NEO INCORPORATION,RAJKOT vs. DCIT CIRCLE- 1(2), RAJKOT, RAJKOT

I have heard, both the parties on this preliminary issue. I note that main reason for delay in filing the appeal, was severe dispute among the partners and eventually the partnership- firm closed its business with effect from assessment year 2016–17. There was no active partner to handle taxation matters. Besides, the tax consultant appointed by the assessee-firm did not inform about the status of passing the order by the learned CIT(A) and did not handle the taxation matters properly. Therefore, I am of the view that because of the mistake of the tax consultant, the assessee-firm should not be penalised, for this reliance is placed on the decision of I.T.A.T., 'C' Bench, Kolkata in the case of M/s. Garg Bros. Pvt. Ltd. & Others vs. DCIT [ITA Nos.2519 to 2521/Kol/2017, order dated 18.04.2018], wherein under similar set of facts and reasons, the Hon'ble Tribunal was pleased to condone the delay of 211 days by holding as under: "3. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the application for condonation of delay, we are of the considered opinion that assessee was under a bona fide belief that the impugned order of Pr. CIT was not appealable before this Tribunal since they were not advised by their Tax Consultants about this legal right. Later on, when a Senior Lawyer advised them to file an appeal, the assessees immediately took steps to file the appeals. Therefore, the delay caused. We note that delay was occurred because of the wrong advice of the Tax Professional for which assessees cannot be penalized. For the ends of justice, we condone the delay and admit the appeal for hearing”. 5. On professional advice, I note that the Courts and Tribunals have consistently held that in the matter of condonation of delay, pragmatic and liberal approach should be taken. The Hon'ble Supreme Court also held the same in case of Investment Trust v. Ujagarsingh observing that unless mala fide or negligence writ large, delay should be condoned and appeals should not be rejected on technical ground of delay and they should be ordinarily decided on merits. The Hon'ble Gujarat High Court has also considered this aspect of condonation of delay in case of Gujarat State Fertilizers & Chemicals Ltd. (283 ITR 149) and held that... "The position in law is well settled that an assessee should be granted due relief where it is due without standing on technicalities and the revenue must bear the established legal position in mind while dealing with applications seeking condonation of delay. It is necessary that liberal approach is adopted in such a matter so as to ensure that substantive rights are not defeated on the basis of technicalities or limitation. "

I note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, I am of the considered opinion that in the interest of justice, the delay deserves to be condoned. I, accordingly, I condone the delay.

The relevant material facts, as culled out from the material on record, are as follows. The assessee-firm filed return of income on 29.08.2012, declaring a total income of Rs. 36,79,520/-. The return of income was processed u/s. 143(1) of the Income Tax Act. Subsequently, assessment u/s 143(3) of the Act was completed in the case vide order dated 17.02.2015 by accepting the returned income. Further, information was received from the Investigation Wing that search carried out in Bhanwarlal Jain group of cases revealed that Malhar Export was a bogus concern of the group engaged in the activity of providing bogus accommodation entry in the form of unsecured loan. Since, the assessee was beneficiary of such loan from Malhar Exports to the tune of Rs. 41,83,748/-, therefore, the case of the assessee, was reopened by issue of notice u/s 148 of the Income Tax Act dated 26.10.2016 which was duly served upon the assessee. In response to the said notice, the assessee vide letter dated 28.10.2016 stated that the original return may be treated as return filed in response to notice u/s 148 of the Act. During the assessment proceedings, the assessing officer issued show cause notice to the assessee to explain the transaction and submit the relevant documents and evidences to prove the genuineness of the transaction.

In response to the notice of the assessing officer, the assessee submitted written submission along with documentary evidences before the assessing officer. The assessee submitted copy of Income Tax Return, Bank statement, Confirmations, and bank statement of third-party M/s Malhar Export. The assessee also submitted that transaction was through banking channel and loan was repaid in subsequent year.

However, assessing officer, rejected the contention of the assessee and made addition of Rs. 40,00,000/- u/s 68 of the Act, being unsecured loan taken from Malhar Exports and Rs. 2,04, 164/- being interest paid thereon.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld.CIT(A), who has confirmed the action of the assessing officer, therefore, assessee is in further appeal before this Tribunal.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee argued that during the course of assessment proceedings, the assessee submitted the Lender's bank statement, Income Tax Return, Contra confirmation, Balance sheet, Profit and loss account, and detailed breakup of loans and advances wherein the assessee's name was reflected. The assessee also deducted TDS at the rate of 10% on the interest payment. Besides, repayment of said loan was made in the subsequent year, for this assessee submitted bank statement confirming repayment of loan. Therefore, learned Counsel for the assessee, submitted that addition made by the assessing officer may be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.

I have considered submissions of both the parties. I find that perusal of the bank statement and ledger account would reveal that the assessee has duly repaid the loans obtained from the said party. Since, the assessee has duly repaid the amount received by it from the lender party and there remains no outstanding amount taken from said party and once such repayment has been made then the loan taken by assessee cannot be subject matter of addition. Furthermore, it is pertinent to note on careful perusal of the ledger account, that the assessee has paid interest on the above loan and requisite TDS has also been deducted on payment of such interest. These facts further fortify the genuineness of the loans obtained by the assessee. For this, I rely on the following judgements:

Therefore, respectfully following the binding precedent of the jurisdictional Hon’ble High Court of Gujarat (supra), I delete the addition pertaining to loan and interest and allow the appeal of the assessee.

In the result, appeal filed by the assessee, is allowed.