M/S LORGAN LIFESTYLE LIMITED ,PUNE vs. NFAC, DELHI

The brief facts of the case are that, the assessee earlier known as Sri Sidhivinayak Marketing has not filed the return of income 1 for the A.Y. 2016-17 and as per the information received from the DGIT system, the assessee has entered into the financial transactions of shipping bill for exports for value exceeding Rs. 5,00,000/- custom export amount aggregating to Rs. 7,04,32,917/- in F.Y 2015-16 The Assessing Officer (A.O) has reason to believe that the income has escaped assessment and issued notice u/sec 148 of the Act and there was no compliance by the assessee and subsequently, notice u/sec 142(1) of the Act was issued to the assessee along with questioner. In compliance to notice, the assessee has filed the reply referred at Para 5 of the order explaining the conversion of earlier partnership firm into limited company. Further the AO has called for additional information and supporting details. Finally, the AO found that the assessee could not substantiate with requisite details and find that the search was conducted by the Directorate of Revenue Intelligence, Mumbai on the office of the assessee company under the Provisions of Customs Act. Further the erstwhile firm Sri Sidhivinayak Marketing and the assessee company Lorgan Lifestyle Ltd are of same management. The A.O was not satisfied with the explanations and find that the assessee has no documentary evidences relating to taxation of shipping bill whether it was taxed in the hands of firm or limited company. Since the assessee has not filed the return of income, the AO has estimated income by applying GP @15% of total gross turnover of shipping bill and assessed the total income of Rs. 1,05,64,437/- and passed the order u/sec 147 r.w.s 144 of the Act dated 29.03.2022.

Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, statements of facts, submissions of the assessee and finding of the AO and the CIT(A) has restricted the addition to the extent @ 5% of the total gross turnover and partly allowed the assessee’s appeal. Aggrieved by the order of the CIT(A), the assessee has filed appeal before the Hon'ble Tribunal. At the time of hearing, the Ld.AR submitted that the 4. CIT(A) has erred in sustaining the order of the AO on non- existing entity and CIT(A) has erred in adopting GP rate@ 5%.The Ld.AR emphasized that the assessee has duly intimated the conversion of partnership firm into a Limited company to the Assessing officer. The Ld.AR substantiated the submissions with the factual the paper book and mentioned that the assesse has a good case on merits and prayed for allowing the appeal. Per Contra, the Ld.DR supported the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.AR that the CIT(A) has erred in sustaining the addition@5% though, the A.O has passed the order on non-existing entity and the Ld.AR contentions are that since the A.O has passed order on non-existing entity and therefore the assessment order is null and void. Further the assessee has made submissions before the first appellate authorities on the legal issue but the CIT(A) has not adjudicated the grounds of appeal in respect to the non-existing entity raised by the assessee. We considered the facts, submissions and find that the CIT(A) has not dealt on the submissions with respect to the non-existing entity and there are no findings in the CIT(A) order. Therefore, we considering the facts, circumstances, submissions and principle of natural justice shall provide with one more opportunity of hearing to the assessee to substantiate the case and to explain the claims with the evidences and information. Accordingly, we set aside the order of the CIT(A) to the extent of disputed issue and remit the legal issue along with the evidences filed before the Hon’ble tribunal to the file the CIT(A) for adjudication afresh on merits and also the CIT(A) to adjudicate the ground of appeal raised by the assessee passing of assessment order on nonexistent entity and pass a speaking order. Further the assessee should be provided adequate opportunity of hearing and shall cooperate in considering the information for earlier disposal of appeal. And we allow the grounds of appeal of the assessee for statistical purposes. 6. In the result, appeal filed by the Assessee is allowed for statistical purposes.