NAVDURGA TRANSPORT COMPANY,HYDERABAD V. INCOME TAX OFFICER, WARD-7(1), HYDERABAD

ITA 219/HYD/2025

AI Insights

The case involves Navadurga Transport Company appealing against the orders of the Income Tax Officer and the Commissioner of Income Tax (Appeals) concerning the assessment of unexplained money and the application of a special tax rate. The Income Tax Officer had initiated proceedings under section 147 based on data showing substantial deposits in the company's bank account without a corresponding income tax return. The Commissioner of Income Tax (Appeals) upheld the initiation of proceedings but set aside the matter for re-assessment regarding the taxability of the deposits, which were claimed to have been taxed in the hands of a partner of the firm. The Tribunal's decision clarified the applicability of the special tax rate under section 115BBE for the relevant assessment year.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784916 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 12-02-2025
• Other Referred Cases: Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors, Sathi Mangayamma vs. Income Tax Officer, S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax, Manju Vani Chigurupati Vs. ACIT, Circle 2(1), Vijaywada, K. Subramanian & Ors. Vs. Siemens India Ltd. & Anr.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Reassessment proceedings
• Section: 147; 148; 142(1); 154; 69C

Judgement Text

"आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Įी रवीश सूद, माननीय ÛयाǓयक सदèय एवं Įी मधुसूदन सावͫडया, माननीय लेखा सदèय SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A. No.218 & 219/Hyd/2025 (Ǔनधा[रणवष[/ Assessment Year: 2017-18) Navadurga Transport Company, Hyderabad. PAN: AACFN5414B VS. Income Tax Officer, Ward-7(1), Hyderabad. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) करदाताकाĤǓतǓनͬध×व/ Assessee Represented by : Shri S. Rama Rao (Hybrid hearing) राजèवकाĤǓतǓनͬध×व/ Department Represented by : Sri Gurpreet Singh, Sr. AR सुनवाईसमाÜतहोनेकȧǓतͬथ/ Date of Conclusion of Hearing : 03/11/2025 घोषणा कȧ तारȣख/ Date of Pronouncement : 12/11/2025 ORDER PER RAVISH SOOD, JM: The present appeals filed by the assessee firm are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 18/12/2024 and 12/12/2024, which in turn arises from the respective Printed from counselvise.com 2 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO orders passed by the Assessing Officer (for short, “A.O.”) under section 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (for short, “the Act”), dated 31/03/2022 and under section 154 r.w.s 147 of the Act, dated 30/06/2022, both for the Assessment Year 2017-18. As the issues involved in the captioned appeals are inextricably interwoven, therefore, the same are being taken up and disposed of by a consolidated order. We shall first take up the appeal filed by the assessee firm in ITA No. 218/Hyd/2025, wherein the impugned order has been assailed on the following grounds of appeal before us: 1. The order of the learned CIT(A) is erroneous to the extent it is prejudicial to the appellant herein. 2. The learned CIT(A) erred in confirming the action of the Assessing Officer in initiating proceedings under section 147 of the Act. 3. Any other ground/grounds that may be urged at the time of hearing.” 2. Succinctly stated, the AO, based on the NMS data that the assessee firm during the subject year had though deposited an amount of Rs. 2,54,59,579/- in its bank account but had not filed its return of income for the year under consideration, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 24/03/2021, was issued to the assessee firm. 3. Thereafter, the AO vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 31/03/2022, held the amount of Rs. 2,54,59,579/- deposited during the subject year in the bank account of Printed from counselvise.com 3 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO the assessee firm as its unexplained money u/s 69A of the Act and assessed its income at the said amount. 4. Aggrieved, the assessee firm carried the matter in appeal before the CIT(A), who though upheld the validity of the jurisdiction that was assumed by the AO for framing the assessment as was assailed by the assessee firm before him, but at the same time, finding substance in the claim of the assessee firm that the subject receipts had already been offered for tax by Smt. Anita Upadhyay, i.e., the continuing partner of the assessee firm who was stated to have taken over the business of the assessee firm w.e.f 01/01/2002 as a running concern and continued the same as such, thus, in exercise of the powers vested with him under section 251(1)(a) of the Act, introduced with effect from 01/10/2024, set aside the matter to the file of the AO with a direction to decide the same afresh in accordance with law. Also, the CIT(A) directed the assessee firm to submit before the AO all evidence to support its claim that the subject receipts were already offered to tax by Smt. Anita Upadhyay (supra), and the AO was directed to pass a speaking order in accordance with the law. Accordingly, the CIT(A), based on his aforesaid observations partly allowed the appeal. 5. The assessee firm, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. Printed from counselvise.com 4 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO 6. Shri S. Rama Rao, Advocate, the Learned Authorized Representative (for short, “Ld. AR”) for the assessee firm, at the threshold of hearing of the appeal submitted, that the AO had grossly erred in law and facts of the case in assuming jurisdiction and framing the impugned assessment vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 31/03/2022. Elaborating on his contention, the Ld. AR submitted that as the impugned notice under section 148 of the Act, dated 24/03/2021, was never served upon the assessee firm, therefore, the said material defect goes to the very root of the jurisdiction that was assumed by the AO for framing the assessment. On merit, the Ld. AR submitted that as the amount of Rs. 2.54 crores (approx.), based on which the case of the assessee firm was reopened under section 147 of the Act, had been offered for tax in the hands of Smt. Anita Upadhyay (supra), i.e., the continuing partner of the dissolved firm, who had taken over the business of the assessee firm w.e.f 01/01/2002, therefore, the AO had based on misconceived reasons initiated proceedings in the case of the assessee firm under section 147 of the Act. 7. Per contra, Shri Gurpreet Singh, the Learned Senior Departmental Representative (for short, “Ld. DR”) relied upon the orders of the lower authorities. Printed from counselvise.com 5 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO 8. We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities, and the material available on record. 9. Ostensibly, the assessee firm, pursuant to the notice issued by the AO under section 148 of the Act, dated 24/03/2021, had, though not filed its return of income in response to the same, but thereafter had participated in the assessment proceedings. Although it is the Ld. AR’s claim that as the participation in the assessment proceedings was pursuant to the notice issued by the AO under section 142(1) of the Act, therefore, there was no compliance of the notice issued under Section 148 of the Act, dated 24/03/2021, but we are unable to persuade ourselves to concur with the same. As the AO after issuing the notice under section 148 of the Act, dated 24/03/2021 had followed up the same by issuing notice under section 142(1) of the Act, wherein the assessee firm was requested to file its return of income and explain the source of the deposits of Rs.2.54 crores (supra), therefore, the same would suffice to conclude that the assessee had participated in the assessment proceedings that were initiated based on the aforesaid notice issued under section 148 of the Act. 10. We thus, are of a firm conviction that now when the assessee firm had pursuant to the notice issued under section 148 of the Act, dated 24/03/2021 appeared before the AO in the course of the assessment Printed from counselvise.com 6 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO proceedings, therefore, as per the provisions of section 292BB of the Act it was to be deemed that the notice under section 148 of the Act had been validly served upon it in time and in accordance with the provisions of the Act. Accordingly, the assessee firm pursuant to its participation in the assessment proceedings is thereafter precluded from taking any objection in any proceedings under the Act, viz., (i) that the notice was not served upon him; or (ii) that the notice was not served upon him in time, or (iii) that the notice was served upon him in an improper manner. Although section 292BB of the Act carves out an exception as regards the applicability of the same where the assessee has objected to the service of the notice before the completion of the assessment or re- assessment, but we find that no such objection was ever raised in the present case before us. 11. Be that as it may, we are of the considered view that as the assessee firm had participated in the assessment proceeding that was initiated on the basis of the notice issued under section 148 of the Act, dated 24/03/2021, therefore, it was thereafter precluded from claiming that no valid service of the said notice was effected upon it. 12. Apropos, the Ld. AR’s claim that, as the subject receipts had been offered for tax by Smt. Anita Upadhyay (supra), i.e., the continuing partner of the erstwhile firm, therefore, the AO had based on misconceived facts initiated the reassessment proceedings, we are Printed from counselvise.com 7 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO unable to persuade ourselves to accept the same. As observed by the CIT(A) and rightly so, as the AO at the stage of initiation of proceedings under section 147 of the Act is only required to have some material available with him, based on which a bona fide belief regarding the escapement of the assessee’s income chargeable to tax can safely be gathered gathered, therefore, we are of a firm conviction that no infirmity arises from the initiation of the proceedings by the AO in the case of the present assessee under section 147 of the Act. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors (1999) 236 ITR 34 (SC). 13. Apropos, the merits of the case, we find that it is the claim of the assessee firm that as the subject receipts had already been offered for tax in the hands of Smt. Anita Upadhyay (supra), therefore, the same could not have been brought to tax in its hands. We find that as the CIT(A) after taking cognizance of the aforesaid contention of the assessee firm, had in exercise of the powers vested with him under section 251(1)(a) of the Act, set aside the matter to the file of the AO with a direction to verify the aforesaid claim of the assessee firm with a liberty to the latter to substantiate its claim in the course of the set aside proceedings, therefore, we find no justification to dislodge the said well- Printed from counselvise.com 8 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO reasoned view taken by him. We, thus, finding no infirmity in the view taken by the CIT(A), uphold his order. 14. Resultantly, the appeal filed by the assessee firm, being devoid and bereft of any substance, is dismissed. ITA No. 219/Hyd/2025 (AY: 2017-18) 15. We shall now take up the appeal filed by the assessee firm against the order passed by the Commissioner of Income Tax (Appeals), dated 12/12/2024, which in turn arises from the order passed by the AO under section 154 r.w.s 147 of the Act, 30/06/2022. 16. Controversy involved in the present appeal lies in a narrow compass, i.e., the applicability of the special tax rates @ 60% under section 115BBE of the Act to the addition of Rs. 2,54,59,579/- made by the AO under section 69A of the Act while framing assessment in the case of the assessee firm under section 147 r.w.s 144 of the Act, dated 31/03/2022. 17. Ostensibly, the AO vide his order passed under section 154 r.w.s 147 of the Act, dated 30/06/2022, had rectified the assessment order passed by him under section 147 r.w.s 144 of the Act, dated 31/03/2022, and had observed that the addition of Rs. 2,54,59,579/- made by him under section 69A of the Act was as per section 115BBE of the Act Printed from counselvise.com 9 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO required to be subjected to tax @ 60% + surcharge instead of the normal rates as were inadvertently mentioned by him in the assessment order. 18. On appeal, the CIT(A), finding no infirmity in the view taken by the AO, had upheld the order passed by him under section 115BBE of the Act, dated 12/12/2024, and dismissed the appeal. 19. Aggrieved, the assessee firm has carried the matter in appeal before us. 20. We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contention. 21. We find that the issue involved in the present appeal, i.e., whether or not the special tax rate contemplated under section 115BBE of the Act could be applied to the addition made in the hands of the assessee under section 69A of the Act for AY 2017-18, is covered by the order passed by the ITAT, Visakhapatnam in the case of Sathi Mangayamma vs. Income Tax Officer in ITA No. 119/Viz/2025 (AY: 2017-18), dated 30/06/2026. In the said case, the Tribunal had based on its exhaustive deliberations, concluded Printed from counselvise.com 10 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO that the special rate of tax, i.e., @ 60% as provided under section 115BBE of the Act, is applicable from AY 2018-19. For the sake of clarity, we deem it apposite to cull out the observations of the Tribunal as under: “16. We shall now deal with the Ld. AR's claim that the A.O. had erred in levying tax as per the special rates contemplated u/s 115BBE of the Act i.e. @60% The Ld.AR submitted that as the amended provisions of Section 115BBE had been made applicable only from A.Y. 2018-19 and onwards, therefore, there was no justification for the A.O. to have applied the same to the addition made in the hands of the assessee for the year under consideration i.e. A.Υ. 2017-18. The Ld. AR to support his aforesaid contention relied on the judgment of the Hon'ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax, WP (MD) No. 2078 of 2020, dated 19.11.2024 and the order of the Tribunal in the case of Manju Vani Chigurupati Vs. ACIT, Circle 2(1), Vijaywada, ITA No. 363/Viz/2024, dated 07.03.2025. 17. We have thoughtfully considered the aforesaid claim of the Ld. AR in the backdrop of the judicial pronouncements relied upon by him. Before proceeding any further, we may herein observe that Section 115BBE of the Act was substituted by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017. Prior to the substitution, sub-section (1) of Section 115BBE read as under: \"(1) Where the total income of an assessee- (a) includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D and reflected in the return of income furnished under section 139; or (b) determined by the assessing officer includes any income referred to in section 68, 69, 69A, 698, 69C or 69D, if such income is not covered under clause (a). the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and (b), at the rate of thirty per cent.; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).\" Thereafter, the legislature in all its wisdom had vide the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 substituted the earlier provision which thereafter read as under: \"(1) Where the total income of an assessee- Printed from counselvise.com 11 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO (a) includes any income referred to in section 68, 69, 69A, 698, 69C or 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, 69, 69A, 69B, 69C or 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).\" 18. We find that on the issue of the year of applicability of the post- amended Section 115BBE(1) of the Act, i.e. as had been made available on the statute vide the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 there are conflicting views of the non-jurisdictional High Courts. On the one hand the Hon'ble High Court of Kerala in the case of Maruthi Babu Rao Jadav Vs. The Assistant Commissioner of Income-tax, Central Circle 1, Kozhikode, WA No. 984 of 2019, dated 23.09.2020 while dealing with the issue as to whether or not the enhanced rate of tax liability contemplated in the post-amended Section 115BBE of the Act as made available on the statute vide the Taxation. Laws (Second Amendment) Act, 2016, dated 15.12.2016 w.e.f. 01.04.2017 will apply to Assessment Year 2017-18, has answered in the affirmative; but on the other hand the Hon'ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax, WP (MD) No. 2078 of 2020, dated 19.11.2024, has after referring to the Taxation Laws (Second Amendment) Bill, 2016, inter alia, concluded that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. It was further observed by the High Court that for the prior transactions the revenue is empowered to impose only 30% rate of tax. 19. Considering the aforesaid conflicting views of the non-non- jurisdictional High Courts, we are guided by the judgment of the Hon'ble High Court of Bombay in the case of K. Subramanian & Ors. Vs. Siemens India Ltd. & Anr. (1985) 156 ITR 11 (Bombay) that in case of conflicting views of the non-jurisdictional High Courts the view that was favorable to the assessee and not against him is to be adopted. We thus, based on the aforesaid position of law respectfully follow the view taken by the Hon'ble High Court of Madras in the case of S.M.I.L.E Microfinance Limited Vs. The Assistant Commissioner of Income-tax (supra), and direct the AO to determine the tax liability on the addition of Rs. 20 lac (supra) made in the hands of the assessee u/s 69A of the Act by Printed from counselvise.com 12 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO applying the tax rate of 30% as was contemplated in the pre- amended Section 115BBE of the Act. The additional ground of appeal is allowed in terms of our aforesaid observations.” 22. We, thus, in terms of our aforesaid observations, set aside the order of the CIT(A) and direct the AO to tax the addition of Rs. 2,54,59,579/- made by him under section 69A of the Act vide his order of assessment passed under section 147 r.w.s 144 of the Act, dated 31/03/2022, as per the normal rates. 23. Resultantly, the appeal filed by the assessee firm is allowed in terms of our aforesaid observations. Order pronounced in the open court on 12th November, 2025. S Sd /- Sd/- (मधुसूदन सावͫडया) (MADHUSUDAN SAWDIA) लेखासदèय/ACCOUNTANT MEMBER S d/- Sd/- (रवीश सूद) (RAVISH SOOD) ÛयाǓयकसदèय/JUDICIAL MEMBER d/- Sd Hyderabad, dated 12.11.2025. *OKK/sps Printed from counselvise.com 13 ITA 218 and 219/Hyd/2025 Navadurga Transport Company vs. ITO आदेशकȧĤǓतͧलͪपअĒेͪषत/ Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/The Assessee : Navadurga Transport Company, 15-7-279/3, Muslimjungbridge, Begum Bazar, Hyderabad, Telangana-500012. 2. राजèव/ The Revenue : Income Tax Officer, Ward-7(1), O/o, ITO, Ward-7(1), Signature Towers, Hyderabad, Telangana. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण /DR,ITAT, Hyderabad. 5. The Commissioner of Income Tax 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Hyderabad. Printed from counselvise.com "