Sucha Singh, Delhi V. ITO, New Delhi

ITA 4656/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6800 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 08-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination
• Section: 40A(3); 2

Judgement Text

I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-4656/DEL/2016 (ASSESSMENT YEAR-2007-08) SUCHA SINGH, PROP. G.S.METAL INDUSTRIES, 1/9988, WEST GORAKH PARK, SHADRA, DELHI PAN-AIBPS6489G ( APPELLANT) VS ITO, WARD-56(4), NEW DELHI. (RESPONDENT) ASSESSEE BY SH.VED JAIN, ADV. REVENUE BY SH. F.R.MEENA, S R.DR DATE OF HEARING 08 . 12 .2016 DATE OF PRONOUNCEMENT 08 . 02 .201 7 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 07.06.2016 OF CIT(A)-19, NEW DELHI PERT AINING TO 2007-08 ASSESSMENT YEAR ON VARIOUS GROUNDS. 2. HOWEVER, AT THE TIME OF HEARING, THE LD.AR SUBMI TTED THAT HE WOULD ADDRESS GROUND NOS.5 TO 10 AND THE ASSESSEE DOES NOT WISH TO PRES S GROUND NOS.1 TO 4, 11 & 12. NOTING TO THIS EFFECT HAS BEEN GIVEN BY THE LD.AR ON THE MEMO OF APPEAL ITSELF, ACCORDINGLY GROUND NO.5 TO 10 ARE REPRODUCED HEREUNDER FOR READY-REFER ENCE:- 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN CONFIRMING THE ADDITION O F AN AMOUNT OF RS.2,78,199/- ON ACCOUNT OF BOGUS PURCHASES. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION TO THE EXTENT OF 25% OF SUC H PURCHASES, WITHOUT THERE BEING ANY BASIS FOR THE SAME. 7. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN CONFIRMING THAT THE FIRM M/S BANKEY BIHARI TRADING CO. ARE NOT ENGAGED IN THE ACTUAL BUSINESS IGNORING THE FACT THAT DURING THE COURSE OF THE SEARCH SUBSTANTIAL INVENTORY IN RESPECT OF THE MATERIAL BEING PURCHASED BY THE ASSESSEE WERE FOUND WHICH CONFIRM THE FACT THAT THI S FIRM WAS DOING ACTUAL BUSINESS. (II)ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTING THAT THE INFERE NCE DRAWN BY THE AO MERELY ON THE BASIS OF A STATEMENT THAT THESE FIRMS ARE NOT I N ACTUAL BUSINESS IS BASELESS AND CONTRARY TO THE FACTS ON RECORD. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN CONFIRMING THE ADDITION TO THE EXTENT OF 25% OF SUCH PURCHASES REJECTING THE MATERIAL AND EVIDENCES BROUGHT ON REC ORD BY THE ASSESSEE TO SHOW THAT THE PURCHASES WERE MADE IN REGULAR COURSE OF T HE BUSINESS AND MATERIAL SO PURCHASED WAS SOLD IN THE REGULAR COURSE OF BUSINES S. PAGE 2 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTING THE CONTENTION OF TH E ASSESSEE THAT THE ADDITION SO MADE ON THE BASIS OF MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE IS BAD IN LAW & LIABLE TO BE DELETED. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS & IN LAW IN REJECTING THE CONTENTION OF TH E ASSESSEE THAT THE ADDITION MADE BY THE LEARNED AO IS UNTENABLE IN THE EYE OF L AW HAVING BEEN MADE WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE PERSON O N THE BASIS OF WHOSE STATEMENT THE ALLEGATIONS HAVE BEEN MADE AGAINST TH E ASSESSEE AND WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE. 3. IN THE LIGHT OF THE GROUNDS AGITATED, THE LD.AR INVITING ATTENTION TO PARA 10 OF THE IMPUGNED ORDER, REFERRING TO THE ASSESSMENT ORDER A ND THE IMPUGNED ORDER, SUBMITTED THAT THE ASSESSEE HAD RETURNED AN INCOME OF RS.2,03,340/ -. THE RETURN IT WAS SUBMITTED WAS SELECTED FOR SCRUTINY VIDE NOTICE DATED 20.12.2013, IN VIEW OF SOME STATEMENTS ALLEGEDLY GIVEN BY THE ENTITIES/ CONCERNS CONTROLLED BY SH. V AIBHAV JAIN, SH. NAVNEET JAIN, SH. RAKESH GUPTA AND SH. VISHESH GUPTA. THE ASSESSEE IT WAS SUBMITTED ACCORDING TO THE TAX AUTHORITIES WAS THE BENEFICIARY OF ACCOMMODATION EN TRIES TO THE TUNE OF RS.11,12,795/- FROM M/S BANKEY BIHARI TRADING CO., 3838, GALI BARNWA, S ADAR BAZAAR, DELHI-110006. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS SUBMITT ED THAT THOUGH THE ASSESSEE SUBMITTED THE LEDGER/BILLS IN SUPPORT OF THE TRANSACTIONS BUT SIMPLY BECAUSE THE LETTERS ISSUED BY THE AO RETURNED UNSERVED, THE AO MADE THE ADDITION. IN TH E APPEAL FILED THE CIT(A) GRANTED PARTIAL RELIEF HOLDING THAT IT CANNOT BE A CASE THAT NO PUR CHASES WERE MADE SINCE THE SALES WERE ACCEPTED THUS IT WAS CONCLUDED THAT THE CORRESPONDI NG PURCHASES WOULD HAVE BEEN MADE FROM THE GREY MARKETS AND THE BILLS MAY HAVE BEEN P ROCURED FROM AN ENTRY PROVIDER. IN THESE CIRCUMSTANCES, PARTIAL RELIEF WAS GRANTED, DISALLOW ING 25% OF THE PURCHASE LEADING TO SUSTAINING THE ADDITION TO THE EXTENT OF RS.2,78,19 9/-. IN THE SAID BACKGROUND, IT WAS HIS SUBMISSION THAT IN THE FACTS OF THE PRESENT CASE, T HE ASSESSEES ACCOUNTS ARE AUDITED AND THE G.P. RATE SHOWN IN THE TRADE IS AT PAR. IN THE CIR CUMSTANCES SUSTAINING THE ADDITION BY DISALLOWING 25% OF THE EXPENDITURE CLAIMED ON AN AD HOC BASIS AS UNJUSTIFIED. RELYING UPON THE ORDER DATED 28.10.2015 IN ITA NO.1372/DEL/2015 IN THE CASE OF UNIQUE METAL INDUSTRIES VS ITO FOR 2006-07 AY, IT WAS SUBMITTED THAT THE ADDITION DESERVES TO BE DELETED AS THE FACTS ARE IDENTICAL. INVITING ATTENTION PARA 14 AT PAGE 23 OF THE SAID ORDER, IT WAS SUBMITTED THAT IN PAGE 3 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO THE FACTS OF THAT CASE ALSO ACCORDING TO THE TAX AU THORITIES M/S. BANKEY BIHARI, APART FROM SOME OTHER CONCERNS HAD ALLEGEDLY PROVIDED ACCOMMOD ATION ENTRIES TO THE ASSESSEE. IN THE FACTS OF THAT CASE, THE BOOKS OF ACCOUNTS OF THE AS SESSEE WERE REJECTED. THE CIT(A) IN APPEAL HAD SUSTAINED THE ADDITION BY DISALLOWING 20 % OF THE EXPENSES. THE ASSESSEE CHALLENGED THE ADDITION SUSTAINED BEFORE THE ITAT. THE ARGUMENTS ON BEHALF OF THE ASSESSEE IT WAS SUBMITTED ARE ADDRESSED IN PARAS 17 TO 21 AND AFTER CONSIDERING THE SUBMISSIONS OF THE REVENUE IN PARA 22, THE ITAT IN PARAS 23 TO 28 PROCEEDED TO DELETE THE ADDITIONS. EMPHASIS WAS LAID ON THE ASPECT THAT IN THE FACTS OF THAT CASE ALSO AS FOUND DISCUSSED IN PARA 24 OF THE SAID ORDER, THE STATEME NT OF THE VERY SAME FOUR PERSONS NAMELY SH. VAIBHAV JAIN, SH. NAVNEET JAIN, SH. RAKESH GUPT A AND SH. VISHESH GUPTA WERE THE BASIS FOR RE-OPENING. THE SAID PERSONS AS PER THEI R STATEMENTS WERE HELD TO BE PERSONS ENGAGED IN THE TRADE OF SCRAP I.E. THE VERY SAME TR ADE IN WHICH THE ASSESSEE WAS ENGAGED IN THE PRESENT PROCEEDINGS. THE ASSESSEE IN THE FACTS OF THAT CASE CONSIDERED BY THE ITAT QUESTIONED THE FACT THAT HOW CAN THE STATEMENT OF T HE PERSON WHO HAD BEEN CAUGHT ON THE WRONG FOOT BE TAKEN AT THE FACE VALUE AND THEN BE A LLOWED TO TAKE AS A DEFENSE THAT THE SALES MADE BY THEM ARE NOT GENUINE AND INFACT ACCOMMODATI ON BILLS HAVE BEEN ISSUED BY THEM. THE ITAT CONSIDERING THE SAID ARGUMENT HELD THAT WH EREON FACTS, SALES HAVE NOT BEEN DOUBTED SHIFTING OF ONUS BY THE REVENUE BY MAKING P RESUMPTION THAT PURCHASES MADE ARE NOT GENUINE, WAS DEPRECATED. IT WAS SUBMITTED THAT THE ITAT IN STRONG WORDS HAS HELD THAT ADVERSE INTERFERENCE CANNOT BE DRAWN AGAINST THE PE RSON MERELY BASED ON DOUBTS AS DOUBT HOWSOEVER STRONG IT HAS BEEN OBSERVED CANNOT PARTAK E THE CHARACTER OF A LEGAL PROOF. ACCORDINGLY IT WAS HIS PRAYER THAT THE ADDITION SHO ULD BE DELETED. 4. LD. SR. DR THOUGH PLACED RELIANCE UPON THE IMPUG NED ORDER HOWEVER OFFERED NO ARGUMENT TO SHOW WHY THE CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE. NO DISTINCTION ON FACTS AND CIRCUMSTANCES WAS BROUGHT TO THE NOTICE OF THE BENCH AND INFACT IT WAS FAIRLY CONCEDED THAT IN THE FACE OF THE ITAT ON THE VERY SAME FACTS THERE WAS NOTHING FURTHER TO BE SAID. PAGE 4 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE O RECORD. IT IS SEEN THAT AS FAR AS THE SIMILARITY OF FACTS IN REGA RD TO THE RE-OPENING OF THE ASSESSMENT IN THE FACTS OF THE TWO CASES IS CONCERNED, IT IS SEEN THA T THE STATEMENT OF THE VERY SAME PERSONS NAMELY SH. VAIBHAV JAIN, SH. NAVNEET JAIN, SH. RAKE SH GUPTA AND SH. VISHESH GUPTA HAS BEEN THE BASIS. THE CIT(A) HAS PROCEEDED TO GIVE P ARTIAL RELIEF TAKING NOTE OF THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING OF NUT & BOLT AND OTHER ITEMS USED IN SANITARY PRODUCTS & USES SCRAP TO MANUFACTURE TH ESE ITEMS. THE ASSESSEE HAS ALLEGED THAT PAYMENTS HAVE BEEN MADE BY CHEQUE AND THE BILL S HAVE BEEN PRODUCED FOR EXAMINATION. HE HAS ALSO STATED THAT HE IS ENGAGED IN THE MANUFACTURING OF MATERIAL BY MELTING SCRAP FOR THE PURPOSE OF CASTINGS. IT HAS ALSO BEEN STATED THAT SINCE THE SALES HAVE BEEN MADE, IT CANNOT BE A CASE OF NON-PURCHASE OF M ATERIAL AS THE SCRAP PURCHASED WAS USED FOR THE PURPOSE OF MELTING & MANUFACTURING THE GOODS. THE CIT(A) IN APPEAL HAS TAKEN NOTE OF THE FACT THAT THE TOTAL PURCHASES WERE RS.2 7,11,618/- AGAINST THE SALES OF RS.47,67,561/-. THEREAFTER, HE HAS GONE ON TO HOLD THAT ONCE THE SALES ARE ACCEPTED, THERE HAVE TO BE CORRESPONDING PURCHASES WHICH IT HAS BEE N INFERRED MAY HAVE BEEN FROM THE GREY MARKET AND THE BILLS WERE PROCURED FROM ANY ENTRY P ROVIDER. IN THESE CIRCUMSTANCES, THE CIT(A) PROCEEDINGS TO DISALLOW 25% OF PURCHASES AND RESTRICTED THE ADDITION TO RS.2,78,199/-. IT IS SEEN THAT THE CO-ORDINATE BEN CH IN THE CASE UNIQUE METAL INDUSTRIES VS ITO ON IDENTICAL FACTS AND CIRCUMSTANCES HAS HELD THAT THE EVIDENCE ON RECORD CANNOT BE DISCARDED ON THE BASIS OF DOUBTS. THE SPECIFIC ALL EGED ENTRY PROVIDER M/S. BANKEY BIHARI IS FOUND MENTIONED AT PAGE 23 PARA 14 OF THE SAME AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REVENUE, THE CO-ORDINATE BENCH HELD AS UNDER:- 23. I HAVE CONSIDERED THE SUBMISSION OF BOTH LEARN ED AR AS WELL AS DR AND PERUSED THE ASSESSMENT ORDER, ORDER PASSED BY THE L EARNED CIT(A AND THE PAPER BOOK. IN THIS CASE, THE LEARNED CIT(A) HAS HELD TH AT THE PURCHASES ARE BOGUS BUT CONSIDERING THE FACT THAT THE SALES AND TRADING PRO FIT HAS TO BE DETERMINED, SHE HAS ESTIMATED PROFIT OF 20% ON ALLEGED BOGUS PURCHA SES. 24. NOW THE ISSUE IS WHETHER ON THE FACTS AND CIRC UMSTANCES OF THIS CASE IT CAN BE SAID THAT THE PURCHASES ARE BOGUS. THE ASSES SING OFFICER HAS PLACED RELIANCE ON THE STATEMENT OF SH. RAKESH GUPTA AND S H, VISHESH GUPTA AND SH. NAVEENET JAIN & SH. VAIBHAV JAIN. ADMITTEDLY THESE STATEMENTS WERE RECORDED AT PAGE 5 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO THE BACK OF THE ASSESSEE. THOUGH THE COPY OF THE SA ME WAS PROVIDED TO THE ASSESSEE BUT AN OPPORTUNITY OF CROSS EXAMINATION HA S NOT BEEN ALLOWED TO THE ASSESSEE. THE ASSESSING OFFICER IN THIS REGARD HAS STATED THAT HE HAS ISSUED SUMMONS TO THESE PERSONS REPEATEDLY BUT THESE PERSO NS HAVE NOT APPEARED NOR HAS FILED THE DESIRED DETAILS AND DOCUMENTS. IN THE ABSENCE OF THEIR CROSS EXAMINATION AND ALSO IN THE ABSENCE OF FURNISHING D ESIRED DETAILS AND THE DOCUMENTS IT WILL NOT BE APPROPRIATE TO SUBSTANTIAT E THE ADDITION ON THE BASIS OF THE STATEMENT. ON EXAMINATION OF FACTS IT ALSO TRAN SPIRES THAT THESE PERSONS WERE IN THE TRADE OF SCRAP, THE SAME BUSINESS IN WHICH T HE ASSESSEE IS ENGAGED. A SURVEY WAS CARRIED OUT ON THESE PERSONS AND DURING THE COURSE OF THE SURVEY IT IS NOT THE CASE OF THE DEPARTMENT THAT THEY WERE NOT F OUND NOT CARRYING ON THE SAME BUSINESS. ON THE CONTRARY THERE IS EVIDENCE ON REC ORD THAT THESE PERSONS WERE NOT ONLY IN THE BUSINESS OF SCRAP BUT ALSO STOCK OF SCRAP WAS ALSO FOUND WITH THEM. 25. THE DEPARTMENT HAS ALSO MADE ASSESSMENT OF THES E PERSONS IN RESPECT OF THE BUSINESS OF SCRAP CARRIED ON BY THEM. THE REVENUE I S DOUBTING THE PURCHASES OF THE ASSESSEE ON THE BASIS THAT THESE PERSONS HAVE M ADE A STATEMENT THAT THEY HAVE ISSUED ACCOMMODATION BILLS AND HAVE NOT MADE A CTUAL SALES TO THE ASSESSEE. CAN SUCH STATEMENTS BE TAKEN AT ITS FACE VALUE? IF THESE PEOPLE WERE ENGAGED IN THE SCRAP TRADE AS CONTENDED BY THE LEAR NED AR THEN THERE IS EVERY POSSIBILITY THAT THESE PERSONS WOULD HAVE COLLECTED THE SCRAP FOR WHICH THEY WERE NOT HAVING ANY INVOICES OR SOURCE OF SUPPLY AND HAV E SOLD THE SAME TO THE ASSESSEE AND TO VARIOUS OTHER PARTIES. ON BEING CAU GHT AT WRONG FOOT THESE PERSONS HAVE TAKEN THE DEFENCE THAT THE SALES MADE BY THEM ARE NOT GENUINE AND THEY HAVE ISSUED ACCOMMODATION BILLS. IN THE PRESEN T CASE THE ASSESSEE HAS MADE PURCHASES AND THERE ARE CORRESPONDING SALES. T HESE SALES ARE NOT BEING DOUBTED. IF SALES ARE NOT BEING DOUBTED THEN OBVIOU SLY PURCHASES WOULD BE THERE. NOW THE LEARNED CIT(A) HELD THAT THE PURCHASES MADE BY THE ASSESSEE ARE NOT GENUINE AND ASSESSEE WOULD HAVE MADE PURCHASES FROM SOME OTHER PERSONS. THE CASE OF THE ASSESSEE THAT IT HAS MADE PURCHASES FROM THESE VERY PERSONS AND HAVING MADE THE PAYMENT BY ACCOUNT 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 PURCHASE AND NOT THE ASSESSEE. THE REVENU E IS TRYING TO SHIFT THE ONUS ON THE ASSESSEE BY MAKING PRESUMPTION THAT THE PURC HASES MADE BY IT ARE NOT GENUINE DESPITE ACCEPTING ITS SALES. IN MY OPINION SHIFTING OF THIS ONUS AND THE ASSUMPTION BEING MADE THAT PURCHASES ARE NOT GENUIN E IN THE PRESENT SET OF FACTS IS NOT CORRECT. THERE WOULD HAVE BEEN SOME LOGIC, H AD THESE PEOPLE WOULD NOT HAVE BEEN IN THE SAME TRADE AND HAD THERE BEEN SOME OTHER CIRCUMSTANCES LEADING TO THE CONCLUSION THAT THE SO CALLED PURCHA SES BY THE ASSESSEE UNDER NO CIRCUMSTANCES CAN BE FROM THESE PERSONS. ADVERSE INFERENCE CANNOT BE DRAWN AGAINST A PERSON MERELY ON THE BASIS OF DOUBT. DO UBT HOWSOEVER STRONG CANNOT PAR-TAKE THE CHARACTER OF LEGAL PROOF. IN TH E PRESENT CASES THERE IS COMPLETE TRAIL OF THE PURCHASES AND SALES SO FAR AS SESSEE IS CONCERNED. THE ASSESSEE HAS BEEN ABLE TO CO-RELATE EACH TRANSACTIO N OF PURCHASE WITH SALES AS IS EVIDENT FROM THE SUBMISSION MADE BEFORE THE L EARNED C1T(A). 26. THERE IS A COMPLETE CO-RELATION BETWEEN THE PUR CHASES AND THE SALES AND THE SAME IS FULLY DOCUMENTED. THUS THE AO AS WELL AS LEARNED CIT(A) WAS NOT CORRECT IN DRAWING ADVERSE AGAINST THE ASSESSEE ON THIS ACCOUNT. I FURTHER NOTE THAT THE LEARNED CIT(A) WHILE GIVING A FINDING THAT THE PURCHASES ARE BOGUS HAS PLACED MUCH RELIANCE ON THE STATEMENT OF THESE PERS ONS. AS DISCUSSED HEREINABOVE THE STATEMENT OF THESE PERSONS CANNOT B E TAKEN ON THE FACE OF IT IN VIEW OF THE SURROUNDING FACTS. THESE PERSONS WERE DEFINITELY IN THE TRADE. THESE PERSONS HAVE NOT APPEARED BEFORE THE ASSESSING OFF ICER DESPITE REPEATED SUMMONS BEING ISSUED. HAD THESE PERSONS WERE CLEAN AND WANTED TO STAND BY THEIR STATEMENT GIVEN BEFORE THE ASSESSING OFFICER AND THE AFFIDAVIT FILED, THERE WAS NO REASON FOR THESE PERSONS TO NOT TO APPEAR AN D TO STAND BY THEIR STATEMENT I AM ALSO OF THE VIEW THAT THE CIT(A) WAS NOT-JUSTI FIED IN DRAWING ADVERSE PAGE 6 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO INFERENCE ON THE BASIS OF THE TRANSPORTATION. AS RI GHTLY POINTED BY THE LEARNED AR THAT THESE WERE LOCAL MOVEMENTS. THE PURCHASES AND SALES WERE WITHIN THE WALLED CITY OF DELHI WHERE THE TRANSPORTATION IS BY MANUAL DRIVEN CARTS AND THE CHARGES FOR THE SAME ARE DEBITED UNDER THE HEAD CARTAGE. FURTHER WHEN SALES ARE ACCEPTED AS GENUINE, THEN DEFINITELY THE TRANSACTIO NS HAVE OCCURRED AND MOVEMENTS OF GOODS HAVE TAKEN PLACE. IT IS ALSO NO T THE CASE OF THE LEARNED CIT(A) THAT TRANSACTIONS HAS NOT HAPPENED. THUS TRA NSPORTATION ON SUCH FACTS CANNOT BE A BASIS TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. I FURTHER NOTE THAT THE LEARNED CIT(A) HAS UPHELD THE ALLEGATION O F THE ASSESSING OFFICER OF THE BOGUS PURCHASES BY MAKING AN OBSERVATION THAT THE A PPELLANTS DEALING WITH THESE PARTIES IS NOT FREE FROM ANY DOUBT. IT IS A SETTLED LAW THAT DOUBT CANNOT BE A BASIS FOR SUSTAINING THE ALLEGATION. ON THE CONTRARY THE ASSESSEE HAD LEAD SUFFICIENT EVIDENCES IN SUPPORT OF ITS PURCHASES WHICH THE ASS ESSING OFFICER IN MY VIEW HAS NOT BEEN ABLE TO REBUT. ACCORDINGLY I AM OF THE VIE W THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE SAID THAT TH E PURCHASES MADE BY THE ASSESSEE ARE BOGUS. 27. AS REGARDS THE ADDITION OF 20% SUSTAINED BY THE LEARNED CIT(A) I AM OF THE VIEW THAT SINCE PURCHASES ARE NOT BOGUS, THE ADDITI ON ON THIS ACCOUNT CANNOT BE SUSTAINED. EVEN OTHERWISE THE ADDITION OF 20% ON TH E 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 WI THOUT DEDUCTING THE COST OF PURCHASES FROM THE SALES AS OTHERWISE IT AMOUNT TO LEVY OF TAX ON GROSS RECEIPT, SHE OUGHT TO HAVE APPLIED PROFIT RATE IN THIS NATUR E OF TRADE. ESTIMATING PROFIT AT THE RATE OF 20% BY TAKING INTO CONSIDERATION THE PROVIS IONS OF SECTION 40A(3) WILL NOT LEAD TO DETERMINATION OF CORRECT REAL INCOME. SECTI ON 40A(3) IS MEANT FOR A DIFFERENT PURPOSE WHEN THE ASSESSEE HAS MADE PURCHA SES 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 TO REJECT BOOKS OF ACCOUNTS AND PRO FIT HAS TO BE ESTIMATED BY APPLYING A COMPARATIVE PROFIT RATE IN THE SAME TRAD E. THOUGH THERE CAN BE A LITTLE GUESS WORK IN ESTIMATING PROFIT RATE BUT SUCH PROFI T RATE CANNOT BE PUNITIVE. 28. IN VIEW OF THE ABOVE, THE ADDITION SUSTAINED BY THE LEARNED CIT(A) IS DIRECTED TO BE DELETED AND GROUND NO.4 TO 11 ARE AL LOWED. 5.1. ACCORDINGLY ON A CONSIDERATION OF THE ABOVE WH EREIN THERE IS NO CHANGE IN THE MATERIAL FACTS AND CIRCUMSTANCES OF THE TWO CASES, I FIND NO GOOD REASON TO DEVIATE FROM THE CONCLUSION DRAWN BY THE CO-ORDINATE BENCH. NO CHAN GE IN FACTS AND CIRCUMSTANCES BEEN POINTED OUT BY THE REVENUE NOR HAS ANY CONTRARY DEC ISION BEEN REFERRED TO BY LD.SR.DR TO TAKE A CONTRARY VIEW. IN THE FACTS AS THEY STAND, I FIND THAT THE PRAYER OF THE ASSESSEE HAS TO BE ALLOWED. THE ADDITION MADE BY WAY OF ESTIMATE I N THE PECULIAR FACTS AND CIRCUMSTANCES ACCORDINGLY IS DIRECTED TO BE DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08 O F FEBRUARY 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER *AMIT KUMAR* PAGE 7 OF 7 I.T.A .NO.-4656/DEL/2016 SUCHA SINGH VS ITO COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI