MONGIA STEEL LIMITED,GIRIDIH vs. ACIT, C.C., DHANBAD

ITA 288/RAN/2025Status: DisposedITAT Ranchi21 April 202620 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings initiated under Section 148 of the Act were invalid in law due to vague reasons recorded, which failed to specify the exact charging provision under which income was alleged to have escaped assessment. This vagueness deprived the assessee of an effective opportunity to defend itself, aligning with the jurisdictional High Court's decision in Pasari Casting And Rolling Mills (P.) Ltd. vs. ITO. Furthermore, on merits, the Tribunal found that the assessee had discharged its initial onus under Section 68 by establishing the identity, genuineness, and creditworthiness of the share applicant. The Tribunal noted that the share application money received from M/s Smart Tradecomm Pvt Ltd had been accepted in earlier years without any change in the transaction's nature or specific adverse findings by the Assessing Officer. The Tribunal also considered the financial statements of the share applicant and the assessee, which supported the source of investment and the need for share capital, respectively. Consequently, the addition of ₹4,99,00,000 made by the Assessing Officer under Section 68 was held to be unsustainable and was deleted. The same reasoning was applied to the appeal for AY 2014-15.

What were the facts?

The assessee, Mongia Steel Limited, is challenging orders from the CIT(Appeals) for Assessment Years 2013-14 and 2014-15. These appeals stem from reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961, following a search and seizure operation on the assessee group. The Assessing Officer added ₹4,99,00,000 to the assessee's income under Section 68 as unexplained cash credit, representing share capital and premium received from M/s Smart Tradecomm Private Limited. The assessee argued that the share applicant was a group company, and similar transactions in prior years were accepted. The CIT(Appeals) confirmed the addition, leading to the present appeals before the Tribunal.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 148 of the Act are legally sustainable, given that the reasons recorded did not specify the exact charging provision (Sections 68, 69, 69A, 69B, etc.) under which income allegedly escaped assessment, thereby rendering the reopening vague and depriving the assessee of an effective defense, as argued by the assessee citing Pasari Casting And Rolling Mills (P.) Ltd. vs. ITO. The assessee also contended that the approval under Section 151 was mechanical and lacked application of mind. The revenue did not record any specific arguments on this issue. 2. Whether, on merits, the addition of ₹4,99,00,000 under Section 68 of the Act as unexplained cash credit is justified, considering the assessee's submission that M/s Smart Tradecomm Private Limited is a group company, a pre-existing shareholder, and that similar transactions in earlier years were accepted, with no fresh funds introduced by the applicant company, and all transactions were through banking channels and duly reflected in audited books, thus adhering to the principle of consistency, as argued by the assessee. The revenue did not record any specific arguments on this issue.

Which sections of the Income-tax Act were involved?

Section 148,Section 68,Section 143(2),Section 149(1)(b)(iii),Section 151,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH-RANCHI

Before: Shri Sonjoy Sarma & Shri Ratnesh Nandan Sahay

Per Sonjoy Sarma, Judicial Member:

The captioned appeals filed by the assessee are directed against he separate orders both dated 04.07.2025 of the CIT(Appeals)-3, Patna (hereinafter referred to as “ld. CIT(A)”) passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). Since both he captioned appeals were filed by the same assessee and involve common issues, except variation in assessment years and figures, they

were heard together and are being disposed of by this common order for he sake of convenie

The order continues below.

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