CHEMSTAR ORGANICS (I) LTD,MUMBAI vs. DCIT CIR 1(1),

सुनवाई की तारीख /Date of Hearing : 01.05.2018 घोषणा की तारीख /Date of Pronouncement : 09.05.2018 आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member

2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-

“1. To quash the penalty proceedings u/s. 271(1)(c) of Rs. 3,20,000/- passed by the Assessing officer.”

In the proceedings conducted by the AO u/s. 271(1)(c) r.w.s. 274 , penalty to the tune of Rs.3,20,000/- was levied by the AO on the assessee within provisions of Section 271(1)(c) w.r.t. unsecured loan of Rs. 8,86,454/- raised by the assessee which were held to be unexplained cash credit in quantum assessment , representing income of the assessee of which the assessee has furnished inaccurate particulars of income and thus concealed particulars of its income within the meaning of Explanation 1 to Section 271(1)(c) of the 1961 Act. The assessee filed first appeal before learned CIT(A) challenging penalty levied by the AO of Rs. 3,20,000/- u/s 271(1)(c) which was dismissed by ld. CIT(A), vide appellate order dated 18-05-2015 passed by learned CIT(A). The assessee explained that its factory is locked and bank accounts are frozen. The expenses related to the assessee are paid by Directors which are booked in the assessee’s books of accounts and credited to unsecured loans received from Directors in assessee’s books of accounts. The learned CIT(A) dismissed the assessee appeal as apart from confirmation from lenders no other details such as bank statements of Directors and other payments particulars were furnished by the assessee.

Order u/s. 127(1) read with section 127(2) of the Income-tax Act, 1961

The assessee company, M/s. Chemstar Organics (India) Ltd., vide letter dated 15.5.2014, has requested for transfer of case from Vadodara to Mumbai for the reason that the registered office of the company is in Mumbai and there is no business activitiy in Vadodara since last many years. The Principal Commissioner of Income-tax -1, Mumbai vide letter No. CIT-1/NOC/2015-16 dated 17.6.2015 has given concurrence for the transfer of the case to ITO, Ward-1(1)-2, Mumbai.

Sd/- (RAVINDRA KUMAR JAIN) Principal Commissioner of Income-tax, Vadodara-1, Vadodara Copy to: 1. The Chief CIT, Vadodara 2. The Pr. Commissioner of Income-tax-1, Mumbai 3. The Addl. CIT, Range-1(1), Vadodara 4. The Addl. CIT, Range-1(1), Mumbai 5. The DCIT, Circle-1(1)(1), Vadodara - The case records may be transferred immediately. 6.The ITO, Ward-1(1)-2, Mumbai. 7.The assessee. Sd/- (ANJESH KUMAR) ITO (HQ) For Principal Commissioner of Income-tax, Vadodara -1, Vadodara There is also a delay of 176 days wherein the appeal is filed late with the tribunal by 176 days beyond the time stipulated u/s. 253(3) of the Act. The Ld. Counsel for the assessee explained that the factory of the assessee was situated near Vadodara , Gujarat which is lying closed and is under possession of GIIC u/s. 29 of the SFC Act , 1951 since 2004 and there is no operation or staff at Vadodara. It was submitted that the assessee has office in Mumbai while assessments were done at Vadodara, Gujarat which was too inconvenient and cumbersome for the assessee as the assessee did not have any staff in Gujarat apart from being too expensive for the assessee. The assessee requested for transfer of jurisdiction to Mumbai and after lot of follow up the same was transferred by Revenue to Mumbai vide orders dated 11.08.2015. It was submitted that the assessee is facing severe financial crisis and Managing Director of the assessee company is Senior Citizen who has to run to various Courts in connection with several litigation going on at several forums viz. BIFR, AAIFR, Hon’ble Delhi High Court and also Hon’ble Supreme Court. It was submitted that due to these extraordinary circumstances such as litigations at various locations, Managing Director being Senior Citizen, financial difficulties being faced , no staff etc., there was delay in filing this appeal with tribunal late by 176 days beyond the time stipulated u/s 253(3). it is submitted that the assessee has filed an application for condonation of delay supported by an Affidavit executed by Managing Director praying that delay in filing this appeal be condoned . The said affidavit dated 26-04-2018 executed by MD of the assessee company is placed in file. The learned DR objected to the condonation of delay application filed by the assessee. After hearing both the parties, we are of the considered view that delay in this case in filing of appeal late by 176 days beyond the time stipulated u/s 253(3) needs to be condoned as it is fairly explained by the assessee that business of the assessee is lying closed since 2004 and the possession of the factory situated near to Vodadara is taken over by the GIIC u/s. 29 of the SFC Act, 1951 , the assessee is facing litigation at various forums and jurisdiction of the assessee have been transferred to Mumbai only on 11.08.2015 . It is also explained in affidavit that the assessee is not having staff at Gujarat . Thus, taking into cumulative effect of these several reasons which were attributed to delay in filing appeal late by 176 days beyond time stipulated u/s 253(3), it is considered proper and appropriate to condone the delay and to adjudicate this appeal on merits . The assessee will not gain any thing by filing appeal late rather if the delay is condoned in genuine cases, it will ultimately at best lead to adjudication of the appeal on merits. The Courts are respected for advancing substantial justice and not for scuttling genuine tax-payers by taking too rigid technical approach. Thus in the interest of justice , we admit this appeal by condoning the delay of 176 days in filing late this appeal beyond time stipulated u/s 253(3).

The Ld. Counsel for the assessee on merits submitted that the factory of the assessee near Vadodra was lying closed and was taken over by GIIC u/s 29 of the SFC Act,1951 since 2004. It was submitted that bank accounts were frozen and hence Directors were incurring expenses for the sustenance of the assessee company from their personal bank accounts..The payments for all these expenses were met out of personal bank accounts of the Directors of the assessee company which was brought into books of accounts of the assessee company as unsecured loans from Directors as these expenses pertained to the assessee company. The confirmation from the Directors who have advanced money to the assessee by meeting expenses of the assessee to the tune of Rs. 8,86,454/- along with their PAN numbers were submitted before the authorities below and it was prayed that the penalty levied be deleted. The said confirmations are filed with tribunal which are placed in file. The Ld. Counsel for the assessee on being asked by the Bench after taking instructions from the assessee’s Managing Director who was also present in the Court Room stated that since the documents were seized by GIIC along with taking over of factory premises in the year 2004, hence the same could not be produced before the AO during assessment as well penalty proceedings , such as bank statements of the Directors, Income-tax Return of the Directors and now the assessee is in a position to produce all these relevant documents to prove identity and creditworthiness of Directors in advancing these money for meeting expenses of the assessee company and genuineness of these loan transactions. It was prayed and conceded by learned counsel for the assessee after seeking instructions from the assesse’s Managing Director that the matter may be set aside to the file of the AO for fresh adjudication on merits wherein all the necessary evidences and documents for satisfying the ingredients of Section 68 will be submitted by the assessee .

The learned DR on the other prayed for sustenance of the penalty as levied by the AO and as confirmed by learned CIT(A).

After considering all the material on record including arguments advanced by both the rival parties and keeping in view factual matrix of the case, we are of the considered view that the assessee deserves one more opportunity of explaining its case supported with cogent evidences and matter needs to be set aside and restored to the file of the AO for fresh adjudication of the issue of penalty of Rs. 3,20,000/- levied u/s 271(1)(c) on merits denovo in set aside proceedings in accordance with law and onus is on the assessee to establish identity and creditworthiness of the lenders and to prove the genuineness of the loan transactions to the tune of Rs. 8,86,454/- to satisfy the ingredients and mandate of Section 68 of the Act as the said unsecured loans are existing in the books of accounts of the assessee . The onus is on the assessee to establish by evidences before the AO in set aside de-novo proceedings that no penalty u/s 271(1)(c) is exigible on the assessee . All the contentions are kept open and assessee to lead evidence to substantiate all its contentions before the AO in set aside de-novo proceedings. The necessary evidences/explanation filed by the assessee in its defence in de- novo set aside proceedings before the AO shall be admitted by the AO and shall be adjudicated on merits in accordance with law while passing fresh assessment order de-novo in set aside proceedings . Needless to say proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with the principal of natural justice in accordance with law before re-adjudicating the issue in set aside proceedings . The appeal of the assessee is allowed for statistical purposes. We order accordingly.