOMMODA TION ENTRIES PROVIDED BY SH.RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH.VAIBHAV JAIN IN THE SHAPE OF BOGUS PURCHA SES AND DIRECTING THIS OFFICE TO TAKE NECESSARY ACTION AS PER SECTION 148 IN RESPECT OF ENTRIES PERTAINING TO A.Y. 2006-07, WHICH WERE GOIN G TO BE BARRED BY LIMITATION ON 31.03.2013. THE INFORMATION PROVIDED BY THE CIT, CENTRAL- II, NEW DELHI VIDE HIS LETTER DATED 19.03.2013 READ S 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, ALONGWITH ITS ENCLOSURES ON THE SUBJECT M ENTIONED ABOVE. 2. THE ASSESSMENT OF SEARCH CASES OF SH.RAKESH GU PTA, SH.VISHESH GUPTA, SH. NAVNEET JAIN & SH.VAIBHAV JAI N ARE UNDER PROCESS WITH THE ACIT, CENTRAL CIRCULE-10. D URING THE ASSESSMENT PROCEEDINGS U//S 153A IN THE AFORESAID CASES, DETAILS REGARDING ACCOMMODATION ENTRIES GIVEN BY TH E ABOVE ENTRY PROVIDERS HAS BEEN OBTAINED BY THE ASSESSING OFFICER. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS HAS BEEN OBTAINED FROM SH.RAKESH GUPTA AND SH.VISHESH GUPTA. HARD COPY OF THE LIST IS ENCLOSED AS ANNEXURE A DULY SIG NED BY SH. VISHESH GUPTA. THE LIST GIVES THE NAME OF THE FIRM WHICH HAS PROVIDED THE ACCOMMODATION ENTRY ALONGWITH THE NAME AND ADDRESS OF THE RECIPIENTS OF ACCOMMODATION ENTRY. 4. SH.NAVNEET JAIN & SH. VAIBHAV JAIN HAS PROVIDE D 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 RECIPIENTS, HAS BEEN OBTAINED FROM SH.NAVNEET JAIN & SH. VAIBHAV JAIN. IT DOES N OT GIVE YEAR WISE BIFURCATION. HARD COPY OF THE LIST IS ENCLOSE D AS ANNEXURE- ITA NO.3819/DEL/2019 3 | P A GE C, DULY SIGNED BY SH.VAIBHAV JAIN. THUS THE FIRMS MENTION IN THE LIST B HAVE PROVIDED ACCOMMODATION ENTRIES TO THE FIRMS MENTIONED IN LIST C. 5. THE SELF COPY OF THE INFORMATION IN RESPECT TO ANNEXURE A, B & C IS ALSO ENCLOSED. 6. THE INFORMATION OF ACCOMMODATION ENTRY INCLUDE S A.Y. 2008-09 ALSO, WHICH IS A TIME BARRING YEAR FOR TAKI NG ACTION U/S 148. 7. THIS INFORMATION IS FORWARDED TO YOU FOR EARLY DISSEMINATION TO VARIOUS FIELD OFFICES IN DELHI(SOF T COPY ALSO ENCLOSED). IT IS EVIDENT FROM THE ASSESSMENT ORDER PASSED BY THE ACIT, CENTRAL CIRCLE-10, NEW DELHI ON 28.03.2013 THAT SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH.NAVNEET JAIN & SH.VAIBHAV JAIN DURING THE COURSE OF SEARCH PROCEEDINGS IN POST SEARCH PROCEED INGS AND IN ASSESSMENT PROCEEDINGS U/S 153A OF I.TAX ACT ADMITT ED THAT THEY HAVE GIVEN ACCOMMODATION ENTRIES TO THE PARTIES WHOSE LI STS HAVE BEEN PROVIDED BY THEM TO THE ACIT, CENTRAL CIRCLE-10, NE W DELHI. THEREFORE, THE ASSESSMENT OF THE FIRMS/CONCERNS/INDIVIDUALS FO R A.Y.2006-07, WHOSE NAMES WERE APPEARING IN THE SAID LIST OF ACCO MMODATION ENTRIES PROVIDED BY SH. RAKESH GUPTA & SH.VISHESH GUPTA AND SH.NAVNEET JAIN & SH. VIABHAV JAIN WERE REOPENED U/S 147 OF I. TAX ACT AND NOTICES U/S 148 OF I.TAX ACT WERE ISSUED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER CONFRONTED THE ASSESSEE REGARDING THE STATEMENT OF SH. VISHESH GUPTA RECORDED BY ACIT, CENTRAL CIRCLE-10, JHANDEWALAN, N EW DELHI WHEREIN IT HAS BEEN ADMITTED BY HIM THAT BESIDES HIS 05 FIRMS AND HIS FATHER NAMELY SH.RAKESH GUTPAS 5 FIRMS AND HIS BROTHER SH.SHASH ANK MITTAL, HE WAS OWNING/MANAGING/CONTROLLING M/S. PASUPATI ENTERPRIS ES, M/S. OM AGENCIES AND M/S. SHREE BANKEY BIHARI TRADING COMPA NY. HE HAD FURTHER STATED THAT HE WAS ENGAGED IN BOGUS PURCHASE AND IS SUE OF BOGUS PURCHASE BILLS/ACCOMMODATION ENTRIES ON COMMISSION @ 0.25% T O 0.50%. HE HAD ITA NO.3819/DEL/2019 4 | P A GE ALSO EXPLAINED THE STEP-WISE PROCEDURE FOR PROVIDIN G BOGUS BILLS/ACCOMMODATION ENTRIES. THIS FACT WAS AGAIN B EEN CONFIRMED/ADMITTED BY SH.RAKESH GUPTA, & SH.VISHESH GUPTA. THE ASSESS ING OFFICER ISSUED SUMMONS U/S 131 OF THE ACT TO SH.RAKESH GUTPA & SH. VISHESH GUPTA AND THEIR STATEMENTS WERE RECORDED. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND THE MATERIAL AVAILABLE BEFORE HIM, THE ASSESSI NG OFFICER CONCLUDED THAT PURCHASE OF RS.19,74,026/- MADE FROM M/S BANKEY BIH ARI TRADING COMPANY AND M/S. VISHU TRADING COMPANY ARE BOGUS PU RCHASES OBTAINED BY THE ASSESSEE FOLLOWING THE PROCEDURE EXPLAINED B Y SH. RAKESH GUTPA & SH.VISHESH GUTPA, AT THE TIME OF RECORDING OF THE S TATEMENT BEFORE THE LD. ACIT, CENTRAL CIRCLE-10, NEW DELHI ON 04.02.2013 & 12.02.2013 RESPECTIVELY AND BEFORE HIM ON 19.02.2016 AND FOR W HICH NO SATISFACTORY EXPLANATION COULD BE PROVIDED BY THE ASSESSEE. 4. BEFORE THE LD. CIT(A), THE ASSESSEE APART FROM C HALLENGING THE ADDITION ON MERIT CHALLENGED THE VALIDITY OF THE RE-ASSESSME NT PROCEEDINGS. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAD ISSUED NOT ICE U/S 148 OF THE ACT WITH PAN NOS. WHICH RELATED TO THE ERSTWHILE PARTNE RSHIP FIRM AND WHICH STANDS DISSOLVED W.E.F. 31.03.2004. IT WAS ARGUED THAT THE ASSESSEE HAS TAKEN OVER THE BUSINESS W.E.F. 01.04.2004. ALTHOUG H THIS FACT WAS ALREADY INFORMED TO THE ASSESSING OFFICER DURING THE ASSESS MENT PROCEEDINGS OF ASSESSMENT YEAR 2006-07 VIDE REPLY DATED 30.04.2013 , HOWEVER, THE ASSESSING OFFICER PASSED THE ORDER IN THE NAME OF T HE ASSESSEE DESPITE THE FACT THAT THE CASE OF THE ASSESSEE WAS NEVER RE-OPE NED. RELYING ON ITA NO.3819/DEL/2019 5 | P A GE VARIOUS DECISIONS, IT WAS SUBMITTED THAT THE COMPL ETION OF ASSESSMENT IN THE NAME OF THE ASSESSEE WHEN THE CASE WAS NOT RE-O PENED IS BAD IN LAW. 5. SO FAR AS THE MERIT OF THE ADDITION IS CONCERNED , IT WAS SUBMITTED THAT THERE IS ABSOLUTELY NO MATERIAL WHATSOEVER WITH THE ASSESSING OFFICER OTHER THAN THE SO-CALLED STATEMENTS OF THE PERSONS. THE FINDING OF THE ASSESSING OFFICER THAT THESE PERSONS ARE NOT ENGAGED IN THE T RADE AT ALL IS CONTRARY TO THE FACTS THAT EMERGED ON THE DATE OF SURVEY IN THE PREMISES OF THE PERSONS DURING WHICH STOCK OF SCRAP WAS FOUND WHICH IS EVID ENT FROM THE INVENTORY OF STOCKS PREPARED AT THE TIME OF SURVEY. IT WAS A RGUED THAT THERE IS COMPLETE TALLY OF THE PURCHASES AND SALES AND EACH ITEM OF THE SCRAP TALLY WITH THE SALES AND PURCHASES AND, THEREFORE, THE AS SESSING OFFICER WAS NOT JUSTIFIED IN IGNORING THIS FACT AND MAKING THE ADDI TION BY HOLDING THAT THE PURCHASES ARE BOGUS. IT WAS ARGUED THAT THE ASSESS EE HAS GIVEN QUANTITATIVE DETAILS OF PURCHASES, SALES, OPENING S TOCK AND CLOSING STOCK. IT WAS SUBMITTED THAT WHEN SALES WERE ACCEPTED BY THE ASSESSING OFFICER, THE ADDITION COULD NOT HAVE BEEN MADE ON ACCOUNT OF BOG US PURCHASES SINCE WITHOUT ANY PURCHASES THERE CANNOT BE ANY SALES. R ELYING ON VARIOUS DECISIONS, IT WAS ARGUED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 6. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH T HE ARGUMENTS ADVANCED BY THE ASSESSEE. SHE NOT ONLY UPHELD THE RE-OPENING OF THE ASSESSMENT BUT ALSO ENHANCED THE ADDITION TO RS.21, 30,030/- AS AGAINST RS.19,74,026/- MADE BY THE ASSESSING OFFICER. WHIL E HOLDING SO, SHE HELD ITA NO.3819/DEL/2019 6 | P A GE THAT THE ASSESSEE MUST HAVE EARNED PROFIT OUT OF TH E TRANSACTIONS AND SINCE EXPENSES HAVE ALREADY BEEN CLAIMED BY HIM IN HIS P& L A/C, THEREFORE, PROFIT ON SUCH TRANSACTION @ 20% OF THE PURCHASES AMOUNTIN G TO RS.3,94,805/- HAD TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE . FURTHER, IN THIS KIND OF ACCOMMODATION ENTRIES COMMISSION @ 0.5% IS PAID TO THE ACCOMMODATION ENTRY PROVIDER WHICH IN THE INSTANT CASE COMES TO R S.9,870/- SHE ACCORDINGLY ENHANCED THE INCOME OF THE ASSESSEE TO RS.4,04,675/- I.E. (RS.3,94,805/- + RS.9,870/-). 7. AGGRIEVED BY SUCH ORDER OF THE LD. CIT(A), THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [C IT(A)] IS BAD, BOTH IN THE EYES OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ACTION OF THE AO DESPITE THE FACT THAT THE REASSESSMENT INITIATED ON A NON-EXISTING ENTITY AND THEREFORE REASSESSMENT PROCEEDINGS ARE VOID AB INITIO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CO NTENTION OF THE ASSESSEE THAT THE INITIATION OF THE REASSESSMENT PR OCEEDINGS AND THE REASSESSMENT ORDER ARE BAD, BOTH ON THE FACTS AND I N LAW AND LIABLE TO BE QUASHED, AS THE STATUTORY CONDITIONS AND PROCEDU RE PRESCRIBED UNDER THE STATUTE HAVE NOT BEEN COMPLIED WITH. 4. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CO NTENTION OF THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS INITIATE D BY THE AO ARE BAD IN THE EYES OF LAW, AS THE REASONS RECORDED FOR THE ISSUE OF NOTICE UNDER SECTION 148 ARE BAD IN THE EYES OF LAW AND AR E CONTRARY TO THE FACTS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LE ARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CO NTENTION OF THE ITA NO.3819/DEL/2019 7 | P A GE ASSESSEE THAT THE REASSESSMENT ORDER PASSED BY THE AO IS BAD AND LIABLE TO BE QUASHED AS THE SAME HAS BEEN REOPENED ON THE BASIS OF THE REASONS WHICH ARE VAGUE AND HAVE BEEN RECORDED WITH OUT APPLICATION OF MIND ON THE PART OF THE AO. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ADDITION OF AN AMOUNT OF RS. 19,74,026/- ON ACCOUNT OF PURCHASES M ADE BY THE ASSESSEE TREATING THE SAME AS BOGUS INVOKING SECTIO N 69C OF THE INCOME TAX ACT. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE ASSESSEE BY THE AMOUNT OF RS.4,04,675/- ON ACCOUNT OF GROSS PROFIT AND COMMISSION PAID FOR THE ABOVE ALLEGED AMOUNT. 7. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HAT THE FIRM M/S VISHU TRADING CO. IS NOT ENGAGED IN ACTUAL BUSINESS , IGNORING THE FACT THAT DURING THE COURSE OF SEARCH ON THESE FIRMS SUB STANTIAL INVENTORY IN RESPECT OF THE MATERIAL BEING PURCHASED BY THE ASSE SSEE WAS FOUND, WHICH CONFIRMS THE FACT THAT THESE FIRMS WERE DOING ACTUAL BUSINESS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED 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 THAT THES E FIRMS ARE NOT IN ACTUAL BUSINESS IS BASELESS AND CONTRARY TO THE FAC TS ON RECORD. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING TH E CONTENTION OF THE ASSESSEE IN IGNORING THE FACT THAT THE QUANTITY PUR CHASED AND SOLD BEING COMPLETELY TALLYING, THE ALLEGATION THAT THE ASSESSEE HAS NOT MADE PURCHASES CANNOT BE SUSTAINED. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE ADDITION ON ACCOUNT OF BOGUS PURCHASES, DESPITE THEIR BEING ADE QUATE MATERIAL AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE BEFORE THE AO TO SHOW THAT THE PURCHASES AND SALES WERE MADE IN THE REGUL AR COURSE OF BUSINESS. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING TH E CONTENTION OF THE ASSESSEE THAT THE ADDITION SO MADE ON THE BASIS OF MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE, IS BAD IN LAW AND LIABLE 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 TH E CONTENTION OF THE ITA NO.3819/DEL/2019 8 | P A GE ASSESSEE THAT THE ADDITION MADE BY THE AO IS UNTENA BLE IN THE EYES OF LAW, HAVING BEEN MADE WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE PERSON ON THE BASIS OF WHOSE STATEMENT THE ALLE GATIONS HAVE BEEN MADE AGAINST THE ASSESSEE AND WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 12. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 8. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMI TTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN ITS FAVOUR BY T HE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 IN ITA NO.1512/DEL/2015 ORDER DATED 02.12.2015 WHEREIN THE TRIBUNAL HAS QUA SHED THE RE- ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING O FFICER AND HAS ALSO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LD.CIT(A) ON MERIT. HE SUBMITTED THAT THE ASSESSIN G OFFICER, IN THE INSTANT CASE, HAS ACCEPTED THE SALES OF THE ASSESSEE AND, T HEREFORE, THERE WAS NO REASON FOR HOLDING THAT PURCHASES ARE BOGUS. RELYI NG ON THE FOLLOWING DECISIONS, HE SUBMITTED THAT UNDER IDENTICAL CIRCUM STANCES, THE CO-ORDINATE BENCHES OF TRIBUNAL HAVE DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUCH BOGUS PURCHASE WHERE SAL ES HAVE BEEN ACCEPTED. * UNIQUE METAL INDUSTRIES V. ITO IN ITA NO. 1372/DEL/ 2015 DATED 28.10.2015 * M/S RADHAY SHYAM AND CO. VS ITO IN ITA NO. 1429/DE L/2015 DATED 30.11.2015 BEFORE SMC-1 BENCH. * M/S KISHAN LAL GAMBHIR & SONS V. ITO IN ITA NO.1516/DEL/2015 DATED 02.12.2015 BEFORE F BENCH * M/S KAKKAR BARTAN STORE V. ITO IN ITA NO. 1380/DE L/2015 DATED 03.03.2016 * M/S KRISHAN LAL & SONS V. ITO IN ITA NO. 1379/DE L/2015 DATED 3.03.2016 ITA NO.3819/DEL/2019 9 | P A GE * M/S LAXMI DHATU BHANDAR V. ITO IN ITA NO. 1369/D EL/2015 DATED 23.03.2016 * M/S KARSHNI METAL STORE V. ITO IN ITA NO. 1365/D EL/2015 DATED 23.03.2016 * M/S KASHMIR METALS V. ITO IN ITA NO. 1366/DEL/20 15 DATED 23.03.2016 * M/S BHARDWAJ METAL (INDIA) V. ITO IN ITA NO. 137 0/DEL/2015 DATED 23.03.2016 * M/S NAYAR METAL CO. V. ITO IN ITA NO. 1374/DEL/2 015 DATED 31/03/2016 * NEERAJ RATHORE PROP. M/S ANJLI METAL OVERSEAS AND RAJIV JAIN PROP. * M/S RAJEEV METAL TRADING CO. V. ITO IN ITA NO. 059/DEL/2017 AND ITA NO:-7061/DEL/2017 DATED 27.09.2018 * JYOTI ENGINEERING WORKS, SADHNA SHARMA, AJAY SHA RMA V. ITO IN ITA NO. 2719/DEL/2018, ITA NO. 2720/DEL/2018, ITA NO. 2721/DEL/2018, ITA NO. 2722/DEL/2018 AND ITA NO. 27 23/DEL/2018 DATED 26.09.2018 * RAJENDER PRASAD PROP. M/S PRIYA ENTERPRISES V. I TO IN ITA NO.7060/DEL/2017 DATED 07.09.2018 * M/S SAPRA METAL CO. V. ITO IN ITA NO. 2910/DEL/2 016 DATED 09.3.2017. 9. HE ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND ENHANCED BY THE LD. CIT(A) IS LIABLE TO BE DELETED. 10. THE LD.DR ON THE OTHER HAND HEAVILY RELIED ON T HE ORDERS OF THE ASSESSING OFFICER AND LD.CIT(A). 11. I HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND LD.CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND ASSESSING OFFICER, IN THE INSTAN T CASE, HAS MADE ADDITION OF RS.19,74,026/- BEING BOGUS PURCHASES MADE BY THE ASSESSEE FROM SHREE ITA NO.3819/DEL/2019 10 | P A GE BANKEY BIHARI TRADING COMPANY AND M/S VISHU TRADING COMPANY. I FIND THE LD.CIT(A) UPHELD THE INITIATION OF RE-ASSESSMEN T PROCEEDINGS AND ALSO UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER A ND FURTHER ENHANCED THE INCOME OF THE ASSESSEE BY RS.4,04,675/-. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL IN ASSES SEES OWN CASE FOR ASSESSMENT YEAR 2006-07 HAS QUASHED THE RE-ASSESSME NT PROCEEDINGS AND HAS ALSO DELETED THE ADDITION ON MERIT. 12. I FIND UNDER IDENTICAL CIRCUMSTANCES THE TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 IN ITA NO.1512/DEL /2015 ORDER DATED 02.12.2015 WHILE DECIDING THE VALIDITY OF RE-ASSESS MENT PROCEEDINGS AND DELETING THE ADDITION HAS OBSERVED AS UNDER:- REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF M/S KRISHAN LAL GAMBHIR & SONS FOR THE ASSE SSMENT YEAR 2006-07 A LETTER BEARING F.NO. ADDL.CIT/(HQ)/(COORD.)/ACCOM MODATION ENTRY/2012- 13/15016 DATED 26.03.2013 WAS RECEIVED FROM THE OFFICE OF THE CHIEF COMMISSIONER OF I.TAX, DELHI-1, NEW DE LHI THEREIN FORWARDING LETTER BEARING F.NO. CIT(C)- II/2012-13/ 3898 DATED 19.03.2013 RECEIVED FROM THE COMMISSIONER OF I.TAX, CENTRAL-II, NEW DELHI ALONG WITH A CD CONTAINING THE DETAILS OF ACC OMMODATION ENTRIES PROVIDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA & SH. NAVNEET JAIN & SH. VAIBHAV JAIN AND DIRECTING THIS OFFICE T O 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 ADDL. CIT, CENTRAL RANGE-IV, ALONG WITH ITS ENCLOSURES ON THE SUBJECT MENTIONED ABOVE. ITA NO.3819/DEL/2019 11 | P A GE 2. THE ASSESSMENT OF SEARCH CASES OF SH. RAKESH GUP TA, SH. VISHESH GUPTA, SH. NAVNEET JAIN & SH. VAIBHAV JAIN ARE UNDE R PROCESS WITH THE ACIT, CENTRAL CIRCLE-10. DURING THE ASSESSMENT PROC EEDINGS U/S 153A IN THE AFORESAID CASES, DETAILS REGARDING ACCOMMODA TION ENTRIES GIVEN BY THE ABOVE ENTRY PROVIDERS HAS BEEN OBTAINED BY T HE ASSESSING OFFICER. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS HAS B EEN OBTAINED FROM SH. RAKESH GUPTA AND SH. VISHESH GUPTA. HARD COPY O F THE LIST IS ENCLOSED AS ANNEXURE A, DULY SIGNED BY SH. VISHES G UPTA. THE LIST GIVEN THE NAME OF THE FIRM WHICH HAS PROVIDED THE A CCOMMODATION ENTRY ALONG WITH THE NAME AND ADDRESS OF THE RECIPI ENTS OF ACCOMMODATION ENTRY. 4. SH. NAVNEET JAIN & SH. VAIBHAV JAIN HAS PROVIDED ACCOMMODATION ENTRY THROUGH THIRTY SEVEN PAPER ENTITIES. THE LIST OF THE FIRMS GIVING ACCOMMODATION ENTRY IS ENCLOSED AS ANNEXURE-B. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS, HAS BEEN OBTAINED F ROM SH. NAVENEET JAIN & SH. VAIBHAV JAIN. IT DOES NOT GIVE YEAR WISE BIFURCATION. HARD COPY OF THE LIST IS ENCLOSED AS ANNEXURE-C, DULY SI GNED BY SH. VAIBHAV JAIN. THUS, THE FIRMS MENTION IN THE LIST B HAVE PROVIDED ACCOMMODATION ENTRIES TO THE FIRMS MENTIONED IN LIS T 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 BARING YEAR FOR TAKING ACTION U/S 1 48. 7. THIS INFORMATION IS FORWARDED TO YOU FOR EARLY D ISSEMINATION TO VARIOUS FIELD OFFICES IN DELHI. ON EXAMINING THE LI ST OF ACCOMMODATION ENTRIES PROVIDED BY SHRI RAKESH GUPTA & SHRI VISHE SH GUPTA AND SHRI NAVNEET 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 KRISHAN LAL GAMBHIR & SONS: S. 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 KRISHAN LAL GAMBHIR & SONS RS. 4,05,860 2. VISHNU TRADING CO. M/S KRISHAN LAL GAMBHIR & SONS RS. 3,52,461 TOTAL AMOUNT OF ENTRIES RS. 7,58,321 ITA NO.3819/DEL/2019 12 | P A GE SINCE SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JAIN DURING THE COURSE OF ASSESS MENT PROCEEDINGS U/S 153A OF I.T. ACT HAVE ADMITTED THAT THEY HAVE G IVEN ACCOMMODATION ENTRIES TO THE PARTIES WHOSE LISTS HAVE BEEN PROVID ED BY THEM TO THE ACIT, CENTRAL CIRCLE-10, NEW DELHI, THEREFORE, IT I S FAIR TO CONCLUDE THAT M/S KRISHAN LAL GAMBHIR & SONS, WHOSE NAME IS APPEA RING IN THE SAID LIST, HAS TAKEN ACCOMMODATION ENTRIES FROM SHRI RAK ESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JA IN PERTAINING TO A.Y. 2006-07. ALSO THE DETAILS OF INCOME TAX RETURN FILED BY M/S KRISHAN LAL GHAMBHIR & SONS FOR A.Y. 2006-07 AND PROCESSING DON E U/S 143(1) OF I.TAX ACT THEREOF WERE TAKEN OUT FROM ITD SYSTEM. F URTHER, NO SCRUTINY ASSESSMENT WAS DONE IN A.Y. 2006-07. THEREFORE, I H AVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX AMOUNTING TO RS. 7,58,321/- FOR THE F.Y. 2005-06 RELEVANT TO A.Y. 2006-07 HAS ESCAP ED 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 2006- 0 7 (F.Y. 2005- 06) IS SUBMITTED HEREWITH FOR KIND CONSIDERATION AN D NECESSARY APPROVAL U/S 151(2) OF THE I.T. ACT, 1961 AS THE SA ME IS GETTING BARRED BY LIMITATION ON 31/03/2013. IF APPROVED, NOTICE U/S 148 OF THE ACT MAY BE ISSU ED. SD/- (PAWAN KUMAR VASHIST) INCOME TAX OFFICER WARD 39(3), NEW DELHI 9. WE FOUND THE ISSUE REGARDING THE VALIDITY OF THE REASSESSMENT IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL IN TH E CASE OF UNIQUE METAL (SUPRA) AND SHREE RADHESHYAM & COMPANY (SUPRA) IN W HICH THIS TRIBUNAL, VIDE ORDERS DATED 28/01/2015 AND 30/11/20 15 RESPECTIVELY, HAS QUASHED THE REASSESSMENT PROCEEDINGS. WE ALSO N OTE THAT IN THESE CASES THE LD. ASSESSING OFFICER HAD RECORDED SIMILA R REASONS, AND THE PARTY FROM WHICH THE ASSESSEE THEREIN HAD MADE PURC HASES WERE ALSO SAME, AS IN THE CASE OF THE PRESENT ASSESSEE. THERE FORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THIS TRIBUNAL IN THE CAS E OF UNIQUE METAL (SUPRA) AND SHREE RADHESHYAM AND COMPANY (SUPRA), W E QUASHED THE REASSESSMENT PROCEEDINGS. 10. NOW COMING TO THE SUSTENANCE OF THE ADDITION BY THE LD. CIT(A) TO AN EXTENT OF 20% OF THE PURCHASES MADE BY THE ASSESSEE , WE NOTE THAT THE ITA NO.3819/DEL/2019 13 | P A GE TRIBUNAL, VIDE ITS ORDER DATED 30/11/2015 IN THE CA SE OF SHREE RADHESHYAM & COMPANY (SUPRA) HAVE DELETED SIMILAR A DDITION. 11. THE TRIBUNAL IN THE CASE OF SHREE RADHESHYAM & COMPANY (SUPRA), HAS FOLLOWED THE FINDINGS GIVEN IN THE ORDER DATED 28/11/2015 IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA). THIS TRIBU NAL HAS OBSERVED AS UNDER: 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 THI S TRIBUNAL VIDE 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 ADDITION OF 20% SUSTAINED BY T HE 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 A PPARENTLY TOO HIGH. THE LD. 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 THE SALES AS OTHERWISE I T AMOUNT TO LEVY OF TAX ON GROSS RECEIPT, SHE OUGHT TO HAVE APP LIED PROFIT RATE IN THIS NATURE OF TRADE. ESTIMATING PROFIT @ 20% BY TAKING 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 PURCHA SES IN CASH. THIS PROVISION CANNOT BE APPLIED IN SUCH CASE S. ONCE THE PURCHASES ARE HELD TO BE BOGUS THEN THE TRADING RES ULTS 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 T RADE. THOUGH THERE CAN BE A LITTLE GUESS WORK IN ESTIMATING PROF IT RATE BUT SUCH PROFIT RATE CANNOT BE PUNITIVE. 12. LD. DR EVEN THOUGH VEHEMENTLY RELIED ON THE ORD ER OF CIT(A) AS WELL AS THAT OF THE ASSESSING OFFICER, COULD NOT BRING T O 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 (SU PRA) AND ITA NO. 1429/DEL/2015(SUPRA). 13. WE THEREFORE, RESPECTFULLY FOLLOWING THE DECISI ON OF THIS TRIBUNAL IN THE CASE OF UNIQUE METAL INDUSTRIES (SUPRA) AND SHR EE RADHESHYAM & COMPANY (SUPRA), DELETE THE ADDITION AS SUSTAINED B Y THE LD. CIT(A) AMOUNTING TO RS. 1,10,845/-. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.3819/DEL/2019 14 | P A GE 13. SINCE THE FACTS OF THIS YEAR ARE IDENTICAL TO T HE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006- 07, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, I QUASH THE R E-ASSESSMENT PROCEEDINGS AND DIRECT THE ASSESSING OFFICER TO DEL ETE THE ADDITION. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2021. SD/- (R.K.PANDA) ACCOUNTANT MEMBER DATED:- 20.01.2021 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI