VIR ALLOYS AND STEEL COMPANY PRIVATE LIMITED,MUMBAI V. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 11(3)(2), MUMBAI, MUMBAI

ITA 2557/MUM/2025

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Vir Alloys and Steel Company Pvt. Ltd. appealed against the orders of the Ld. Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, Delhi, for the assessment years 2012-13 and 2013-14. The primary issues involved were the disallowance of additional depreciation claimed by the assessee and the validity of the reassessment proceedings. The Assessing Officer had disallowed the additional depreciation on the grounds that the assessee did not qualify for the higher rate applicable to businesses engaged in rubber or plastic goods manufacturing, as they were involved in recycling steel scrap and manufacturing ingots and castings. The Ld. CIT(A) upheld the disallowance and the validity of the reassessment, leading to the current appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708491 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2013-2014
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITHA KAUSHIK
• Assessee Lawyers: AKHILESH SINDHU
• Keywords: Reassessment proceedings; Depreciation; Additional depreciation; Principle of natural justice
• Section: 147; 148; 143(3); 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 2489 & 2557/MUM/2025 Assessment Year: 2012-13 & 2013-14 Vir Alloys and Steel Company Pvt. Ltd., 401/1A, Ratan Nagar, Four Bunglow, Main Market, Andheri West, Mumbai-400053. Vs. The Asst. CIT, Circle-11(3)(2), Aayakar Bhavan, M.K. Road, Mumbai-400020. PAN NO. AAACV 3781 C Appellant Respondent Assessee by : Mr. Akhilesh Sindhu Revenue by : Ms. Kavitha Kaushik, Sr. DR Date of Hearing : 10/07/2025 Date of pronouncement : 17/07/2025 ORDER PER OM PRAKASH KANT, AM These appeals by the assessee are directed against two separate orders, both dated 11.02.2025, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2012- 13 and 2013-14 respectively. As common issues-in-dispute are involved in these appeals and therefore, same were heard together and disposed off by way of this consolidated for the sake of convenience. 2. Briefly stated, the facts pertaining to Assessment Year 2012 13 are that the assessee filed its return of income on 30.09.2012, declaring total income of completed under Section 143(3) of the Income (hereinafter referred to as \"the Act\") on 16.03.2015, determining total income at ₹57,16,548/ by issuance of notice under Sectio 30.05.2018. During reassessment proceedings, the Assessing Officer raised a specific query as to why depreciation on moulds should not be restricted to 15% of the written down value, in accordance with the applicable Income explanation was submitted by the assessee, despite having been provided multiple opportunities. Consequently, the reassessment order dated 11.10.2018 passed under Section 147 disallowed additional depreciation of 30% claimed by the assessee to 15%, on the ground that the assessee was engaged in recycling of steel scrap and manufacturing of ingots and castings goods manufacturing, where the higher rate would app relevant finding of the Assessing Officer is reproduced as under: “In response to the notice issued u/s. 142(1) on 25.08.2018 assessee preferred adjourn 06.09.2018. Adjournment was granted up to 17.09.20,18. Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & and disposed off by way of this consolidated for the sake of Briefly stated, the facts pertaining to Assessment Year 2012 13 are that the assessee filed its return of income on 30.09.2012, declaring total income of ₹57,04,372/-. The assessment was completed under Section 143(3) of the Income- (hereinafter referred to as \"the Act\") on 16.03.2015, determining 57,16,548/-. Subsequently, the case was reopened by issuance of notice under Section 148 of the Act dated 30.05.2018. During reassessment proceedings, the Assessing Officer raised a specific query as to why depreciation on moulds should not be restricted to 15% of the written down value, in accordance with the applicable Income-tax Rules explanation was submitted by the assessee, despite having been provided multiple opportunities. Consequently, the reassessment order dated 11.10.2018 passed under Section 147 disallowed additional depreciation of ₹37,41,179/-, reducing the ra 30% claimed by the assessee to 15%, on the ground that the assessee was engaged in recycling of steel scrap and manufacturing of ingots and castings — not in the business of rubber or plastic goods manufacturing, where the higher rate would app relevant finding of the Assessing Officer is reproduced as under: In response to the notice issued u/s. 142(1) on 25.08.2018 e preferred adjournment vide letter dated 06.09.2018. Adjournment was granted up to 17.09.20,18. Vir Alloys and Steel Company Pvt. Ltd 2 ITA No. 2489 & 2557/MUM/2025 and disposed off by way of this consolidated for the sake of Briefly stated, the facts pertaining to Assessment Year 2012– 13 are that the assessee filed its return of income on 30.09.2012, . The assessment was -tax Act, 1961 (hereinafter referred to as \"the Act\") on 16.03.2015, determining . Subsequently, the case was reopened n 148 of the Act dated 30.05.2018. During reassessment proceedings, the Assessing Officer raised a specific query as to why depreciation on moulds should not be restricted to 15% of the written down value, in tax Rules. However, no explanation was submitted by the assessee, despite having been provided multiple opportunities. Consequently, the reassessment order dated 11.10.2018 passed under Section 147 disallowed , reducing the rate from the 30% claimed by the assessee to 15%, on the ground that the assessee was engaged in recycling of steel scrap and manufacturing not in the business of rubber or plastic goods manufacturing, where the higher rate would apply.. The relevant finding of the Assessing Officer is reproduced as under: In response to the notice issued u/s. 142(1) on 25.08.2018 ment vide letter dated 06.09.2018. Adjournment was granted up to 17.09.20,18. Assessee again 18.09.2018 filed in tapal of this office. In response to the same another notice u/s. 142(1) was issued on 19.09.2018 fixing hearing on 26.09.2018 & assessee was once again requested to provide details. The assessee how produce any details/explanation a lapse of one month after issuance of notice u/s. 142(1) on 25.08.2018. Therefore a final opportunity was given to assessee vide notice issued u/s. (1) on 29.09.2018 to explain why depreciation may not be restricted to 15% as provided in the Act. However no explanation was offered by assessee in this regard. Therefore in view of the clear provisions of IT Rules deprecation on moulds used be assessee in its business of recycling of st allowed @ 15% instead of depreciation claimed @ 30% by the assessee and additional depreciation of Rs. 37,41,179 claimed by assessee as worked out below is disallowed. Depreciation claimed @30% Less: Depreciation allowable @15% Disallowance Rs. 3. On appeal, the assessee challenged both the validity of the reassessment and the disallowance on merits. The Ld. CIT(A), however, upheld the reassessment as well as the addition. In respect of the depreciation claim, it was held that the assessee failed to submit any documentary evidence to demonstrate that the moulds used had a life span of less than one year, or that they qualified as consumables warranting revenue treatment or higher depreciation. The Ld. CIT(A) accordingly confirmed the findings of the Assessing Officer “4.4 Now coming to the next ground, the appellant challenged the disallowance towards claim of depreciation Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & Assessee again sought adjournment vide letter dated 18.09.2018 filed in tapal of this office. In response to the same another notice u/s. 142(1) was issued on 19.09.2018 fixing hearing on 26.09.2018 & assessee was once again requested to provide details. The assessee however did not produce any details/explanation till 28.09.2018 even after a lapse of one month after issuance of notice u/s. 142(1) on Therefore a final opportunity was given to assessee vide notice issued u/s. (1) on 29.09.2018 to explain why depreciation may not be restricted to 15% as provided in the Act. However no explanation was offered by assessee in Therefore in view of the clear provisions of IT Rules deprecation on moulds used be assessee in its business of recycling of steel scrape and manufacturing of ingots is allowed @ 15% instead of depreciation claimed @ 30% by the assessee and additional depreciation of Rs. 37,41,179 claimed by assessee as worked out below is disallowed. Particular Amount Depreciation claimed @30% 74,82,357 Depreciation allowable @15% 37,41,179 Disallowance Rs. 37,41,179 On appeal, the assessee challenged both the validity of the reassessment and the disallowance on merits. The Ld. CIT(A), however, upheld the reassessment as well as the addition. In respect of the depreciation claim, it was held that the assessee submit any documentary evidence to demonstrate that the moulds used had a life span of less than one year, or that they qualified as consumables warranting revenue treatment or higher depreciation. The Ld. CIT(A) accordingly confirmed the findings of Assessing Officer observing as under: 4.4 Now coming to the next ground, the appellant challenged the disallowance towards claim of depreciation Vir Alloys and Steel Company Pvt. Ltd 3 ITA No. 2489 & 2557/MUM/2025 sought adjournment vide letter dated 18.09.2018 filed in tapal of this office. In response to the same another notice u/s. 142(1) was issued on 19.09.2018 fixing hearing on 26.09.2018 & assessee was once again ever did not 28.09.2018 even after a lapse of one month after issuance of notice u/s. 142(1) on Therefore a final opportunity was given to assessee vide notice issued u/s. (1) on 29.09.2018 to explain why depreciation may not be restricted to 15% as provided in the Act. However no explanation was offered by assessee in Therefore in view of the clear provisions of IT Rules deprecation on moulds used be assessee in its business of eel scrape and manufacturing of ingots is allowed @ 15% instead of depreciation claimed @ 30% by the assessee and additional depreciation of Rs. 37,41,179 claimed by assessee as worked out below is disallowed. Amount 74,82,357 37,41,179 37,41,179 On appeal, the assessee challenged both the validity of the reassessment and the disallowance on merits. The Ld. CIT(A), however, upheld the reassessment as well as the addition. In respect of the depreciation claim, it was held that the assessee submit any documentary evidence to demonstrate that the moulds used had a life span of less than one year, or that they qualified as consumables warranting revenue treatment or higher depreciation. The Ld. CIT(A) accordingly confirmed the findings of 4.4 Now coming to the next ground, the appellant challenged the disallowance towards claim of depreciation amount of Rs.37,41,179/ assessee has claimed depreciation on moulds at 30% though higher depreciation @30% is allowable only on the moulds used in the rubber and plastic goods factories. The appellant was involved in the business of recycling of steel scrape & manufacturing ingots and castings and in such case, depreciation was allow offered no explanation in this regard during the assessment proceedings. During the appellate proceedings, the appellant submitted steel industry is less than one year and moulds are in nature of items of stores and consumables in this industry, thereby assessee should claim the purchase of moulds as revenue expenses instead of fixed assets and instead it has claimed depreciation only @30%. But the appellant has failed to file any documentar that the moulds are usable only for one year in the business of recycling of steel scrape & manufacturing ingots and castings. Therefore, due to lack of evidence, 1 side with the findings of the AO with respect to disallowance of depreciation claimed. The evidence furnished by the appellant before me in the form of reply do not carry the factual weight found during the assessment proceedings and are not found to be substantial enough to controvert the assessing officer's findings. appeal relating to this issue stands 3.1 On the issue of the validity of the reassessment, the Ld. CIT(A) observed that the reopening was carried out after recording reasons, with due approval and within the period pre the law. It was further held that the principles of natural justice had been followed, and therefore, the objections raised by the assessee on jurisdiction and limitation were devoid of merit. Relevant part of his decision is reproduced as un “4.3 It has been noticed from the grounds filed by the appellant that he has objected to the validity of reopening proceedings. The facts of the case in the light of the above allegation were carefully considered. As per the contents of assessment ord reopening were correctly recorded, necessary approval Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & amount of Rs.37,41,179/-. The AO has observed that the assessee has claimed depreciation on moulds at 30% gh higher depreciation @30% is allowable only on the moulds used in the rubber and plastic goods factories. The appellant was involved in the business of recycling of steel scrape & manufacturing ingots and castings and in such case, depreciation was allowable @ 15%. The assessee has offered no explanation in this regard during the assessment proceedings. During the appellate proceedings, the appellant submitted that the usable life of moulds in the steel industry is less than one year and moulds are in ure of items of stores and consumables in this industry, thereby assessee should claim the purchase of moulds as revenue expenses instead of fixed assets and instead it has claimed depreciation only @30%. But the appellant has failed to file any documentary evidence which can prove that the moulds are usable only for one year in the business of recycling of steel scrape & manufacturing ingots and castings. Therefore, due to lack of evidence, 1 side with the findings of the AO with respect to disallowance of depreciation claimed. The evidence furnished by the appellant before me in the form of reply do not carry the factual weight found during the assessment proceedings and are not found to be substantial enough to controvert the assessing officer's findings. Consequently, Grounds of appeal relating to this issue stands dismissed.” On the issue of the validity of the reassessment, the Ld. CIT(A) observed that the reopening was carried out after recording reasons, with due approval and within the period pre the law. It was further held that the principles of natural justice had been followed, and therefore, the objections raised by the assessee on jurisdiction and limitation were devoid of merit. Relevant part of his decision is reproduced as under: 4.3 It has been noticed from the grounds filed by the appellant that he has objected to the validity of reopening proceedings. The facts of the case in the light of the above allegation were carefully considered. As per the contents of assessment order, it is evident that the reasons for reopening were correctly recorded, necessary approval Vir Alloys and Steel Company Pvt. Ltd 4 ITA No. 2489 & 2557/MUM/2025 . The AO has observed that the assessee has claimed depreciation on moulds at 30% gh higher depreciation @30% is allowable only on the moulds used in the rubber and plastic goods factories. The appellant was involved in the business of recycling of steel scrape & manufacturing ingots and castings and in such able @ 15%. The assessee has offered no explanation in this regard during the assessment proceedings. During the appellate proceedings, the usable life of moulds in the steel industry is less than one year and moulds are in ure of items of stores and consumables in this industry, thereby assessee should claim the purchase of moulds as revenue expenses instead of fixed assets and instead it has claimed depreciation only @30%. But the appellant has y evidence which can prove that the moulds are usable only for one year in the business of recycling of steel scrape & manufacturing ingots and castings. Therefore, due to lack of evidence, 1 side with the findings of the AO with respect to disallowance of depreciation claimed. The evidence furnished by the appellant before me in the form of reply do not carry the factual weight found during the assessment proceedings and are not found to be substantial enough to controvert the Consequently, Grounds of On the issue of the validity of the reassessment, the Ld. CIT(A) observed that the reopening was carried out after recording reasons, with due approval and within the period prescribed under the law. It was further held that the principles of natural justice had been followed, and therefore, the objections raised by the assessee on jurisdiction and limitation were devoid of merit. : 4.3 It has been noticed from the grounds filed by the appellant that he has objected to the validity of reopening proceedings. The facts of the case in the light of the above allegation were carefully considered. As per the contents of er, it is evident that the reasons for reopening were correctly recorded, necessary approval obtained, served the notice within the stipulated time and had also provided the reasons for reopening the assessment. Further, Assessing Officer has provided adequate opportunity to the appellant before completing the assessment order and the Principles of Natural Justice have been duly complied. Therefore, the corresponding grounds of appeal are found to be unsubstantiated, made in a mechanical fashion and hence a legality of reopening stands dismissed. 4. We have heard the rival submissions of the parties and perused the material on record. As regards the merits of the disallowance, it is noted that the assessee did not produce any evidence either during the reassessment proceedings or before the Ld. CIT(A) to substantiate its claim that depreciation at the rate of 30% was allowable in respect of moulds used in its line of business. However, before us, learned counsel for the assessee has that necessary documents can now be furnished to support the claim and requested that one more opportunity be granted to present the relevant material. 4.1 Considering the totality of the circumstances, and in the interest of justice, we deem it the file of the Ld. CIT(A) for a fresh adjudication of the issue relating to depreciation, after affording the assessee a reasonable opportunity to submit supporting documentary evidence. 4.2 Insofar as the validity of note that the assessee had raised a specific ground challenging the reopening on the basis that the notice under Section 148 was Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & obtained, served the notice within the stipulated time and had also provided the reasons for reopening the assessment. Further, Assessing Officer has provided uate opportunity to the appellant before completing the assessment order and the Principles of Natural Justice have been duly complied. Therefore, the corresponding grounds of appeal are found to be unsubstantiated, made in a mechanical fashion and hence all the grounds related to legality of reopening stands dismissed.” We have heard the rival submissions of the parties and perused the material on record. As regards the merits of the disallowance, it is noted that the assessee did not produce any ce either during the reassessment proceedings or before the Ld. CIT(A) to substantiate its claim that depreciation at the rate of 30% was allowable in respect of moulds used in its line of business. However, before us, learned counsel for the assessee has that necessary documents can now be furnished to support the claim and requested that one more opportunity be granted to present the relevant material. Considering the totality of the circumstances, and in the interest of justice, we deem it appropriate to restore the matter to the file of the Ld. CIT(A) for a fresh adjudication of the issue relating to depreciation, after affording the assessee a reasonable opportunity to submit supporting documentary evidence. Insofar as the validity of the reassessment is concerned, we note that the assessee had raised a specific ground challenging the reopening on the basis that the notice under Section 148 was Vir Alloys and Steel Company Pvt. Ltd 5 ITA No. 2489 & 2557/MUM/2025 obtained, served the notice within the stipulated time and had also provided the reasons for reopening the assessment. Further, Assessing Officer has provided uate opportunity to the appellant before completing the assessment order and the Principles of Natural Justice have been duly complied. Therefore, the corresponding grounds of appeal are found to be unsubstantiated, made in a ll the grounds related to We have heard the rival submissions of the parties and perused the material on record. As regards the merits of the disallowance, it is noted that the assessee did not produce any ce either during the reassessment proceedings or before the Ld. CIT(A) to substantiate its claim that depreciation at the rate of 30% was allowable in respect of moulds used in its line of business. However, before us, learned counsel for the assessee has submitted that necessary documents can now be furnished to support the claim and requested that one more opportunity be granted to Considering the totality of the circumstances, and in the appropriate to restore the matter to the file of the Ld. CIT(A) for a fresh adjudication of the issue relating to depreciation, after affording the assessee a reasonable opportunity to submit supporting documentary evidence. the reassessment is concerned, we note that the assessee had raised a specific ground challenging the reopening on the basis that the notice under Section 148 was issued beyond four years from the end of the relevant assessment year, and that there was no disclose fully and truly all material facts during the original assessment. However, we find that the Ld. CIT(A) has not examined this contention in terms of the first proviso to Section 147 of the Act. Since the matter is being remanded on merits, we consider it appropriate to restore this ground also to the Ld. CIT(A) for adjudication afresh, in accordance with law and after considering the assessee’s submissions on the aspect of limitation and full disclosure. 5. The grounds raised in the appeal for Assessment Year 2013 14 are identical to those raised in the appeal for Assessment Year 2012–13. Accordingly, following our findings hereinabove, the grounds in the appeal for AY 2013 the Ld. CIT(A) to be decided afresh, 6. In the result, both appeals of the assessee are allowed for statistical purposes, with directions as aforesaid. Order pronounced in the open Court on Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 17/07/2025 Rahul Sharma, Sr. P.S. Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & issued beyond four years from the end of the relevant assessment year, and that there was no failure on the part of the assessee to disclose fully and truly all material facts during the original assessment. However, we find that the Ld. CIT(A) has not examined this contention in terms of the first proviso to Section 147 of the ter is being remanded on merits, we consider it appropriate to restore this ground also to the Ld. CIT(A) for adjudication afresh, in accordance with law and after considering the assessee’s submissions on the aspect of limitation and full he grounds raised in the appeal for Assessment Year 2013 14 are identical to those raised in the appeal for Assessment Year 13. Accordingly, following our findings hereinabove, the grounds in the appeal for AY 2013–14 are also restored to the file of the Ld. CIT(A) to be decided afresh, mutatis mutandis In the result, both appeals of the assessee are allowed for statistical purposes, with directions as aforesaid. nounced in the open Court on 17/07/2025. Sd/- Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH JUDICIAL MEMBER ACCOUNTANT MEMBER Vir Alloys and Steel Company Pvt. Ltd 6 ITA No. 2489 & 2557/MUM/2025 issued beyond four years from the end of the relevant assessment failure on the part of the assessee to disclose fully and truly all material facts during the original assessment. However, we find that the Ld. CIT(A) has not examined this contention in terms of the first proviso to Section 147 of the ter is being remanded on merits, we consider it appropriate to restore this ground also to the Ld. CIT(A) for adjudication afresh, in accordance with law and after considering the assessee’s submissions on the aspect of limitation and full he grounds raised in the appeal for Assessment Year 2013– 14 are identical to those raised in the appeal for Assessment Year 13. Accordingly, following our findings hereinabove, the 14 are also restored to the file of mutatis mutandis. In the result, both appeals of the assessee are allowed for /07/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Vir Alloys and Steel Company Pvt. Ltd ITA No. 2489 & Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Vir Alloys and Steel Company Pvt. Ltd 7 ITA No. 2489 & 2557/MUM/2025 BY ORDER, (Assistant Registrar) ITAT, Mumbai "