Sahanu Sponge and Power Private Limited Vs ITO (ITAT Panaji)
Panaji ITAT Quashes ₹17.95 Crore Reassessment as Time-Barred: Post-Rajeev Bansal, Section 148 Notice Had to Be Issued Within “Surviving Period”
The Panaji ITAT in Sahanu Sponge and Power Pvt. Ltd. v. ITO dealt with reassessment for AY 2014-15, arising from information gathered during a DGCEI investigation alleging unaccounted purchases of MS ingots/billets used for manufacture and unaccounted cash sales of TMT bars. The AO ultimately made an addition of ₹17.95 crore under section 69C towards alleged unexplained/unaccounted purchases.
The decisive issue before the Tribunal was limitation under sections 148/149 in light of the Supreme Court’s decision in Union of India v. Rajeev Bansal. The original notice under the old regime had been issued on 29 June 2021. Consequently, only two days of the limitation period survived. Thereafter, pursuant to Ashish Agarwal, notice under section 148A(b) was issued on 25 May 2022 and the assessee replied on 6 June 2022.
The ITAT held that even after giving the Revenue the benefit of extending the surviving period of two days to seven days, the order under section 148A(d) and notice under section 148 ought to have been issued on or before 13 June 2022. They were actually issued only on 29 July 2022. The notice was therefore clearly time-barred, the AO never validly assumed jurisdiction, and the entire reassessment along with the ₹17.95 crore addition was quashed.
Interestingly, despite quashing the reassessment, the Tribunal proceeded to decide the merits academically. It found that the alleged ₹1.51 crore unaccounted purchases from Mohit Steels Ltd. were wrongly computed, as the AO had apparently taken figures pertaining to another assessment year.
For the remaining alleged unaccounted purchases of ₹16.44 crore, the ITAT observed that the goods were ultimately sold through unaccounted sales. Since the same suppliers were regular suppliers and substantial accounted purchases from them had already been accepted, the entire purchases could not effectively be brought to tax; only the profit element embedded in the transactions could be taxed. The Tribunal also invoked the rule of consistency, noting that in AY 2016-17 the Department itself had taxed only the profit on similar unaccounted purchases/sales.
Accordingly, the ITAT held that, even on merits, only 4.50% of ₹16,44,09,773 = ₹73,98,440 could have been added, instead of ₹17.95 crore. However, this computation remained academic because the entire reassessment itself had already been quashed as time-barred.
