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Facts
The assessee, a private limited company engaged in transport contracts, failed to file its ROI for AY 2013-14. The AO, relying on Form 26AS, estimated income based on contract receipts and interest income. The assessee contended that the reassessment notice u/s 148 was issued after the limitation period.
Held
The Tribunal held that the reassessment notice u/s 148 was validly issued on 31.03.2021. Regarding the grounds related to gross receipts and net profit, the Tribunal found the AO's estimation to be on the higher side and directed the AO to recompute income based on Form 26AS receipts at a net profit rate of 0.50%.
Key Issues
1. Validity of reassessment notice u/s 148 issued on 31.03.2021 versus the amended provisions of the Finance Act, 2021. 2. Correct estimation of gross receipts and net profit rate in the transport business.
Sections Cited
147, 148, 144, 194C, 194A, 250, 142(1), 148A, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The present appeal has been instituted by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act dated 25.01.2025. The assessee in the memo of appeal has raised as many as 11 grounds, which, we for the sake of brevity and convenience, are not inclined to reproduce here.
At the outset, we note that the ground No. 1 raised by the assessee is general in nature and does not call for adjudication. Hence, the same is dismissed as being infructuous.
Ground No. 2 and 3 are interconnected and pertains to assessment made u/s 147 of the Act.
The relevant facts are that the assessee, a private limited company, engaged in the business of execution of transport contract, failed to file its ROI for the captioned AY. The case of assessee was selected for scrutiny under NMS category. During the assessment proceedings, the assessee neither filed its ROI in response to notice issued u/s 148 of the Act nor made any written submissions against the notices issued u/s 142(1) of the Act. The AO thereafter completed the assessment u/s 147 read with section 144 of the Act on the basis of the information available on record. In the absence of any response from the assessee, the AO relied primarily on the information reflected in Form 26AS.
On examination of Form 26AS, the AO observed that the assessee had received contract receipts on which TDS was deducted u/s 194C from the following parties:
Particulars Section Amount (Rs.) Ultratech Cement 194C 12,41,23,184 Vasavadatta Cement 194C 5,68,01,670 . Total 18,09,24,854
Considering the above receipts of Rs. 18,09,24,854 reflected in Form 26AS, the AO proceeded to estimate the income of the assessee by applying a profit rate of 2.44 percent, which was adopted based on the assessee’s earlier return of income for AY 2010–11. By applying the said profit rate, the AO computed the business income of the assessee at Rs. 44,14,566.00 only.
Further, the AO also noticed that as per Form 26AS the assessee had received interest income of Rs. 41,775 from Vasavadatta Cement, on which tax had been deducted u/s 194A of the Act. The said amount was also treated as income and added to the total income of the assessee. Accordingly, the total addition made by the AO aggregated to Rs. 44,56,341.00 only.
Aggrieved, assessee preferred an appeal before the Ld. CIT(A).
Before the Ld. CIT(A), the assessee submitted that the order passed by the AO u/s 147 is bad in law as the same is being barred by time. The last date to issue notice for AY 2013-14 u/s 148 of the Act, considering the TOLA provisions, was 31.03.2021. However, the notice was issued on 01.04.2021.
9.1 However, the Ld. CIT(A) dismissed the plea of assessee by submitting that the assessee did not furnish any substantial evidence in support of its grounds of appeal and upheld the order of the AO.
Being aggrieved by the order of the ld. CIT-A, the assessee preferred an appeal before us.
The Ld. AR before us filed a paper book running from pages 1 to 156, which contains, inter alia, the orders of the lower authorities, compilation of case laws relied upon by the assessee, and screenshots of the ITBA portal. Referring to the screenshots placed in the paper book, the Ld. AR contended that the notice u/s 148 was issued on 01.04.2021. The Ld. AR therefore argued that since the notice was issued after 01.04.2021, the reassessment proceedings ought to have been initiated only in accordance with the amended provisions introduced by the Finance Act, 2021, particularly the procedure prescribed u/s 148A of the Act. According to the Ld. AR, the AO has issued the notice by invoking the unamended provisions of section 148A of the Act, without following the mandatory procedure laid down under the amended law. Hence, it was contended that the impugned reassessment proceedings are invalid in law and liable to be quashed. The assessee also relied on various judicial precedents including Union of India vs. Ashish Agarwal reported in [2022] 138 taxmann.com 64 (SC)/[2022] 286 Taxman 183 (SC)/[2022] 444 ITR 1 (SC)[04-05-2022]
The Ld. DR, on the other hand, submitted that the impugned notice u/s 148 of the Act was issued on 31 March 2021 at 6:38 PM. It was contended that under the ITBA system, once the notice is generated, it is generally transmitted automatically to the assessee through the registered e-mail. However, due to certain technical glitches in the server, the date of service or transmission may sometimes appear as the subsequent date even though the notice was generated and . issued on the earlier date. To substantiate the said contention, the Ld. DR placed reliance on a screenshot of the ITBA portal, wherein the date of issuance of the notice is clearly reflected as 31 March 2021. The Ld. DR therefore submitted that the notice was issued within the prescribed limitation period. The Ld. DR also placed on record a duly notarised affidavit in this regard.
11.1 The Ld. DR further relied upon the judgment of the Malavika Enterprises v. Central Board of Direct Taxes reported in [2022] 137 taxmann.com 398 (Madras) / [2022] 287 Taxman 693 (Madras) / [2022] 445 ITR 651 (Madras) dated 29-03-2022. It was submitted that in the said case, on similar facts, the Hon’ble Madras High Court held that where the notice was generated and issued on 31 March 2021, the same would be regarded as a valid notice under the unamended provisions of section 148 of the Act, even if the communication or service of the notice occurred subsequently. The Ld. DR therefore contended that the notice issued in the present case is valid in law.
We have carefully considered the rival submissions of both the parties and perused the materials available on record including the judgments relied by both the parties. The short controversy before us is whether the notice u/s 148 of the Act for AY 2013-14 can be said to have been validly issued on 31.03.2021 under the unamended law, or whether it must be treated as a notice issued on 01.04.2021 so as to attract the amended provisions introduced by the Finance Act, 2021. On a careful consideration of the factual matrix and the legal position, we are unable to accept the contention of the assessee.
12.1 In the present case, the Revenue has placed on record the screenshot of the ITBA portal showing that the notice u/s 148 was issued on 31.03.2021 at 6:38 PM. The Ld. DR has specifically submitted that under the ITBA system, once the notice is generated, it is ordinarily transmitted automatically through the registered e-mail system, and owing to server latency or technical issues, the time of delivery or reflection in the assessee’s inbox may appear on the following date. In our considered view, this explanation is in consonance with the manner in which electronically generated notices are issued in the faceless and ITBA environment. The assessee has relied upon the date of receipt reflected in its records but has not produced any material to establish that the notice was not digitally generated, authenticated, and pushed outside the control of the AO on 31.03.2021 itself.
12.2 The issue, in our view, is squarely covered against the assessee by the judgment of the Hon’ble Madras High Court in Malavika Enterprises vs. CBDT (Supra). In that case also, the notice dated 31.03.2021 was stated to have been received by the assessee only on the subsequent date, and the assessee contended that the amended law effective from 01.04.2021 ought to apply. The Hon’ble High Court rejected the said contention and held in clear terms that the statutory requirement is of issuance of notice and not of its receipt by the assessee. The Hon’ble High Court further held that in the case of electronic communication, once the notice is generated and authenticated in terms of Rule 127A and transmitted electronically, it has to be regarded as issued on that date. The Hon’ble Court also emphasized that the word used in the statute is “issued” and the same cannot be substituted by “received”. The ratio of the said decision, in our . considered opinion, applies to the facts of the case before us. The relevant extract of the judgment is reproduced below: “Coming to the facts of the case, it is stated that notice u/s 148 of the Act of 1961 is said to have been issued on 31-3-2021 for the assessment year 2013-2014, followed by consequential notices. It is the case of the petitioner that the notice is said to have been issued vide email at 6.42 pm, but was served on 1-4-2021 at 2 am and, therefore, the unamended provision of section 148 of the Act of 1961 would not be applicable to the case. However, the notice dated 31-3-2021 has been issued under the unamended provision, i.e. the old provision of section 148 of the Act of 1961, as it stood prior to 1-4-2021 and, therefore, is liable to be set aside.”
12.3 Besides and in view of the above, the reliance which was sought to be placed by the assessee on the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal, in our humble view, is misplaced. The said judgment dealt with an entirely different class of cases, namely reassessment notices issued on or after 01.04.2021 under the old, unamended provisions, relying upon the extended notifications. The Hon’ble Supreme Court itself proceeded on the basis that those notices were issued after the new law had come into force and, therefore, should be treated as deemed show-cause notices u/s 148A(b) as a one-time measure. The very foundation of the decision in Ashish Agarwal was that the impugned notices belonged to the post-01.04.2021 period. In the present case, once the notice is held to have been issued on 31.03.2021, the occasion to invoke the principle laid down in Ashish Agarwal case does not arise at all. Therefore, the said decision does not assist the assessee.
12.4 Accordingly, on the facts of the present case, we hold that the notice u/s 148 of the Act was validly issued on 31.03.2021 under the . unamended provisions of the Act. The mere fact that the assessee claims to have received the same on 01.04.2021 does not invalidate the notice nor does it attract the substituted procedure under the Finance Act, 2021. We therefore reject the legal ground raised by the assessee challenging the validity of reassessment proceedings on this count. Hence, this ground of appeal of the assessee is hereby dismissed.
13. Ground No. 4 relate to the best judgment assessment framed by the AO u/s 144 of the Act.
14. At the outset, we note that, at the time of hearing, the assessee did not make any submission with respect to the aforesaid ground. Hence, the same is dismissed as infructuous.
15. Ground Nos. 5 to 9 are interconnected and relates to alleged gross receipts and rate of net profit from the activity of transportation business.
The relevant facts are that the AO completed the assessment u/s 147 read with section 144 of the Act by relying upon the information available in Form 26AS. Based on the gross contract receipts reflected therein amounting to Rs. 18,09,24,854, the AO estimated the net profit at 2.44 percent and computed the total income of the assessee at Rs. 44,56,341.00 only.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted various documents in support of his contentions, including the . online generated Form 26AS for the relevant assessment year, financial statements along with schedules, ledger account of transportation bills, bank statements of Axis Bank, Canara Bank and HDFC Bank, as well as statements of account issued by Ultratech Cement Limited and Kesoram Industries Limited, comparable cases of other companies etc.
However, the Ld. CIT(A), without properly considering the submissions and documents furnished by the assessee, dismissed the appeal of the assessee in its entirety and sustained the additions made by the AO. The ld. CIT-A passed ex-parte order as there was no representation by the assessee.
Aggrieved by the order of the Ld. CIT(A), the assessee has preferred the present appeal before us.
The Ld. AR before us submitted that during the relevant assessment year the assessee had undertaken transport contracts for Ultratech Cement Ltd. and Kesoram Industries Ltd. The assessee explained that he was not operating the transport business through owned vehicles but was executing the contracts by engaging motor lorries available in the open market on a lease or hire basis. The assessee also submitted that the AO has taken a rate of 2.44% for previous year returns filed by assessee, wherein the assessee was owning the transportation vehicles hence, the higher net profit percentage was linked to this fact.
20.1 The Ld. AR further submitted that in the transport industry the margin of net profit varies depending upon the nature of ownership and . operation of vehicles. It was contended that where a transporter owns the vehicles and executes the contracts through such vehicles, the net profit normally ranges between about 2.15 percent to 2.35 percent. In cases where the transporter operates partly through owned vehicles and partly through leased vehicles, the net profit margin generally ranges between 1.75 percent to 1.90 percent. However, in cases where the transport contract is executed entirely by hiring third-party motor vehicles from the market, the net profit margin is significantly lower and usually remains below 0.05 percent.
20.2 On the basis of the above industry trend, the Ld. AR contended that the AO was not justified in adopting a net profit rate of 2.44 percent while estimating the income of the assessee. It was further submitted that even the figure of gross receipts of Rs. 18,09,24,854 adopted by the AO is incorrect and without any proper basis. The Ld. AR pointed out that as per the books of account of the assessee placed at page 39 of the appeal set, the gross receipts from transport activity amounted to Rs. 5,97,43,044.00 only.
20.3 Further, referring to the Form 26AS placed at page 27 of the appeal set for the relevant assessment year 2013–14, the Ld. AR submitted that the receipts reflected therein show payments of Rs. 3,16,57,096 from Ultratech Cement Ltd. and Rs. 2,84,20,722 from Kesoram Industries Ltd., aggregating to Rs. 6,00,78,818.00 only. It was therefore contended that the gross receipts adopted by the AO are factually incorrect and have been arrived at merely on the basis of conjectures and assumptions.
20.4 In order to substantiate the prevailing profit margin in the transport industry, the Ld. AR also placed reliance on three comparable cases to demonstrate that the net profit margin in cases where transport contracts are executed through hired vehicles is substantially lower than the rate adopted by the AO. The comparables cases are as follows: (a) M K Transport Company (Leased Vehicles from Market): Less than 1% net profit AY Receipts GP NP GP% NP% 2011-12 2,19,90,967 11,65,576 29,005 5.30% 0.13% 5.07% 0.11% 2011-12 1,89,57,382 9,61,254 21,030 6.64% 0.16% 2012-13 1,27,56,093 8,47,219 20,363 2013-14 1,26,27,599 9,57,798 27,011 7.58% 0.21% (b) In Case of Own Vehicles: No comparables available (c) Santosh Lorry Transport (In case of owned plus leased vehicles): Less than 2.05% net profit AY Receipts GP NP GP% NP% 2010-11 2,10,21,360 16,01,960 4,31,693 7.62% 2.05% 2011-12 2,04,89,270 18,23,613 2,35,833 8.90% 1.15% 1.58% 2012-13 1,02,69,737 - 1,62,296 - 2013-14 1,04,72,438 15,17,503 2,11,017 14.49% 2.01% 14.38% 0.97% 2014-15 1,06,75,548 15,35,148 1,03,595 (d) Manoj Transport (In case of owned plus leased vehicles): Less than 2.33% net profit AY Receipts GP NP GP% NP% 2010-11 2,03,01,667 16,34,634 4,72,504 8.05% 2.33% 2011-12 2,06,09,050 16,60,767 2,44,660 8.06% 1.19% 7.28% 1.04% 2012-13 2,49,46,016 18,16,705 2,59,269 2013-14 3,49,17,734 25,81,825 5,82,878 7.39% 1.67% 8.85% 1.79% 2014-15 4,14,97,566 36,70,820 7,40,916 .
On the Contrary, the Ld. DR supported the orders of the lower authorities and submitted that the assessee failed to produce the relevant books of account or supporting evidence before the AO despite several opportunities. In such circumstances, the AO was justified in completing the assessment u/s 144 of the Act and estimating the income on the basis of information available in Form 26AS. The Ld. DR further submitted that the profit rate adopted by the AO was based on the assessee’s own past return and therefore cannot be said to be arbitrary. It was also contended that the documents now relied upon by the assessee were not properly substantiated before the AO and hence cannot be relied upon to disturb the estimation made in the assessment order. Accordingly, it was prayed that the order of the ld. CIT(A) be upheld.
We have carefully considered the rival submissions of both the parties and perused the materials available on record. The issue for our consideration in these grounds relates to the determination of gross receipts and estimation of net profit in the case of the assessee. From the assessment order, we find that the AO has adopted the gross contract receipts at Rs. 18,09,24,854 and applied a net profit rate of 2.44 percent to compute the income of the assessee. However, on a careful examination of the records, we find that the assessment order does not clearly demonstrate the basis on which the figure of Rs. 18,09,24,854 has been arrived at. The AO has not brought any supporting material or documentary evidence on record to establish that the assessee had in fact received contract receipts to the extent of Rs. 18.09 crores during the relevant assessment year.
22.1 On the other hand, the assessee has placed reliance on the Form 26AS for the relevant assessment year, which reflects receipts from Ultratech Cement Ltd. and Kesoram Industries Ltd. The details available in Form 26AS show that the receipts from Ultratech Cement Ltd. amounts to Rs. 3,16,57,096 and the receipts from Kesoram Industries Ltd. amounts to Rs. 2,84,21,722, aggregating to Rs. 6,00,78,818.00. Since Form 26AS is an official record generated from the departmental system reflecting payments on which tax has been deducted at source, in the absence of any contrary evidence brought on record by the Revenue, we consider it appropriate to rely upon the receipts reflected therein for the purpose of determining the income of the assessee.
22.2 As regards the estimation of profit, the assessee has explained that the transport contracts were executed by hiring third-party motor vehicles from the open market and not through owned vehicles. The assessee has also brought on record the prevailing industry trend to demonstrate that in cases where transport contracts are executed entirely through hired vehicles, the profit margin is extremely less. In order to substantiate the same, the assessee also placed on record comparable cases in this regard. Considering the nature of the business activity carried on by the assessee and the explanation placed on record regarding the operational model followed by the assessee, we are of the view that the profit rate of 2.44 percent adopted by the AO is on the higher side and does not reflect the realities of such business.
22.3 During the appellate proceedings, the assessee had placed on record certain comparable cases to show the normal profit margin in the transport business. However, on perusal of the order of the Ld. CIT(A), . we find that no discussion has been made regarding these comparable cases furnished by the assessee. The Ld. CIT(A) has neither examined the financial details placed on record nor given any reasons for not accepting the same.
22.4 In our view, once the assessee had produced these comparable cases, the Ld. CIT(A) ought to have examined them before confirming the estimation made by the AO. If the Ld. CIT(A) had any doubt about the correctness of these comparables, he could have verified the same by issuing notices to the concerned parties or by calling for necessary information. However, without carrying out any such verification and without giving any reasons for rejecting the comparables, the Ld. CIT(A) simply confirmed the estimation made by the AO. This approach, in our considered view, is not proper.
22.5 Taking into account the nature of the business carried on by the assessee and the material placed on record, we are of the view that the net profit rate adopted by the AO is on the higher side. At the same time, we also note that the assessee was not cooperative during the course of assessment proceedings and failed to respond to the statutory notices issued by the department.
22.6 Considering the overall facts and circumstances of the case, and in order to put an end to the dispute between the parties, we deem it reasonable to estimate the income of the assessee by applying a net profit rate of 0.50 percent on the gross receipts reflected in Form 26AS amounting to Rs. 6,00,78,818.00. Accordingly, we hold that the income of the assessee for the year under consideration shall be computed by . applying the net profit rate of 0.50 percent on the receipts of Rs. 6,00,78,818, and the addition sustained by the Ld. CIT(A) is modified to that extent. The AO is accordingly directed to recompute the income of the assessee by applying the net profit rate of 0.50 percent on the aforesaid receipts and give effect to this order while passing the consequential order in accordance with law. This ground is allowed for statistical purposes.
Ground No. 10 relates to the levy of interest u/ss 234A, 234B and 234C of the Act.
We note that these issues being consequential and mandatory in nature, the AO is directed to recompute the interest, if any, while giving effect to this order. Accordingly, this ground of appeal of the assessee is disposed of as consequential.
In the result, the appeal of assessee is hereby partly allowed for statistical purposes.
Order pronounced in court on 12th day of March, 2026