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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, M/s. Auto Ignition Limited (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 31.10.2012, passed by the Commissioner of Income-tax (Appeals)-V, New Delhi under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) along with application for condonation of delay of 481 days, qua the assessment year 2008-09 on the grounds inter alia that :- “The Hon'ble CIT(A) has erred in law and on facts in 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.
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 the 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 managerial 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 Company Law Board was pending. However, the same was shown as Income by the Managing Director in his Income Tax Return paying maximum rate of Income Tax. Therefore, the disallowance upheld by the Hon'ble CIT(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 not 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 in 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 company of the assessee which has closed its operation and the amount was not recoverable. Therefore, no interest income was booked by the assessee on the amount of loan which was not recoverable, as there is no point to create an income which is not recoverable. Therefore, the addition upheld by the CIT(A) is arbitrary, 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 assessee is into the business of manufacturing of auto electrical parts being supplied in domestic as well as export market. During scrutiny proceedings, Assessing Officer noticed that during the year under assessment, assessee declared gross profit ratio at 13.17% against the total turnover of Rs.1567.63 lakhs as compared to the gross profit rate of 14.12% out of the total turnover of Rs.12016.06 lakhs immediately in the preceding year. AO also noticed that during the year under assessment, remuneration has been paid to the Managing Director and whole-time Director in excess of the limit prescribed under section 198 and 309 of the Companies act to the extent of Rs.22,91,309/-. On failure of the assessee to explain, the AO disallowed the remuneration paid to the Managing Director of Rs.19,26,105/-. AO also noticed from the audit report that the company has granted loan to a company covered in the 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 during 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 taxable income and assessed the total income of the assessee at Rs.2,31,77,920/-.
Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who dismissed the appeal ex-parte. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Ld. AR for the assessee by relying upon the affidavit filed by Shri T.R. Bansal, R/o House No.1025, Sector 28, Faridabad contended that the delay of 481 days in filing the appeal is due to the reason that Shri R.K. Sarine, the Chairman of the 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 over the affairs of the company.
On the other hand, ld. DR for the revenue contended 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.
We are of the considered view that when continuous working of the assessee company since filing of appeal before the Tribunal is not in dispute, the service of notice for want of complete address is not believable. Moreover, the reason for delay in filing the appeal on account of sickness and death of Shri R.K. Sarine, Chairman of the company, who was looking after the Income-tax affairs of the assessee company is a genuine reason sufficient to condone the delay. To advance the cause of justice, we hereby condone the delay of 481 days in filing the appeal subject to payment of cost of Rs.10,000/- to the Revenue.
At the same time, we are of the considered view that when ld. CIT (A) has merely proceeded to dismiss the appeal for want of prosecution by applying the decision rendered by ITAT, Delhi Bench cited as CIT vs. Multiplan India (P) Ltd. – 38 ITD 320 (Del.), the assessee is required to be provided an opportunity of being heard. So, the present appeal is allowed and matter is restored to the file of the ld. CIT (A) to decide afresh after providing an opportunity of being heard to the assessee. 9. Resultantly, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in open court on this 16th day of January, 2017.