ITAT Upholds Reassessment Validity Citing TOLA, Reduces Scrap Sales Addition at 8% Profit Rate [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the validity of reassessment proceedings relying on the extended limitation period under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and reduced Scrap Sales addition at an 8% profit rate of the Cash Deposits.

Parvati Steel Re Rolling Mills Pvt. Ltd. (assessee) did not file its income tax return for the assessment year 2013-14. Based on information regarding financial transactions, the Assessing Officer (AO) reopened the assessment and issued a notice to the assessee.

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The assessee failed to file a return or respond to subsequent notices. The AO, relying on available data, noted cash deposits of Rs. 2,23,20,800 in the assessee’s HDFC Bank account, interest income of Rs. 3,86,810 (with TDS of Rs. 38,681), and a transaction of Rs. 60,01,813 per the TCS statement. The AO assessed a total income of Rs. 2,87,09,423 and treated these as unexplained income.

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Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee also challenged the validity of the reassessment, claiming the Section 148 notice was time-barred. The CIT(A) upheld the AO’s order and dismissed the appeal due to lack of substantiating evidence.

Aggrieved by the order of CIT(A), the assessee filed an appeal before the ITAT. The assessee argued that the notice issued on 31.03.2021 was beyond the limitation period ending 31.03.2020, arguing that TOLA’s extension was inapplicable.

The assessee argued that the cash deposits resulted from scrap sales of raw materials and finished goods, as reflected in the balance sheet for AY 2012-13, and only the profit element should be taxed.

The two-member bench, comprising R.K. Panda (Vice President) and Vinay Bhamore (Judicial Member), relied on the Supreme Court’s ruling in Union of India v. Rajeev Bansal (2024), which clarified that TOLA extended the limitation period for issuing Section 148 notices for AY 2013-14 until 30.06.2021.

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The Tribunal held the reassessment valid. The Tribunal observed the balance sheet evidence which suggested scrap sales. The tribunal applied an 8% profit rate on the total deposits of Rs. 2,83,22,613 (cash deposits of Rs. 2,23,20,800 plus TCS transaction of Rs. 60,01,813).

The interest income of Rs. 3,86,810 was separately taxed as income from other sources. The tribunal directed the AO to compute the total income accordingly. The appeal of the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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