NATIONAL STEELS,DELHI V. I.T.O WARD 46(1), DELHI, DELHI

ITA 2595/DEL/2024

AI Insights

The case involves M/s National Steels, a partnership firm that was dissolved in 2002 and later converted into a proprietorship under the name of Shri Kishan Lakhani. Despite the dissolution, the Income Tax Officer (ITO) issued an assessment order under section 144 of the Income-tax Act, 1961, treating the firm as still existent and making additions under sections 68 and 69C for alleged bogus purchases and commission expenditures. The National Faceless Appeal Centre (NFAC) upheld the ITO's decision, which was contested in the Tribunal. The Tribunal found that the assessment was improperly made in the name of a non-existent firm, leading to the quashing of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34892 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Keywords: Bogus purchase; Bogus
• Section: 148; 144; 143(3); 68; 69C

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 2595/Del/2024 (Assessment Year: 2012-13) National Steels, Maheshwari Building, 4647, Ajmeri Gate, Delhi Vs. ITO, Ward-46(1), Delhi PAN: AAAFN2899Q Assessee by : None Revenue by: Shri Sanjay Kumar, Sr.DR Date of Hearing 11/02/2025 Date of pronouncement 07/03/2025 O R D E R 1. The appeal in ITA No.2595/Del/2024 for AY 2012-13 arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] dated 24.03.2024 against the order of assessment passed u/s 144 of the Income-tax Act, 1961 dated 21.12.2019 (hereinafter referred to as ‘the Act’) by ITO, Ward-46(1), Delhi (hereinafter referred to as ‘ld. AO’). 2. None appeared on behalf of the assessee despite issuance of notice. Hence we proceed to dispose of this appeal after hearing the Ld DR and based on materials available on record. 3. The assessee has raised a preliminary ground vide ground number 1 that assessment has to be declared void ab initio as it was framed in the hands of the non-existent firm. Since, this goes to the root of the matter and the preliminary issue, I deem it fit and appropriate to address the same first. ITA No. 2595/Del/2024 National Steels Page | 2 4. I find that assessee was a partnership firm with PAN AAAFN2899Q . No return of income was submitted by the assessee firm for the assessment year 12-13. The case of the assessee is that the firm got dissolved in the year 2002 itself and the intimation regarding the dissolution of the firm was duly made by the assessee before the learned AO. The case of the assessee was sought to be reopened vide issuance of notice under section 148 of the Act by the learned AO. No return of income was filed in response to the said notice under section 148 of the Act. The assessee through the authorised representative’s letter dated 7-6-2019 submitted that the firm M/s National Steels was converted into a proprietary concern in the year 2002 and as such no status of a firm exist and that the proprietarship concern is owned by Shri Kishan Lakhani. The authorised representative also submitted a copy of assessment framed in the name of M/s National Steels, Proprietor Shri Kishan Lakhani under section 143(3) of the Act dated 23-3-2015. Further the assessee submitted copy of ledger accounts and bank statements to substantiate his claim that no transactions were ever made with M/s Global Suppliers during the financial year 2011- 12 relevant to Assessment year 2012-13 by Shri Kishan Lakhani or by M/s National Steels. 5. This fact goes to prove that the assessee had duly intimated about the dissolution of the firm in the year 2002 and at present only the proprietary concern is being run in the name of National Steels. These facts are reflected in page 7 of the assessment order. The learned AO during the course of assessment proceedings recorded a statement on oath from Shri Kishan Lakhani on 12-12-2019 wherein he was specifically asked in respect of issue of status of M/s National Steels and purchases made from M/s Global Suppliers. Mr. Kishan Lakhani stated that he is the proprietor of M/s National Steels since 2002 and filing his income tax return by using PAN of ITA No. 2595/Del/2024 National Steels Page | 3 AABPL 0735A. He specifically stated that there is no status of M/s National Steels (Firm) in PAN AAAFN 2899Q. But the learned AO informed Shri Lakhani that PAN of M/s National Steels in the status of the firm was still active. The learned AO thereafter proceeded to treat the purchases made from M/s Global Suppliers as bogus and made estimation of profit on such bogus purchases at the rate of 5 percent and made an addition of Rs 5,18,286/- under section 68 of the Act. Further, he also added commission expenditure alleged to have been incurred for earning such accommodation entry and made another addition of Rs 5,18,286/- under section 69C of the Act. With these two additions, the assessment was completed under section 144 of the Act on 21-12-2019 in the capacity of firm. 6. The assessee referred an appeal and reiterated that the firm was never in existence since 2002, but still the learned NFAC upheld the action of the learned AO. It is crystal clear from the aforesaid narration of facts that the firm had dissolved in the year 2002. Even though the PAN of the firm was active, but still no activities were carried out in the name of the said firm. The assessee had also stated the said fact in the statement recorded on oath before the learned AO by confirming that the firm was dissolved way back in 2002 and that the firm was converted into a proprietorship concern in the name of M/s National Steels with different PAN of Mr. Lakhani in the capacity of individual. Merely because the firm is reflected as in active category in the ITBA portal, no assessment could be directly framed in the hands of the said firm as it never existed even on the date of framing of assessment. Hence, this is a clear case of assessment and appellate order being framed in the hands of a non-existent entity and accordingly deserve to be quashed. Hence we have no hesitation to quash the assessment framed in the hands of M/s National Steels in the ITA No. 2595/Del/2024 National Steels Page | 4 capacity of firm as it was non-existent. Accordingly, the ground number 1 raised by the assessee is hereby allowed. 7. Since the entire assessment framed is hereby quashed, the other grounds raised by the assessee need not be adjudicated and they are left open. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07/03/2025. -Sd/- (M. BALAGANESH) ACCOUNTANT MEMBER Dated: 07/03/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "