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Before: SHRI N.K. SAINI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
This is an appeal preferred by the assessee against the order of the ld. CIT(A)-XX, New Delhi vide his order dated 16/12/2014 for A.Y. 2006-07 on the following grounds:
1. “On the facts and circumstances of the case, the order passed by the ld. CIT(A) is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the initiation of the reassessment proceedings and the reassessment order are bad both on facts and in law and liable to be quashed as the statutory conditions and procedure prescribed under the statute have not been complied with. 3. (i)On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the ld. Assessing Officer are bad in the eye of law as the reasons recorded for the issue of notice u/s 148 are bad in the eye of law and are contrary to the facts. (ii) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the Assessing Officer is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded without application of mind on the part of the Assessing Officer.
4. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming the rejecting of the books of accounts of the assessee by the Assessing Officer, despite the fact that the assessee has been maintaining proper books of accounts as per law.
5. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming the addition of an amount of Rs. 1,10,845/- on account of bogus purchases.
6. On the facts and circumstances of the case, the ld. CIT(A) has erred in confirming the addition to the extent of 20% of such purchases, without there being any basis for the same. 7. (i)On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming that the firms M/s Om Agencies, M/s Shree Shyam Trading Company & M/s Shree 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 this firm was doing actual business. (ii)On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts & in law in rejecting that the inference drawn by the Assessing Officer merely on the basis of a statement that these firms are not in actual business is baseless and contrary to the facts on record.
8. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in rejecting the contention of the assessee in ignoring the fact that there being a complete tally of the quantity purchased and sold the allegation that the assessee has not made purchases cannot be sustained.
9. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts & in law in confirming the addition to the extent of 20% of such purchases rejecting the material and evidences brought on record by the assessee to show that the purchases were made in regular course of the business and material so purchased was sold in the regular course of business.
10. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts & in law in rejecting the 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 & liable to be deleted.
11. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts & in law in rejecting the contention of the asessee that the addition made by the ld. Assessing Officer is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice.
12. The appellant craves leave to add, amend or alter any of the grounds of appeal.”
Brief facts of the case as recorded by the ld. Assessing Officer are as under: The assessee had not filed its return of income for the year under consideration. The assessment was reopened on an information received from the ACIT, Central Circle 10, Jhandelwalan Extn., on the allegation that the assessee had made bogus purchases. The assessment was completed by the ld. Assessing Officer by making an addition of Rs. 5,54,226/- treating the entire purchases made by the assessee from M/s Shree Bankey Bihari Trading Company, M/s. Om Agencies and M/s Shree Syam Trading Company to be accommodation entries.
3. Aggrieved by the order of the ld. Assessing Officer, the assessee went into appeal before the ld. CIT(A). The ld. CIT(A) upheld the validity of the reassessment but reduced the addition to 20% of the purchases being Rs.1,10,845/-. 4. Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us now. 5. The grounds taken before us by the assessee relates to the validity of the reassessment as well as the sustenance of the addition to an extent of Rs.1,10,845/-. 5.1. So far as the validity of the assessment is concerned, the ld. AR submitted that, this Tribunal in the case of Unique Metal Industries vs. ITO in vide dated 28/03/2015, has decided the issue. The ld. AR submitted that the assessment in the case of Unique Metal (supra) was reopened, on the same allegation and the facts of the case are identical, as a number of assessments were reopened by the same Assessing Officer, on the basis of the same set off information. The ld. AR submitted that the Assessing Officer has recorded similar reasons in all the cases. The ld. AR has submitted that in the case of Unique Metal (supra) this Tribunal has held the reopening to be bad in law.
6. The ld. AR has also produced before us the order of this Tribunal in the case of Radheshyam & Company vs. ITO, Ward 39(3), New Delhi in wherein this Tribunal vide order dated 30/11/2015 has considered a similar and identical issue, and held the reassessment to be bad in law.
On the contrary, the ld. DR relies upon the orders passed by the authorities below. 8. We have heard the rival submissions and carefully considered the documents placed on record. It is noted that the assessment has been reopened by the ld. Assessing Officer by recording the following reasons: “Reasons for the belief that the income has escaped assessment in the case of M/s Krishan Lal Gambhir & Sons for the assessment year 2006-07 A letter bearing F.No. Addl.CIT/(Hq)/(Coord.)/Accommodation entry/2012- 13/15016 dated 26.03.2013 was received from the Office of the Chief Commissioner of I.Tax, Delhi-1, New Delhi 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 accommodation entries provided by Sh. Rakesh Gupta & Sh. Vishesh Gupta & Sh. Navneet Jain & Sh. Vaibhav Jain and directing this office to take necessary action as per section 148 in respect of entries pertaining to A.Y. 2006-07, which is time barring on 31.03.2013. The information provided by the CIT, Central-II, New Delhi vide his letter dated 19.03.2013 reads as under: 1. “Kindly find enclosed herewith letter dated 13.03.2013 of ACIT, Central Circle-10 duly forwarded by the Addl. CIT, Central Range-IV, along with its enclosures on the subject mentioned above.
2. The assessment of search cases of Sh. Rakesh Gupta, Sh. Vishesh Gupta, Sh. Navneet Jain & Sh. Vaibhav Jain are under process with the ACIT, Central Circle-10. During the assessment proceedings u/s 153A in the aforesaid cases, details regarding accommodation entries given by the above entry providers has been obtained by the Assessing Officer.
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 signed by Sh. Vishes Gupta. The list given the name of the firm which has provided the accommodation entry along with the name and address of the recipients of accommodation entry.
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 from Sh. Naveneet Jain & Sh. Vaibhav Jain. It does not give year wise bifurcation. Hard copy of the list is enclosed as annexure-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’.
The soft copy of the information in respect to annexure A, B & C is also enclosed.
The information of accommodation entry includes A.Y. 2006-07 also, which is a time baring year for taking action u/s 148.
7. This information is forwarded to you for early dissemination to various field offices in Delhi. On examining the list of accommodation entries provided by Shri Rakesh Gupta & Shri Vishesh Gupta and Shri Navneet Jain & Shri Vaibhav Jain pertaining to A.Y. 2006-07. It is noticed that the following accommodation entries have been taken by the assessee namely M/s Krishan Lal Gambhir & Sons: S. Accommodation entry Name of party to Amount of No. provided by whom Accommodation Accommodation entry entry is provided 1. Shree Shyam Trading Co. M/s Krishan Lal Rs. 4,05,860 Gambhir & Sons 2. Vishnu Trading Co. M/s Krishan Lal Rs. 3,52,461 Gambhir & Sons Total amount of Rs. 7,58,321 entries Since Sh. Rakesh Gupta & Sh. Vishesh Gupta and Sh. Navneet Jain & Sh. Vaibhav Jain during the course of assessment proceedings u/s 153A of I.T. Act have admitted that they have given accommodation entries to the parties whose lists have been provided by them to the ACIT, Central Circle-10, New Delhi, therefore, it is fair to conclude that M/s Krishan Lal Gambhir & Sons, whose name is appearing in the said list, has taken accommodation entries from Shri Rakesh Gupta & Sh. Vishesh Gupta and Sh. Navneet Jain & Sh. Vaibhav Jain 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 done u/s 143(1) of I.Tax Act thereof were taken out from ITD System. Further, no scrutiny assessment was done in A.Y. 2006-07. Therefore, I have 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 escaped 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- 07 (F.Y. 2005-06) is submitted herewith for kind consideration and necessary approval u/s 151(2) of the I.T. Act, 1961 as the same is getting barred by limitation on 31/03/2013. If approved, notice u/s 148 of the act may be issued.
Sd/- (Pawan Kumar Vashist) Income Tax Officer Ward 39(3), New Delhi
We found the issue regarding the validity of the reassessment is duly covered by the decision of this Tribunal in the case of Unique Metal (supra) and Shree Radheshyam & Company (supra) in which this Tribunal, vide orders dated 28/01/2015 and 30/11/2015 respectively, has quashed the reassessment proceedings. We also note that in these cases the ld. Assessing Officer had recorded similar reasons, and the party from which the assessee therein had made purchases were also same, as in the case of the present assessee. Therefore, respectfully following the decisions of this Tribunal in the case of Unique Metal (supra) and Shree Radheshyam and Company (supra), we quashed the reassessment proceedings.
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 Tribunal, vide its order dated 30/11/2015 in the case of Shree Radheshyam & Company (supra) have deleted similar addition. 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 Tribunal 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 submissions and going through the order of the Tribunal, I noted that this 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 the ld. 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 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 it amount to levy of tax on gross receipt, she ought to have applied’ 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 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.”
Ld. DR even though vehemently relied on the order of CIT(A) as well as that of the Assessing Officer, could not bring to our knowledge any cogent material or evidence which may compel us not to follow the decision of this Bench in (supra) and ITA No. 1429/Del/2015(supra).
We therefore, respectfully following the decision of this Tribunal in the case of Unique Metal Industries (supra) and Shree Radheshyam & Company (supra), delete the addition as sustained by the ld. CIT(A) amounting to Rs. 1,10,845/-.
In the result, the appeal filed by the assessee is allowed.