NAVDURGA TRANSPORT COMPANY,HYDERABAD vs. INCOME TAX OFFICER, WARD-7(1), HYDERABAD

Facts

The assessee firm deposited Rs. 2,54,59,579/- but failed to file an income tax return for AY 2017-18, prompting the AO to initiate reassessment under Section 147 and treat the amount as unexplained money under Section 69A. The CIT(A) upheld the reassessment's validity but remanded the case for the AO to verify if the amount was already taxed by a continuing partner. Separately, the AO, via a rectification order, applied the special tax rate of 60% under Section 115BBE, which the CIT(A) upheld, leading to an appeal concerning its applicability for AY 2017-18.

Held

For the reassessment validity appeal (ITA No. 218/Hyd/2025), the Tribunal dismissed the assessee's appeal, ruling that participation in proceedings cured notice defects under Section 148 as per Section 292BB, and the AO had valid reasons for initiation. For the Section 115BBE applicability appeal (ITA No. 219/Hyd/2025), the Tribunal held that the 60% special rate applies from AY 2018-19, not AY 2017-18. Therefore, the addition for AY 2017-18 should be taxed at the pre-amended normal rate of 30%, setting aside the CIT(A)'s order on this point and allowing this specific appeal.

Key Issues

1. Whether the reassessment proceedings initiated under Section 147 were valid despite the assessee's claim of improper service of notice under Section 148. 2. Whether the special tax rate of 60% under Section 115BBE is applicable to unexplained money under Section 69A for Assessment Year 2017-18.