Facts of the Case

The assessee, Nezone Tubes Limited, is engaged in the business of manufacturing M.S. Pipes and Galvanized Pipes. For Assessment Year 2011-12, the assessee filed its return declaring total income of ₹8,79,96,137. A search was conducted in the case of the assessee on 01.08.2012 and assessment under Section 153A read with Section 143(3) was completed accepting the returned income. Subsequently, the assessment was reopened under Section 147 on the basis of information from the Investigation Wing alleging that sale proceeds of ₹42,61,133 received from M/s Ambika Ispat Udyog were accommodation entries without actual delivery of goods. The Assessing Officer treated the said sale amount as unexplained cash credit under Section 68. The addition was confirmed by the CIT(A).

For Assessment Year 2015-16, reassessment proceedings were initiated alleging receipt of accommodation entries aggregating to ₹1,15,00,000 from M/s Primary Investment Consultants Pvt. Ltd. and ₹75,00,000 from M/s Mangal Chand Property & Investment Pvt. Ltd. The reassessment was completed under Section 147 read with Section 144B. The CIT(A) set aside the assessment to the Assessing Officer for fresh adjudication. Aggrieved, the assessee preferred appeals before the Tribunal for both years.

Issues Involved

Whether sale proceeds already recorded in the books could be treated as unexplained cash credits under Section 68 leading to double addition, whether reassessment for AY 2011-12 was justified solely on the ground of non-availability of transportation documents, whether reassessment for AY 2015-16 was barred by limitation in view of amended provisions of Section 149 read with TOLA, and whether notice under Section 148 issued after the permissible period was valid in law.

Petitioner’s Arguments

For AY 2011-12, the assessee contended that the amount of ₹42,61,133 represented genuine sales duly recorded in the books and forming part of turnover, and treating the same as unexplained cash credit resulted in double taxation. It was argued that merely because summons issued to the purchaser were returned unserved or some transportation documents could not be produced after several years, the sales could not be treated as bogus.

For AY 2015-16, the assessee argued that reassessment was barred by limitation as the notice under Section 148 was issued on 30.06.2022, beyond the time permitted under Section 149 of the Act as interpreted by the Supreme Court in Union of India vs Rajeev Bansal. It was contended that the benefit of TOLA was not available for reopening assessments for AY 2015-16 and therefore the entire reassessment proceedings were without jurisdiction.

Respondent’s Arguments

The Revenue supported the orders of the lower authorities. For AY 2011-12, it was argued that the assessee failed to prove actual movement of goods and therefore the sales were accommodation entries. For AY 2015-16, the Revenue relied on the reopening based on information received regarding accommodation entries and supported the action taken by the Assessing Officer.

Court Order / Findings

For Assessment Year 2011-12, the ITAT Kolkata observed that the Assessing Officer had treated part of the recorded sales as unexplained cash credits without excluding the same from turnover, resulting in apparent double addition. The Tribunal held that if sales were to be treated as non-genuine, the books ought to have been rejected and income recomputed accordingly. In the interest of justice, the Tribunal set aside the order of the CIT(A) and remanded the matter to the Assessing Officer to allow the assessee an opportunity to furnish transportation and related evidences and to recompute income after proper verification.

For Assessment Year 2015-16, the Tribunal held that the notice under Section 148 issued on 30.06.2022 was barred by limitation. Relying on the Supreme Court decision in Union of India vs Rajeev Bansal and the coordinate bench decision in Kothari Metals Ltd., the Tribunal held that the benefit of TOLA was not available for reopening AY 2015-16 and that the reassessment notice issued beyond 31.03.2022 was invalid. Consequently, the reassessment order was quashed as being without jurisdiction.

Important Clarification

The Tribunal clarified that sale transactions already recorded as part of turnover cannot be simultaneously taxed as unexplained cash credits without necessary adjustment, as it results in double taxation. It further clarified that reassessment proceedings must strictly comply with the limitation provisions under Section 149, and notices issued beyond the permissible period are void ab initio, notwithstanding information alleging escapement of income.

Final Outcome

The appeal for Assessment Year 2011-12 was partly allowed for statistical purposes, with the issue of alleged bogus sales of ₹42,61,133 remanded to the Assessing Officer for fresh adjudication after proper verification. The appeal for Assessment Year 2015-16 was allowed in full, and the reassessment proceedings initiated under Section 147 pursuant to notice under Section 148 dated 30.06.2022 were quashed as time-barred.

Source Link- https://itat.gov.in/public/files/upload/1768385977-y6MuGz-1-TO.pdf

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