M/s. Auto Ignition Limited, New Delhi V. DCIT, New Delhi

ITA 2537/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6965 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANIL MALHOTRA
• Keywords: Opportunity of being heard; Principle of natural justice; Condonation of delay; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2537/DEL./2014 (ASSESSMENT YEAR : 2007-08) M/S. AUTO IGNITION LIMITED, VS. DCIT, CIRCLE 2 (1) , C/O M/S. WAHI & CO., NEW DELHI. K 1, KAILASH COLONY, NEW DELHI 110 048. (PAN : AAAFI1856J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL MALHOTRA, CA REVENUE BY : SHRI S.K. JAIN, SENIOR DR DATE OF HEARING : 11.01.2017 DATE OF ORDER : 16.01.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. AUTO IGNITION LIMITED (HEREINA FTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 31.10.2012, PASS ED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, NEW DELHI U NDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (FOR SHO RT THE ACT) ALONG WITH APPLICATION FOR CONDONATION OF DELAY OF 481 DAYS, QUA THE ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTER AL IA THAT :- THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ARBITRARY ADDITIONS MADE BY THE LD. OCIT ON THE PLEA THAT A SOLO NOTICE DATED 09.10.2012 FIXING THE HEARING ON 26.10.2012 WAS RETURNED BY POSTAL AUTHORITIES. ITA NO.2537/DEL./2014 2 THE ORDER PASSED BY THE HON'BLE C!T(A) IS UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1) GROUNDS OF APPEAL NO.1 EXCESS REMUNERATION PAID TO MANAGING DIRECTOR OF TH E COMPANY AMOUNTING TO RS.19,26,105/- THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN MAINTAINING THE DISALLOWANCE MADE BY THE LD. A.O. ON THE MANAGE RIAL REMUNERATION PAID TO MANAGING DIRECTOR OF RS.19,26 ,105/- WHEREAS, THE REMUNERATION WAS PAID TO THE MANAGING DIRECTOR REWARDING HIS PERFORMANCE AND THE APPROVAL FROM COM PANY LAW BOARD WAS PENDING. HOWEVER, THE SAME WAS SHOWN AS I NCOME BY THE MANAGING DIRECTOR IN HIS INCOME TAX RETURN PAYI NG MAXIMUM RATE OF INCOME TAX. THEREFORE, THE DISALLOWANCE UPHELD BY THE HON'BLE C IT(A) IS ARBITRARY, UNLAWFUL AND PRAYED TO BE ALLOWED. 2) GROUNDS OF APPEAL NO.2 ADDITION OF RS.14,73,104/- ON ACCOUNT OF INTEREST N OT PROVIDED BY THE ASSESSEE COMPANY ON LOAN GIVEN TO A SUBSIDIARY COMPANY WHICH HAS CLOSED ITS OPERATIONS THE HON'BLE CIT (A) HAS ERRED IN LAW AND ON FACTS I N MAINTAINING THE ADDITION OF RS. 14,73,104/- MADE BY THE LD. A. O. ON ACCOUNT OF NON PROVIDING OF INTEREST ON LOAN TO SUBSIDIARY COMPANY WHICH HAS CLOSED ITS OPERATION. IN OTHER WORDS, THE LOAN WAS GIVEN TO SUBSIDIARY CO MPANY OF THE ASSESSEE WHICH HAS CLOSED ITS OPERATION AND THE AMO UNT WAS NOT RECOVERABLE. THEREFORE, NO INTEREST INCOME WAS BOOK ED BY THE ASSESSEE ON THE AMOUNT OF LOAN WHICH WAS NOT RECOVE RABLE, AS THERE IS NO POINT TO CREATE AN INCOME WHICH IS NOT RECOVE RABLE. THEREFORE, THE ADDITION UPHELD BY THE CIT(A) IS ARB ITRARY, UNJUSTIFIED AND PRAYED TO BE DELETED IN FULL. 3) THE ASSESSEE COMPANY CRAVES MERCY TO ADD/ AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. BRIEFLY STATED FACTS OF THIS CASE ARE : THE ASSE SSEE IS INTO THE BUSINESS OF MANUFACTURING OF AUTO ELECTRICAL PARTS BEING SUPPLIED IN DOMESTIC AS WELL AS EXPORT MARKET. DURING SCRUTINY PROCEEDINGS, ITA NO.2537/DEL./2014 3 ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDE R ASSESSMENT, ASSESSEE DECLARED GROSS PROFIT RATIO AT 13.17% AGAI NST THE TOTAL TURNOVER OF RS.1567.63 LAKHS AS COMPARED TO THE GRO SS PROFIT RATE OF 14.12% OUT OF THE TOTAL TURNOVER OF RS.12016.06 LAK HS IMMEDIATELY IN THE PRECEDING YEAR. AO ALSO NOTICED THAT DURING THE YEAR UNDER ASSESSMENT, REMUNERATION HAS BEEN PAID TO THE MANAG ING DIRECTOR AND WHOLE-TIME DIRECTOR IN EXCESS OF THE LIMIT PRES CRIBED UNDER SECTION 198 AND 309 OF THE COMPANIES ACT TO THE EXT ENT OF RS.22,91,309/-. ON FAILURE OF THE ASSESSEE TO EXPL AIN, THE AO DISALLOWED THE REMUNERATION PAID TO THE MANAGING DI RECTOR OF RS.19,26,105/-. AO ALSO NOTICED FROM THE AUDIT REP ORT THAT THE COMPANY HAS GRANTED LOAN TO A COMPANY COVERED IN TH E REGISTER MAINTAINED UNDER SECTION 301 OF THE COMPANIES ACT, 1956 AND THE MAXIMUM AMOUNT INVOLVED DURING THE YEAR WAS RS.2,78 ,67,338/- AND IN THE AUDIT REPORT, IT IS POINTED OUT THAT OUT OF THE TOTAL LOAN, AN AMOUNT OF RS.29,25,679/- COULD NOT BE RECOVERED DUR ING THE YEAR INCLUDING INTEREST OF RS.14,73,193/-. FINDING THE REPLY FILED BY THE ASSESSEE NOT SATISFACTORY, THE AO MADE AN ADDITION OF RS.14,73,193/- ON ACCOUNT OF INTEREST TO THE TAXABL E INCOME AND ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.2,3 1,77,920/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO DISMISSED THE APPEAL EX-PARTE . FEELING ITA NO.2537/DEL./2014 4 AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE BY RELYING UPON THE AFFI DAVIT FILED BY SHRI T.R. BANSAL, R/O HOUSE NO.1025, SECTOR 28, FAR IDABAD CONTENDED THAT THE DELAY OF 481 DAYS IN FILING THE APPEAL IS DUE TO THE REASON THAT SHRI R.K. SARINE, THE CHAIRMAN OF T HE COMPANY AND INCHARGE OF INCOME-TAX AFFAIRS, AGED 77 YEARS, WAS A HEART PATIENT AND WAS SERIOUSLY SICK AND FINALLY EXPIRED ON 24.07 .2013 AND AFTER HIS DEMISE, SHRI R.K. SARINE, HIS GRANDSON, TOOK OV ER THE AFFAIRS OF THE COMPANY. 6. ON THE OTHER HAND, LD. DR FOR THE REVENUE CONTEN DED THAT AS MANY AS 8 EFFECTIVE OPPORTUNITIES WERE GIVEN TO THE ASSESSEE BY WAY OF ISSUING NOTICE WHICH RECEIVED BACK UNSERVED WITH THE REMARKS THAT NO SUCH COMPANY IS IN EXISTENCE. 7. WE ARE OF THE CONSIDERED VIEW THAT WHEN CONTINUO US WORKING OF THE ASSESSEE COMPANY SINCE FILING OF APP EAL BEFORE THE TRIBUNAL IS NOT IN DISPUTE, THE SERVICE OF NOTICE F OR WANT OF COMPLETE ADDRESS IS NOT BELIEVABLE. MOREOVER, THE REASON FOR DELAY ITA NO.2537/DEL./2014 5 IN FILING THE APPEAL ON ACCOUNT OF SICKNESS AND DEA TH OF SHRI R.K. SARINE, CHAIRMAN OF THE COMPANY, WHO WAS LOOKING AF TER THE INCOME-TAX AFFAIRS OF THE ASSESSEE COMPANY IS A GEN UINE REASON SUFFICIENT TO CONDONE THE DELAY. TO ADVANCE THE CA USE OF JUSTICE, WE HEREBY CONDONE THE DELAY OF 481 DAYS IN FILING T HE APPEAL SUBJECT TO PAYMENT OF COST OF RS.10,000/- TO THE RE VENUE. 8. AT THE SAME TIME, WE ARE OF THE CONSIDERED VIEW THAT WHEN LD. CIT (A) HAS MERELY PROCEEDED TO DISMISS THE APP EAL FOR WANT OF PROSECUTION BY APPLYING THE DECISION RENDERED BY IT AT, DELHI BENCH CITED AS CIT VS. MULTIPLAN INDIA (P) LTD. 38 ITD 320 (DEL.) , THE ASSESSEE IS REQUIRED TO BE PROVIDED AN OPPORT UNITY OF BEING HEARD. SO, THE PRESENT APPEAL IS ALLOWED AND MATTER IS RESTORED TO THE FILE OF THE LD. CIT (A) TO DECIDE A FRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. 9. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE ST ANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 16 TH DAY OF JANUARY, 2017 TS ITA NO.2537/DEL./2014 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-V, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.