PARVATI STEEL RE ROLLING MILLS PRIVATE LIMITED,MUMBAI V. ACIT, CC-2, AURANGABAD, AURANGABAD

ITA 1741/PUN/2024

AI Insights

The case involves Parvati Steel Re Rolling Mills Pvt. Ltd., which did not file its return of income for the assessment year 2013-14. The Assessing Officer reopened the assessment under section 147 of the Income Tax Act, 1961, due to unfiled returns despite significant financial transactions. The Tribunal examined the validity of the reassessment and the merits of the additions made by the Assessing Officer, which included unexplained cash deposits and other income. The Tribunal found the reassessment valid but modified the income assessment by taxing only the profit element from the deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361035 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: New India Assurance Company Ltd. vs. The Asst. Commissioner of Income Tax, Circle, DCIT vs. Amcor Flexibles India Pvt. Ltd., Union of India vs. Rajeev Bansal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI; ADDL
• Assessee Lawyers: RAJKUMAR SINGH VIRTUAL
• Keywords: Set aside; Business income; Period of limitation; Reopening of assessment; TDS; Competent authority; Time period of passing order
• Section: 147; 148; 142(1); 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.1741/PUN/2024 Assessment year : 2013-14 Parvati Steel Re Rolling Mills Pvt. Ltd. 28 30, Baroda Street, Carnac Bunder, Mumbai – 400009 Vs. ACIT, Central Circle-2, Aurangabad PAN: AADCP5216F (Appellant) (Respondent) Assessee by : Shri Rajkumar Singh (Virtual) Department by : Shri Arvind Desai, Addl CIT DR Date of hearing : 26-03-2025 Date of pronouncement : 23-05-2025 O R D E R PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 20.06.2024 of the Ld. CIT(A), Pune-12 relating to assessment year 2013-14. 2. Facts of the case, in brief, are that the assessee is a company and has not filed its return of income for the year under consideration. On the basis of information available with the department that the assessee company has made financial transactions but failed to file its return of income, the Assessing Officer, after recording reasons and after prior approval of the competent authority, reopened the assessment as per the provisions of section 147 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) and thereafter issued notice u/s 148 2 ITA No.1741/PUN/2024 on 31.03.2021. The notice was duly served upon the registered e-mail of the assessee. However, no return of income in response to the said notice was filed. Subsequently, the Assessing Officer issued notices u/s 142(1) of the Act on 07.01.2022, 27.01.2022 and 16.02.2022 along with detailed questionnaire. However, again there was no compliance to the said statutory notices. The Assessing Officer therefore, proceeded to complete the assessment on the basis of information available on record. He noted that the assessee during the impugned assessment year has deposited cash to the extent of Rs.2,23,20,800/- in the bank account maintained with HDFC Bank. The assessee has also received interest of Rs.3,86,810/- on which TDS of Rs.38,681/- was made u/s 194A of the Act. Further, TCS statement shows a transaction of Rs.60,01,813/- during the year under consideration. In absence of filing of any return of income and in absence of any explanation regarding the nature and source of the above transactions, the Assessing Officer treated the cash deposited to the extent of Rs.2,23,20,800/- as unexplained money u/s 69A and brought to tax the same. Similarly, the Assessing Officer also made addition of Rs.3,86,810/- being the interest income received on which TDS of Rs.38,681/- was made. Similarly, on the basis of TCS statement uploaded, the Assessing Officer brought to tax an amount of Rs.60,01,813/-. Thus, the Assessing Officer completed the assessment on a total income of Rs.2,87,09,423/-. 3. Before the Ld. CIT(A) the assessee apart from challenging the addition on merit, challenged the validity of the re-assessment proceedings. So far as the 3 ITA No.1741/PUN/2024 validity of re-assessment proceedings are concerned, the Ld. CIT(A) upheld the same in absence of any submission before him. 4. So far as the merit of the case is concerned, the assessee filed detailed written submission and it was argued that the cash deposits amounting to Rs.2,23,20,800/- was on account of sale of scrap and therefore, only a percentage of profit may be estimated. It was argued that in such type of scrap sale, the profit rate varies from 3% to 7%. 5. So far as the addition of Rs.60,01,813/- is concerned, it was submitted that the said amount was received from Dilipkumar Gokulprasad Agrawal who had paid the same as deposits. 6. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and dismissed the appeal filed by the assessee. 7. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. That the ld. C.I.T. (Appeals), Pune-12 has erred in upholding the validity of reassessment proceeding initiated by ld. AO on issue of time-barred notice u/s.148 dated 31-03-2021 which reopening notice legally in any event ought to have been issued on or before 30-03-2021. In view of the same appellant prays that impugned notice u/s.148 being invalid and time-barred notice and consequent reassessment order passed u/s.144 on 28-03-2022 also being illegal and without jurisdiction order therefore, may be quashed and set aside. 4 ITA No.1741/PUN/2024 2. That the ld. C.I.T (Appeals) has erred in confirming the addition of cash deposited in bank accounts made by ld. AO at Rs.2,23,20,800/- without properly appreciating the facts of the case and law. 3. That the Id. C.I.T. (Appeals) has erred in confirming the addition made by ld. AO at Rs.60,01,813/ on the basis of TCS statement without properly appreciating the facts of the case. 4. That all the appeal grounds raised are independent ground and without prejudice to one another. 5. That the appellant craves the leave to amend, alter, substitute any of the above appeal grounds and or to raise new or additional grounds of appeal at the time of hearing. 8. The Ld. Counsel for the assessee at the outset while challenging the validity of re-assessment proceedings submitted that the Assessing Officer has issued the notice u/s 148 of the Act on 31.03.2021 for the assessment year 2013-14 and the limitation period for the impugned assessment year ends on 31.03.2020. He submitted that TOLA extending the date after 31.03.2021 is not applicable to the facts of the present case. Referring to the decision of the Hon‟ble Bombay High Court in the case of New India Assurance Company Ltd. vs. The Asst. Commissioner of Income Tax, Circle reported in (2024) 158 taxmann.com 367 (Bom) [2024 (1) TMI 803] and the decision of the Mumbai Bench of the Tribunal in the case of DCIT vs. Amcor Flexibles India Pvt. Ltd. vide ITA No.3842/MUM/2024 order dated 06.09.2024, he submitted that under identical circumstances the re-assessment notices issued for assessment year 2013-14 have been quashed. He accordingly submitted that such re-assessment proceedings initiated by issue of notice u/s 148 of the Act on 31.03.2021 being barred by limitation, has to be quashed. 5 ITA No.1741/PUN/2024 9. So far as the merit of the case is concerned, the Ld. Counsel for the assessee referred to the balance sheet for the preceding assessment year and submitted that as per the balance sheet the assessee is holding certain raw material and finished goods which were sold during the impugned assessment year as scrap and the cash so generated from sale of such scrap has been deposited into the bank account. He accordingly submitted that instead of taxing the entire amount, only a percentage of profit embedded in the said scrap should be brought to tax. 10. So far as an amount of Rs.60,01,813/- is concerned, he submitted that the Assessing Officer has made the addition on the basis of TCS statement without properly appreciating the facts of the case. He accordingly submitted that the assessment order be quashed. In his alternate contention, he submitted that a certain percentage should be adopted instead of bringing the entire amount of Rs.2,23,20,800/- and Rs.60,01,813/- to tax. 11. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A). He submitted that the assessee did not file any return in response to notice u/s 148 of the Act nor filed any details in response to notice u/s 142(1) of the Act. Before the Ld. CIT(A) the assessee did not make any submission with regard to the validity of re-assessment proceedings. Similarly, the assessee did not furnish any evidence to substantiate that the cash so deposited in the bank account is out of sale of scrap. Further, the assessee did not file any details in respect of amount of Rs.60,01,813/- which is now claimed as deposit 6 ITA No.1741/PUN/2024 received from Dilipkumar Gokulprasad Agrawal . He accordingly submitted that the appeal filed by the assessee should be dismissed. 12. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case had not filed its return of income. Based on the data available with the department that the assessee had made certain financial transactions but failed to file its return of income, the Assessing Officer reopened the assessment by recording reasons after obtaining prior approval of the competent authority and accordingly notice u/s 148 of the Act was issued on 31.03.2021. It is the submission of the Ld. Counsel for the assessee that the assessment year being assessment year 2013-14 the notice issued on 31.03.2021 is barred by limitation since the 6 year limitation period ends on 31.03.2020 and the TOLA has extended the date after 31.03.2021 and not on 31.03.2020. It is also his submission that in view of the decision of the Hon‟ble Bombay High Court in the case of New India Assurance Company Ltd. Vs. ACIT (supra), notification of the CBDT vide No.20/2021, dated 31.03.2021 and the decision of the Mumbai Bench of the Tribunal in the case of DCIT vs. Amcor Flexibles India Pvt. Ltd. (supra), the notice issued u/s 148 of the Act on 31.03.2021 for assessment year 2013-14 being barred by limitation, the entire re-assessment proceedings have to be quashed. 7 ITA No.1741/PUN/2024 13. We do not find any merit in the arguments advanced by the Ld. Counsel for the assessee challenging the validity of reopening of assessment. It is an admitted fact that the notice u/s 148 of the Act was issued by the Assessing Officer on 31.03.2021. 14. We find the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70 (SC) has observed as under: 19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID-19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income Tax Act; b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re- assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re- assessment for previous assessment years; c. The relaxations provided under Section 3(1) of TOLA apply “notwithstanding anything contained in the specified Act.” Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with Section 149 of the Income Tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act, PART C including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: 8 ITA No.1741/PUN/2024 Assessment Year Within 3 Years Expiry of Limitation read with TOLA (or (2) Within six Years Expiry of Limitation read with TOLA for (4) (1) (2) (3) (4) (5) 2013-2014 31-3-2017 TOLA not applicable 31-3-2020 30-6-2021 2014-2015 31-3-2018 TOLA not applicable 31-3-2021 30-6-2021 2015-2016 31-3-2019 TOLA not applicable 31-3-2022 TOLA not applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 2017-2018 31-3-2021 30-6-2021 31-3-2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines “specified Act” to mean and include the Income Tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income Tax Act. Therefore, TOLA continues to apply to the Income Tax Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under Section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income Tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra). 15. Similarly, at para 46 of the order the Hon'ble Supreme Court has observed as under: “46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under 9 ITA No.1741/PUN/2024 the provisions of” 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime.” 16. Finally, the Hon'ble Supreme Court at para 114 of the order has observed as under: “G. Conclusions 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148; d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by 10 ITA No.1741/PUN/2024 the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside;” (emphasis supplied by us)” 17. A perusal of the above clearly shows that the Assessing Officer has time upto 30.06.2021 and since the notice is dated 31.03.2021, therefore, the same is in order and therefore, the reopening of assessment is held to be valid in law. 18. So far as the decision of the Mumbai Bench of the Tribunal in the case of DCIT vs. Amcor Flexibles India Pvt. Ltd. (supra) is concerned, in that case the notice u/s 148 of the Act for the assessment year 2013-14 was issued on 20.04.2021 i.e. after 31.03.2021, in response to which the assessee challenged the re-opening of assessment by filing its objections vide letter dated 09.06.2021 stating that the mandatory procedure under the new section 148A of the Act was not followed and hence notice is bad in law. Similarly in the case of New India Assurance Company Ltd. (supra) the notice was issued u/s 148 for the assessment year 2013-14 on 28.07.2022 for which the Hon‟ble Bombay High Court quashed the re-assessment proceedings. Herein, in the instant case the notice u/s 148 of the Act for the assessment year 2013-14 was issued on 31.03.2021. Therefore, the above 2 decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. The various other decisions relied on by the Ld. Counsel for the assessee are also distinguishable and are not 11 ITA No.1741/PUN/2024 applicable to the facts of the present case especially when the assessee has neither filed any return in response to notice u/s 148 of the Act nor objected to the issue of such notice before the Assessing Officer and the notice u/s 148 issued under the old provisions is within the extended period under TOLA. In view of the above discussion and respectfully following the decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal (supra), we hold that the issue of notice u/s 148 of the Act on 31.03.2021 for the assessment year 2013-14 is in order. The ground raised by the assessee on this issue is accordingly dismissed. 19. So far as the addition on merit is concerned, it is an admitted fact that the cash to the tune of Rs.2,23,20,800/- has been deposited in the bank account on various dates. Similarly, the TCS statement shows a transaction of Rs.60,01,813/- during the year under consideration. Thus, the total amount so deposited into the bank account and credited to bank account comes to Rs.2,83,22,613/-. It is also an admitted fact that neither the assessee filed any return in response to the notice u/s 148 of the Act nor filed any response in response to the notice issued u/s 142(1) of the Act. We find before the Ld. CIT(A) the assessee has submitted that the amounts so deposited into the bank account are out of sale of scrap. However, in absence of any details furnished by the assessee, the Ld. CIT(A) dismissed the grounds raised before him. It is an admitted fact that no books of account were produced before the Assessing Officer. At the same time, it is also an admitted fact that the assessee thereafter has not filed any return of income till date and the business of the assessee is closed as stated by the Ld. Counsel for the assessee. 12 ITA No.1741/PUN/2024 Under these circumstances, it would not serve any purpose by remitting the matter to the file of the Assessing Officer or to the Ld. CIT(A) as the matter is very old i.e. assessment year 2013-14 and the litigations must come to an end. Since the Balance Sheet filed by the assessee in the paper book shows the closing stock of inventories, raw materials, etc. as on 31.03.2012 and the assessee has closed its business, therefore, we find it is possible that the assessee has sold such raw material and finished goods at scrap value which has been deposited into the bank account. Under these circumstances, the entire deposits into the bank account in our opinion, cannot be treated as income of the assessee and only the profit element embedded in the same should be brought to tax. It was the submission of the Ld. Counsel for the assessee before the Ld. CIT(A) that a profit range of 3% to 7% should be adopted. However, no justification for adoption of such profit range has been brought on record by filing any comparables cases. Under these circumstances and considering the totality of the facts of the case and to bring the litigation to an end, we are of the considered opinion that the adoption of profit rate of 8% on the amount so deposited into the bank account totaling to Rs.2,83,22,613/- which comes to Rs.22,65,810/- will meet the ends of justice. We hold and direct accordingly. 20. Further, the assessee has also received interest of Rs.3,86,810/- on which TDS of Rs.38,681/- has been deducted which should be brought to tax separately as income from other sources. We, therefore, direct the Assessing Officer to determine the business income of Rs.22,65,810/- and interest income of 13 ITA No.1741/PUN/2024 Rs.3,86,810/- and do the necessary computation of income. The grounds raised on this issue are accordingly partly allowed. 21. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 23rd May, 2025. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 23rd May, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, „B‟ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune 14 ITA No.1741/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 20.05.2025 Sr. PS/PS 2 Draft placed before author 21.05.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "