ITAT Kolkata: Reassessment Quashed for AY 2015-16 as Time-Barred; AY 2011-12 Remanded for Fresh Consideration — Nezone Tubes Limited vs DCIT

Background and Overview

The Income Tax Appellate Tribunal, Kolkata Bench, recently delivered a significant ruling in the case of Nezone Tubes Limited Vs DCIT (ITAT Kolkata), addressing two separate appeals pertaining to Assessment Years 2011-12 and 2015-16. Both appeals were clubbed together and adjudicated through a consolidated order. The outcome varied significantly between the two years — while the matter for AY 2011-12 was sent back to the Assessing Officer for fresh examination, the reassessment for AY 2015-16 was entirely quashed on the ground of limitation, following the binding precedent laid down by the Supreme Court.

The assessee is engaged in the manufacture of M.S. pipes and galvanized pipes and had contested the orders passed by the Commissioner of Income Tax (Appeals)-NFAC, Delhi under Section 250 of the Income Tax Act, 1961.

AY 2011-12 — ITA No. 179/KOL/2025

Facts and Reassessment Background

The assessee had originally filed its return of income for AY 2011-12 on 23.09.2011, disclosing total income under normal provisions. A search and seizure operation was conducted on 01.08.2012, following which a notice under Section 153A was issued. In response, the assessee filed a fresh return, and assessment under Section 153A/143(3) was completed on 29.08.2014 at the returned income.

Subsequently, the case was reopened under Section 147 on the basis of intelligence received from the Investigation Wing, ADIT (Inv.), Unit 5, Kolkata. The information alleged that a sum of ₹42,61,133 received by the assessee from M/s Ambika Ispat Udyog constituted an accommodation entry, with no actual delivery of goods having taken place. The funds were reportedly routed through multiple layered bank accounts before being credited to the assessee's account during FY 2010-11.

Assessing Officer's Findings

During reassessment proceedings, the AO issued statutory notices and called for documentary evidence. The assessee claimed the amount represented genuine sales of its manufactured goods and submitted bank statements, ledger accounts, and sale invoices in support. However, critical documents establishing physical movement of goods — including delivery challans, road challans, and transportation details — were not produced.

Relying on the provisions of Section 68 of the Income Tax Act, 1961, and the ratio laid down in Nemi Chand Kothari v. CIT [2004] 136 Taxman 213 (Gau.), the AO concluded that the assessee had failed to discharge its burden of proving the genuineness and creditworthiness of the transaction. The amount was accordingly treated as unexplained cash credit and added to the total income, which was assessed at ₹9,17,97,553/–.

Note: A summons issued under Section 131 to M/s Ambika Ispat Udyog was returned unserved with the remark "Co. Abolished," which the AO relied upon as a further indicator of the bogus nature of the transaction.

CIT(A) Order for AY 2011-12

The CIT(A) upheld both the validity of the reopening and the addition made under Section 68. It observed that the assessee had provided only partial responses to the notices and had not furnished adequate documentary evidence to substantiate the genuineness of the transactions. The CIT(A) further noted that the Investigation Wing's findings pointed to layered fund transfers devoid of any physical movement of goods. Accordingly, the appeal was dismissed.

Assessee's Contentions Before the Tribunal

Before the Tribunal, the assessee's Authorized Representative argued that: