INCOME TAX OFFICER, MUMBAI vs. DEEP KUTIR PRIVATE LIMITED, MUMBAI

ITA 4482/MUM/2026Status: DisposedITAT Mumbai30 September 2026AY 2013-1415 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal allowed the Cross-Objection filed by the assessee and dismissed the appeal filed by the Revenue. The Tribunal found that the reassessment proceedings were initiated beyond three years from the end of AY 2013-14. For invoking the extended period of limitation under section 149(1)(b), the material available with the AO must reveal that the income chargeable to tax which has escaped assessment amounts to, or is likely to amount to, Rs. 50 lakh or more. The statutory threshold is referable to the escaped income, not the gross value of the transaction. In this case, the actual profit from the transaction was Rs. 69,459. Even considering the sale transaction of Rs. 41,89,800 as the relevant amount (allegation of benefit from CCM), both figures are below the Rs. 50 lakh threshold. The AO's figure of Rs. 82,99,900 was an aggregation of purchase and sale values, which does not represent income chargeable to tax that escaped assessment. Therefore, the condition prescribed under section 149(1)(b) was not satisfied. Consequently, the assumption of jurisdiction for initiating reassessment proceedings was not in accordance with the limitation prescribed under section 149(1) of the Act. The reassessment proceedings, including the assessment order, were liable to be quashed. As the impugned reassessment proceedings were quashed on jurisdictional grounds, other grounds raised by the assessee and the Revenue were rendered academic and did not require adjudication.

What were the facts?

The Revenue appealed against the order of the CIT(A) for AY 2013-14, which had restricted an addition from Rs. 82,99,800 to Rs. 69,459. The original assessment order under section 147 r.w.s 144 was passed by the AO on 11.05.2023. The assessee, Deep Kutir Private Limited, a construction and real estate company also involved in commodity trading, filed its original return declaring Nil income. Reassessment proceedings were initiated under section 148. The AO proposed an addition of Rs. 82,99,800 for alleged client code modification (CCM) transactions, treating them as unexplained under section 69A. The assessee contended that the transactions were genuine commodity trading with an actual profit of Rs. 69,459, which was already offered to tax. The CIT(A) accepted the profit of Rs. 69,459 but rejected the assessee's challenge to reassessment proceedings.

What were the issues?

1. Whether the Revenue's appeal is maintainable despite the tax effect being below the monetary limit, due to the exception clause for tax evasion through organized syndicates providing accommodation entries (CBDT Circular No. 15/2024)? (Revenue's Ground 1) 2. Whether the CIT(A) erred in restricting the addition from Rs. 82,99,800 to Rs. 69,459, deleting the balance, by not appreciating that the entire transaction was a result of Client Code Modification (CCM) intended to generate fictitious profits? (Revenue's Ground 2) 3. Whether the CIT(A) erred in holding that Section 69A is not applicable to the total amount merely because the investment was recorded in the books, failing to recognize that 'incorporation in books' does not validate a transaction found to be an accommodation entry? (Revenue's Ground 3) 4. Whether the CIT(A) erred in not appreciating that once CCM transactions were identified as non-genuine, the entire credit of fictitious profit became taxable as unexplained income u/s 69A? (Revenue's Ground 4) 5. Whether the CIT(A) erred in not considering the assessee's failure to provide satisfactory explanation or documentary evidence for the commercial genuineness of trade timing and subsequent CCM? (Revenue's Ground 5) 6. Whether the reopening under section 148A(b) and consequential notice under section 148 are bad in law and require to be quashed? (Assessee's Ground I.1) 7. Whether the CIT(A) erred in holding reassessment proceedings under section 147/148 to be valid and summarily dismissing the assessee's ground? (Assessee's Ground I.2) 8. Whether the CIT(A) erred in considering the total buy and sell transaction of Rs. 82,99,800 as escapement of income against the profit element of Rs. 81,065, whereby any escapement is below the threshold of Rs. 50,00,000 for reopening beyond 3 years? (Assessee's Ground I.3) 9. Whether the reassessment under section 148 requires to be quashed? (Assessee's Ground I.4) 10. Whether the CIT(A) erred in not adjudicating Ground IV raised by the assessee regarding addition under section 68/69A? (Assessee's Ground II.1) 11. Whether the CIT(A) erred in not appreciating that Section 69A applies only where the appellant is the owner of money not recorded in books, and that Section 69A was inapplicable as the transaction and profit were recorded in audited books and offered to tax? (Assessee's Ground II.3) 12. Whether the CIT(A) erred in sustaining an addition of Rs. 69,459 under section 69A despite the income being part of audited accounts and return, leading to double addition? (Assessee's Ground III.1 & III.2) Assessee's Contentions: The reassessment proceedings under section 148A(b) and 148 are bad in law. The CIT(A) erred in upholding these proceedings. The total transaction value of Rs. 82,99,800 cannot be considered as escaped income for the purpose of the Rs. 50 lakh threshold for reassessment beyond three years, as the actual profit was Rs. 69,459. Section 69A is inapplicable as the transactions and profits were recorded in audited books and offered to tax, leading to a potential double addition. The AO initially proposed addition under section 68 but finally made it under section 69A. Revenue's Contentions: The appeal is maintainable under the exception clause of CBDT Circular No. 15/2024. The CIT(A) erred in restricting the addition and not appreciating that the entire transaction was a result of CCM to generate fictitious profits. The CIT(A) erred in holding Section 69A inapplicable merely because the investment was recorded in books. The CIT(A) failed to appreciate that once CCM transactions were found non-genuine, the fictitious profit became taxable u/s 69A. The assessee failed to provide satisfactory explanation for commercial genuineness.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A,Section 149(1),Section 149(1)(b),Section 69A,Section 68,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM

For Appellant: Shri Prasanna Tewari, Sr. DR
Pronounced: 30.09.2026

Heard together (2 matters)

I.T.A. No. 4482/Mum/2026
C.O. No.231/Mum/2026

Read from the judgment's own cause title. This page is filed under one of them.

Per Arun Khodpia, AM: The captioned appeal is preferred by the Revenue, directed against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal

ITA No. 4482/Mum/2026 & CO No. 231/Mum/2026 Deep Kutir Private Limited Centre (NFAC), Del

The order continues below.

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