PARDEEP KUMAR AGGARWAL,DELHI vs. ITO, WARD-63(3), NEW DELHI

The brief facts of the case are that the assessee filed the return of income on 29.10.2017 at a total income of Rs. 3,14,860/-. Subsequently, the AO received an information from the Investigation Wing through CIT(Central), New Delhi as per which the assessee has obtained accommodation entries in the form of bogus purchases through various persons namely, Sh. Rakesh Gupta, Sh. Vishesh Gupta, Sh. Navneet Jain and Sh. Vaibhav Jain. Based on the information, the AO reopened assessment u/s 147 of the Income Tax Act, 1961 (in short “Act”) and issued notice u/s 148 of the Act on 14.03.2014. During the course of assessment proceedings, the AO issued a detailed show cause notice to the assessee on 20.02.2015 in which the details of the accommodation entries amounting to Rs.20,72,820/- obtained by the assessee in the name of its proprietorship concern Tara Metal Udyog from two concerns namely, Shree Bankey Bihari Trading Co. and Shree Goverdhan International was furnished to the assesse and it was also stated that Sh. Rakesh Gupta and Sh. Vishesh Gupta have admitted to have provided accommodation entries in their statements recorded during the course of search proceedings u/s 132 of the Act and thereafter in the statements recorded by ACIT, Central Circle-10, New Delhi on 12.02.2013 and 04.02.2013 respectively. It was also stated that these persons have also filed affidavits in which they have confirmed that they were not making any actual sales but were issuing bogus purchase bills to provide accommodation entries. The assessee was asked to show cause why these purchases booked by the appellant amounting to Rs.20,72,820/- be not treated as bogus purchases and be not added to the total income. The AO had also issued summons u/s 131 of the Act to Sh. Rakesh Gupta and Sh. Vishesh Gupta during the course of assessment proceedings in other cases pending before him and has recorded the statements in which they have reconfirmed the fact that they are providing accommodation entries and are not engaged in any actual sale. The appellant also failed to furnish the books of accounts before the AO. The AO was also not satisfied with the reply of the assessee and therefore, the AO has treated these purchases of Rs.20,72,820/- as bogus purchases and has treated the same as income of the appellant u/s 69C of the Act and assessed the income of the assessee at Rs. 23,87,680/- vide order dated 18.03.2015 passed u/s. 143(3)/147 of the Act. Against the assessment order dated 18.03.2015, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 28.12.2017 has partly allowed the appeal of the assessee. Aggrieved with the impugned order dated 28.12.2017, assessee is in appeal before the Tribunal.

At the time of hearing, Ld. Counsel for the assessee stated that the issue in dispute has been adjudicated and decided by the various Benches of the ITAT wherein the Tribunal has deleted the addition in all the cases. In support of his contention, he filed the copy of the order dated 31.10.2018 passed in (AY 2006-07) in the case of Metal India vs. ITO, Ward 39(2), New Delhi wherein on exactly similar issue, the addition was deleted. He has also filed a Paper Book containing pages 1-68 in which various copy of the decision were attached i.e. M/s Unique Metal Industries (Page 1-37); M/s Radhey Shyam & Co. (Page 38-46); M/s Karshni Metal Store & Others (Page 47-55); M/s Metal India (Page 56-66); CIT vs. M/s Odean Builders Pvt. Otd. (2019) 105 CCHO 392 ISCC (SC) (Page 67-68) and various other decisions on the Rule of Consistency which includes the famous case of Radhasoami Satsang (1992) 193 ITR 321 (SC). Ld. Counsel for the assessee also filed 02 other Paper Books containing pages 57-90 in which assessee has filed 04 cases and in another Paper Book which contain pages 1-58 in which the assessee has filed the written submissions before the ITAT and Written Submissions before the Ld. CIT(A) alongwith various other documentary evidences for substantiating the claim of the assessee and requested that by following the Rule of Consistency and in view of the various decisions on the similar facts and circumstances of the case of the assessee the addition in dispute may be deleted by allowing the appeal of the assessee.

On the contrary, Ld. DR relied upon the orders passed by the revenue authorities. He has also filed the 04 pages Written Submissions in which he supports the order of the Ld. CIT(A) on the issue of reopening of the case of the assessee u/s. 147 of the Act.

I have heard both the parties and perused the records, especially the orders of the revenue authorities alongwith the orders passed by the ITAT, Hon’ble High Courts and the Hon’ble Supreme Court of India on the issue in dispute. I am of the considered view that the assessee has filed his original return of income for the assessment year in dispute on 29.10.2007 by declaring total income of Rs. 3,14,860/-. The return of the assessee was processed by the Assessing Officer u/s. 143(1) of the Act. Later on, information from the ACIT, Central Circle-X, Jhandewala Extension, New Delhi vide letter dated 13.3.2013 forwarded through CIT, Central Circle-II, New Delhi and CCIT, Delhi-I vide letter dated 19.3.2013 and 26.3.2013 respectively wherein providing a CD containing details of all parties to whom the bogus purchases/ bogus entries provided by S/Sh. Rakesh Gupta, Vishesh Gupta, Vineet Jain and Navneet Jain were appearing. After going through the material the AO made the addition of Rs. 20,72,820/- on account of alleged bogus purchases and completed assessment of income on Rs. 23,87,680/- on 18.03.2015. Aggrieved with the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order 28.12.2017 restricted the addition to 25% of the total bogus purchases of Rs. 20,72,820/- i.e. the addition was restricted to Rs. 5,18,205/- and the balance addition of Rs. 15,54,215/- was deleted.

The department has also made assessment of these persons in respect of the business of scrap carried on by them. The Revenue is doubting the purchases of the assessee on the basis that these persons have made a statement that they have issued accommodation bills and have not made actual 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 learned 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 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 accommodation 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 obviously purchasing would be there. Now the learned CIT(A) held 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 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 purchases and not the assessee. The Revenue is trying to shift the onus on the assessee by making presumption 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 genuine in the present set of facts is not correct. There would have been some logic, had 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 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 before the learned CIT(A).

There is a complete co-relation between the purchases and the sales and the same is fully documented. Thus the AO as well as leaned CIT(A) was not correct in drawing adverse inference against the assessee on this account. If further note that the leaned cIT(A) while giving a finding that the 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 the surrounding facts. These persons were definitely in the trade. These persons have not appeared before the Assessing Officer 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 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 the transportation. As rightly pointed by the learned AR 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 under the head cartage. Further when sales are accepted as genuine, then definitely the transactions have occurred and movements of goods have taken place. It is also not the case of the learned CIT(A) that transactions has not happened. Thus transaction 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 of the Asses sing Officer of the bogus purchases by making an observation that the appellant’s 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 assessing Officer in my view has not been able to rebut. Accordingly I am of the view that in the facts and circumstances of the case it cannot be said that the purchases made by the assessee are bogus.

As regards the additionof20% sustained by the learned CIT(A) I am of the view that since purchases are not bogus the addition on this account cannot be sustained. Even otherwise 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 the sales as otherwise it amount to levy of tax on gross receipt, she ought to have applied' profit rate in this nature of trade. Estimating profit at the rate of 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 purchases in cash. This provision cannot be applied in such cases. Once the purchases 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 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 rate but such profit rate cannot be punitive.”

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 5.3.1.1 The above order has been followed in the following cases: • Unique Metal Industries Vs ITO Dated. 28.10.2015

In the result, the appeal filed by the assessee stands allowed.