INCOME TAX OFFICER, WARD-3(1)(1), AHMEDABAD., VEJALPUR V. PEL INDUSTRIES LIMITED, ASHRAM ROAD

ITA 2216/AHD/2024

AI Insights

The case involves the Income Tax Officer, Ward-3(1)(1) as the appellant and Pel Industries Limited as the respondent. The Revenue appealed against the order of the National Faceless Appeal Centre (NFAC), which had allowed the appeal of Pel Industries Limited, reversing the addition of Rs.116,01,95,815 made by the Assessing Officer under Section 68 of the Income Tax Act, 1961. The addition was initially made on the grounds that the sales were bogus and constituted accommodation entries. The main legal contention in the appeal was the validity of the notices issued for reopening the assessment under Section 147, which were found to be time-barred based on judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774995 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 31-12-2024
• Other Referred Cases: Deepak Steel and Power Limited vs. CBDT, Mayurkumar Babubhai Patel vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALPESH PARMAR
• Assessee Lawyers: HARDIK VORA
• Keywords: Corroborative evidences; Accommodation entries; Bogus
• Section: 147; 148; 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.2216/Ahd/2024 Assessment Year: 2015-16 Income Tax Officer, Ward – 3(1)(1), Room No.524, 5th Floor, Aayakar Bhavan, 100 Feet Anandnagar Road, Near Sachin Tower, Vejalpur, Ahmedabad – 380 015. (Gujarat). Vs. Pel Industries Limited, 1/3, Himalaya Park, Nr. RBI, Ashram Road, Ahmedabad – 380 009. [PAN – AAECP 2220 N] (Appellant) (Respondent) Assessee by Shri Hardik Vora, AR Revenue by Shri Alpesh Parmar, CIT-DR Date of Hearing 14.08.2025 Date of Pronouncement 04.09.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: This appeal is filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 25.10.2024 for the Assessment Year (A.Y.) 2015-16 in the proceedings under Section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 2 of 7 2. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2015-16 on 30.09.2015 declaring loss of Rs.3,41,66,470/-, which was processed under Section 143(1) of the Act. Subsequently, the Assessing Officer had received an information that the assessee was a beneficiary of transaction of Rs.116,01,95,815/- in the form of bogus sales made to M/s. Pankaj Metals. The case of the assessee was reopened under Section 147 of the Act. In the course of re-assessment proceedings, the Assessing Officer was not satisfied with the explanation of the assessee regarding transaction of Rs.116,01,95,815. Therefore, the entire sale proceeds were treated as accommodation entry and added under Section 68 of the Act. The assessment was completed under Section 147 r.w.s. 144B of the Act on 25.05.2023 at total income of Rs.116,01,95,820/-. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed. 4. Now, the Revenue is in appeal before us. The following grounds have been taken in this appeal: - “(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.116,01,95,815/- made by AO on account of accommodation entry in form of bogus Sales made to M/s. Pankaj Metals u/s. 68 of I.T. Act without appreciating that: (i) In this case, the information was received from DIT (Investigation) and DIT(I&CI) that the transaction made between the related parties including the assessee company with M/s. Pankaj Metals is only paper transaction and hence they are only providing entries. It was also proved from the contradictory statement of Directors of Pankaj Metal Centre Pvt. Ltd. that Ms. Pankaj Metal and its related parties are taking purchase or sale entries on paper only. Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 3 of 7 (ii) To verify the claim of the assessee regarding purchases, notices u/s 133(6) were issued and duly served to the purchase parties, asking them to confirm the details of transactions with M/s. PEL Industries Ltd. However, no reply has been received from any of these purchase parties confirming the alleged transactions with the assessee during the year under consideration. It is clear that the onus is on the assessee to prove that the genuineness of transaction with corroborative evidences but the assessee has failed to do so. The assessee has also failed to provide adequate corroborative evidence to substantiate the legitimacy of the purchase. (iii) Regarding filing of MVAT along with transaction register by the assessee is concerned, it is submitted that the assessee could not establish the genuineness of the same and delivery of material.” 5. Shri Alpesh Parmar, Ld. CIT-DR submitted that the sale transactions made by the assessee to M/s. Pankaj Metals was paper transaction, which was apparent from the contradictory statement of the Director of M/s Pankaj Metals. He further submitted that the Assessing Officer had issued notice under Section 133(6) of the Act to the parties from whom purchases were disclosed by the assessee. However, no reply was received from them and the purchases were not confirmed. In the absence of any corroborative evidence regarding genuineness of purchases, the Assessing Officer had rightly treated the sales as shown by the assessee as accommodation entries. Therefore, he strongly defended the order of the Assessing Officer. 6. Per contra, Shri Hardik Vora, Ld. AR of the assessee submitted that the Ld. CIT(A) had carefully examined the facts of the case and allowed relief to the assessee. He submitted that the entire sales made by the assessee company could not have been considered as bogus without Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 4 of 7 treating the corresponding purchase also as bogus. He, therefore, strongly supported the order of the Ld. CIT(A) on this issue. 6.1 The Ld. AR further submitted that the Ld. CIT(A) had not adjudicated the legal grounds taken by the assessee in respect of reopening of the case for the reason that the quantum addition made by the Assessing Officer was deleted on merits. The Ld. AR invoked the provisions of Rule 27 of the Income Tax (Appellate Tribunal) Rules and submitted that the case for A.Y. 2015-16 could not have been reopened under Section 147 of the Act. He explained that notice under Section 148 of the Act was issued on 25.06.2021 which was subsequently treated as show cause notice under Section 148A of the Act. And after passing the order under Section 148A(d) of the Act on 24.08.2022, another notice under Section 148 of the Act was issued by the AO on 24.08.2022. According to the Ld. AR, the first notice dated 25.06.2021 was beyond the period of three years from the end of relevant A.Y. whereas the second notice dated 24.08.2022 was beyond the period of six years from the relevant A.Y. and none of the notices were valid. In this regard, he relied upon the judgement of Hon’ble Supreme Court in the case of Deepak Steel and Power Limited vs. CBDT, 174 taxmann.com 144 (SC) and also on the judgement of jurisdictional High Court in the case of Mayurkumar Babubhai Patel vs. ACIT, 176 taxmann.com 25 (Guj). 7. We have carefully considered the rival submissions. As the legal issue raised by the assessee goes to the root of the matter, it will be relevant to first examine whether the case of the assessee was validly reopened under Section 147 of the Act. There is no dispute to the fact that the first notice under Section 148 for A.Y. 2015-16 was issued on 25.06.2021. In the case of Deepak Steel and Power Limited (supra), the Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 5 of 7 identical issue was involved wherein notice under Section 148 of the Act for A.Y. 2015-16 was issued after 1st April 2021. The Hon’ble Supreme Court, in that case, had referred to the submission of the Revenue made in the case of Union of India vs. Rajeev Bansal and had given the following findings: - 4. The learned counsel appearing for the revenue with his usual fairness invited the attention of this Count to a three-judge bench decision of this Court in Union of India v. Rajeev Bansal 2024 SCC OnLine SC 2693/[2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) more particularly, paragraph 19(f) which reads thus :- “19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.” 5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.06.2021.” [Emphasis supplied.] 7.1 It was thus held by the Hon’ble Supreme Court that for the A.Y. 2015-16 all the notices issued on or after 1st April 2021 was required to withdrawn. In the present case, the first notice under Section 148 of the Act dated 25.06.2021, which was after 1st April, 2021, and was required to be dropped. Therefore, the said notice is held as invalid. Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 6 of 7 7.2 The second notice under Section 148 of the Act dated 24.08.2022 was beyond the period of six years from the end of the relevant A.Y. This aspect was examined by the jurisdictional High Court in the case of Mayurkumar Babubhai Patel (supra) and the relevant part of the order is reproduced below “15. Considering the facts of the case, it is not in dispute that the respondent Assessing Officer has issued the notice under section 148A(b) of the Act after the period of six years were over on 31.03.2022. As observed by the Hon'ble Apex Court in case of Deepak Steel and Power Limited (supra) and in view of the concession made by the Revenue before the Apex Court for the Assessment Year 2015-16, all the notices issued on or after 01.04.2021 will have to be dropped as they would not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and therefore, nothing further is required to be adjudicated in the matters as the notice so far as the present petitions are concerned, though dated 31.03.2021, admittedly have been issued after 01.04.2021. 16. It is also not in dispute that the notices under section 148A(b) have been issued pursuant to the decision of the Hon'ble Apex Court in Ashish Agarwal (supra) dated 04.05.2022 admittedly after 31.03.2022. Therefore, on both counts, the notices issued under section 148 of the Act dated 27/28/29.07.2022 would be time barred.” 7.3 In the above referred case, the Hon’ble Gujarat High Court had held the notice issued under Section 148 of the Act on 27/28/29.07.2022 as time barred. Respectfully following this decision, the second notice issued under Section 148 on 24.08.2022 in this case, is also held as time barred. 7.4 In view of the above judicial pronouncement of the Hon’ble Supreme Court as well as the jurisdictional High Court, it is held that the proceedings under Section 147 of the Act initiated in this case was time barred. Since the assessee succeeds on the legal ground raised by it, we Printed from counselvise.com ITA No.2216/Ahd/2024 (Assessment Year: 2015-16) ITO vs. Pel Industries Ltd. Page 7 of 7 don’t deem it necessary to adjudicate the grounds taken by the Revenue on the merits of the addition. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on this 4th September, 2025. Sd/- Sd/- (SANJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 4th September, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "