LACIER INDUSTRIES,MUMBAI vs. ITO WD 21(2)2, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-33, Mumbai [CIT(A)], Appeal No. CIT(A)-33/Rg.-21/190/2015-16 dated 06/09/2016 on following grounds of appeal: -

2. The Honorable CIT(A) has erred not considering the fact that M/s Lacier Industries, a partnership firm has not done any business since inception, and from remand report obtained from the ITO 21(1)(3) dated 16 June. 2016 it was evident that the purchases of Rs.99,48,034/- were actually made by Mr. Chirag Agarwal, Prop of M/s Lacier Industries. In spite of these facts the learned Assessing Officer has confirm the addition of Rs.9,95,000/- on the basis of the voluntary declaration made vide letter dated 13th March, 2015 without considering the subsequent submission made on 27th March, 2015 and the statement recorded of partner of the firm Mr. Surender Kumar Agarwal on 26th March, 2015 wherein it was clearly mentioned that the purchases were actually made by Mr. Chirag Agarwal who is having the VAT No. 27480019084V. 2.1 Facts in brief are that the assessee being resident firm was assessed u/s 143(3) r.w.s 147 on 30/03/2015 wherein the income of the assessee was determined as Rs.216.20 Lacs. The reassessment proceedings were triggered pursuant to receipt of certain information from Sales Tax Department that the assessee stood beneficiary of alleged bogus purchases aggregating to Rs.99.48 Lacs stated to be made from three parties, the details of which have already been extracted in the quantum assessment order. Therefore, the case was reopened vide notice u/s 148 dated 17/01/2014. Initially, the assessee did not file any return in response thereto. However, the assessee, vide letter dated 29/12/2014 submitted that the firm has not done any business till date and do not hold any bank account. Subsequently, on 19/03/2015, the assessee produced a copy of return of income reflecting Nil income which was signed by one of the partners Shri Surendra Kumar Agarwal. 2.2 During reassessment proceedings, notices sent u/s 133(6) to the suppliers to confirm the transactions elicited no satisfactory response and the same were returned back unserved by the postal authorities.

3 The said fact was confronted to the assessee who, vide reply dated 13/03/2015, reiterated that no business has been carried out by the firm since its inception. It was also submitted that no partnership deed was prepared. At the same time, the partner of the assessee namely Shri S.K.Agarwal, owing to ill-health and to buy peace of mind, owned up the transactions and agreed to pay the tax on the deemed income of the firm computed @10% of alleged bogus purchases. Accordingly, the firm agreed to offer Rs.9.95 Lacs as deemed income ostensibly to avoid further litigation. 2.3 However, the submissions could not find favor with Ld. AO who opined that the factual matrix call for full disallowance and accordingly, the purchases of Rs.99.48 Lacs was disallowed and added to the income of the assessee. 2.4 Proceeding further, the information as obtained from Sales Tax Department u/s 133(6) revealed that the assessee reflected gross turnover of Rs.445.28 Lacs and in the absence of any information forthcoming from the assessee, the income was estimated against the same @25% which led to an addition of Rs.111.32 Lacs in the hands of the assessee. The third addition of Rs.5.40 Lacs was made being receipts from Oil India Limited in the absence of any information / explanation forthcoming from the assessee. 2.5 The income of the firm so computed, worked out to Rs.216.20 Lacs. 3.1 Aggrieved, the assessee agitated the same without any success before Ld. CIT(A) vide impugned order dated 06/09/2016. During appellate proceedings, assessee filed additional evidences to support 4 the fact that the stated transactions were carried out by similarly named proprietary concern of Shri Chirag S. Agarwal. Consequently, during remand proceedings, to verify the stated facts, information was passed on to concerned Assessing Officer of Shri Chirag S. Agarwal having PAN AERPA-5913-R. The case of Shri Chirag S. Agarwal was reopened for AY 2009-10 & 2010-11. In the above background, Ld. AO, in the remand report, submitted that no additional evidence was furnished by the assessee. 3.2 The assessee reiterated that no business was carried out by the firm and the stated transactions were carried out by proprietary concern of Shri Chirag S. Agarwal. In support, financial documents as well as Income Tax Return of Shri Chirag S. Agarwal was also furnished. Therefore, pleadings were made to delete the impugned additions in the hands of the assessee. 3.3 The Ld. first appellate authority, upon perusal of submissions and remand report, concurring with assessee’s stand deleted all the additions. However, an observation was made that since the assessee had voluntarily offered undisclosed income of Rs.9.95 Lacs in the hands of the firm, the estimated undisclosed profit of Rs.9.95 Lacs were to be sustained. Aggrieved the assessee is in further appeal before us.