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TMI Blog2018 (10) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in my view has not been able to rebut. Accordingly in the facts and circumstances of the case it cannot be said that the purchases made by the assessee are bogus. As regards the addition of sustained by the CIT(A)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. Once the purchases are held to be bogus then the trading result 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. - Decided in favour of assessee. - ITA NO. 2862/DEL/2016 - - - Dated:- 31-10-2018 - Shri H.S. Sidhu, Judicial Member And Shri L.P. Sahu, Accountant Member For the Assessee : Sh. Ved Jain, Adv. Sh. Ashish Goel, CA For the Department : Smt. Ranu Mukharjee, Sr. Dr. ORDER PER H.S. SIDHU, JM This is an appeal by the Assessee against the order dated 18.3.2016 of the Ld. CIT(A)-20, New Delhi relevant to assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as under: This Court is of the opinion that the reassessment in this case was validly based on fresh material in the form of information received by the concerned authorities during the course of search assessment and disclosures made. They would fit the description of tangible material unavailable with the Revenue at the time the original assessment was completed. Furthermore, in the present case, the original assessment was not completed under Section 143(3) of the Act, rather, merely framed under Section 142(1) of the Act. Having regard to these facts, the impugned order is clearly untenable and set aside. The ITAT is directed to examine the merits of the respondent/assessee s appeal and decide it in accordance with law after hearing counsel for the parties. The parties are directed to be present before the ITAT on 26.02.2018 for further directions/appropriate query. The question of law is answered in favour of the Revenue and against the respondent-assessee. The appeal is allowed in the above terms. Registry is directed to communicate the order directly to the Registrar of the ITAT, Delhi Bench C , New Delhi. Order Dasti to the parties as well. 3. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchases. (ii) That the learned CIT(A) has erred in making the addition by estimating the income at an arbitrary rate of 20% of the purchases made from these parties, without there being any basis for the same and by rejecting the explanations of the assessee. 10. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and 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 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 the contention of the assessee that the addition made by the AO is untenable in the eyes 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 principles of natural justice. 12. The appellant craves the leave to add, amend or alter any of the grounds of appeal. 4. The Ld. CIT(A) has confirmed the action of the AO in regard to the addition of ₹ 79,86,868/- and has fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vishu Trading Co. M/s Metal India ₹ 125268/- 3 Shree BankeyBihari M/s Metal India ₹ 2821468/- 4 Om Agencies M/s Metal India ₹ 2287549/- Total amount of entries ₹ 7986868/- 5.2 The Ld. CIT(A) has confirmed the order of the AO and has further added 20% of the purchases i.e. ₹ 15,97,431/- as profit earned on such purchases a sum of ₹ 3,93,705/- on account of commission, the assessee would have paid on such purchases. We have also perused the order passed by the ITAT in the case of Unique Metal Industries Vs. ITO in ITA no. 1372/Del/2015 dt. 28th October, 2015. In this case also, the issue was exactly the same. In fact, the name of the parties from whom the allegation is of bogus purchases are also the same. The ITAT in this order after examination of all the facts has deleted the addition. The relevant findings of this order reads as under: 24. Now the issue is whether on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 28. 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 The above order has been followed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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