2018 (5) TMI 750 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of unexplained cash credit u/s. 68 - 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 - Held that - 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. Thus we 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 . - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Penalty u/s. 271(1)(c) for unexplained cash credit u/s. 68 of the Income-tax Act, 1961.

Analysis:

Issue 1: Penalty Proceedings u/s. 271(1)(c)
The appellant challenged the penalty proceedings of ?3,20,000 imposed by the Assessing Officer (AO) under Section 271(1)(c) for unexplained cash credit. The AO made additions on account of unexplained cash credit under Section 68 of the Act, as the assessee failed to prove the identity and creditworthiness of lenders and genuineness of the loan transactions. The Commissioner of Income Tax (Appeals) upheld the penalty, noting the lack of sufficient evidence beyond confirmation letters from lenders. The appellant explained that its factory was closed, and expenses were paid by directors from personal accounts, booked as unsecured loans. Despite explanations, the penalty was sustained.

Issue 2: Jurisdiction Transfer and Delay Condonation
The jurisdiction of the assessee was transferred from Vadodara to Mumbai, leading to a delay of 176 days in filing the appeal with the ITAT. The delay was attributed to the closed factory, financial crisis, and litigation faced by the senior citizen Managing Director. The Tribunal, considering the reasons for delay genuine, condoned the delay to ensure justice and proceeded to hear the appeal on merits.

Issue 3: Merits and Fresh Adjudication
On merits, the appellant submitted confirmations from directors regarding unsecured loans. Due to documents being seized earlier, the appellant requested a fresh adjudication with all relevant evidence. The Tribunal, after considering arguments from both parties, set aside the matter for fresh adjudication by the AO. The onus was placed on the appellant to establish the identity, creditworthiness of lenders, and genuineness of loan transactions to satisfy Section 68 requirements in the de-novo proceedings.

Conclusion
The Tribunal allowed the appeal for statistical purposes, directing a fresh adjudication by the AO to substantiate the appellant's contentions with proper evidence. The decision aimed at ensuring a fair opportunity for the appellant to present its case and satisfy the legal requirements under Section 68 of the Act.