Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad V. Margadarsi Chit Fund Private Limited , Hyderabad

ITA 1662/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4046 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Appeal Filed On: 14-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R. DIPAK
• Keywords: Bad and doubtful debts; Set aside
• Section: 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 1662/HYD/2019 ASSESSMENT YEAR: 2016-17 DY.COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD VS M/S.MARGADARSHI CHITFUND PVT. LTD., HYDERABAD [PAN: AABCM4751G] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI R.DIPAK, DR FOR ASSESSEE : SHRI MOHD. AFZAL FOR SHRI V.SIVA KUMAR, AR DATE OF HEARING : 21-04-2021 DATE OF PRONOUNCEMENT : 28-05-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2016-17 ARISES FROM THE CIT(A)-4, HYDERABADS ORDER DATED 29-08-2019 PASSED IN APPEAL NO.10259/2018-19/ACIT,CIR.16(2)/CIT(A)-4/HYD /19- 20, INVOLVING PROCEEDINGS U/S.143(3) OF THE INCOME T AX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GROUND RAISED IN TH E INSTANT APPEAL SEEKS TO REVERSE THE CIT(A)S ACTION ALL EGEDLY RESTORING THE ISSUE OF DISALLOWANCE OF BAD DEBTS WRITTEN -OFF ITA NO. 1662/HYD/2019 :- 2 -: AMOUNTING TO RS.41,28,63,386/- FOR THE SOLE REASON THAT THE SET ASIDE JURISDICTION U/S.251(1)(A) OF THE ACT STAND S OMITTED VIDE FINANCE ACT, 2001 W.E.F.01-06-2001. 3. THE ASSESSEES CASE ON THE OTHER HAND IS THAT THE CI T(A)S DETAILED DISCUSSION IN PARAS 4.2 TO 4.4 TO THIS EFFECT HAS FOLLOWED THE TRIBUNALS ORDER ITSELF IN ITA NO.268/HYD /2018, AY.2014-15 TO RE-WORK THE AMOUNTS INVOLVED QUA THE INSTANT ISSUE AS FOLLOWS: 4.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER, SUBMISSIONS OF THE AR AND THE CASE LAWS RELIED UPON. IN THIS RE GARD, I WOULD LIKE TO REFER TO THE APPELLATE ORDER PASSED BY MY PREDEC ESSOR IN THE APPELLANT COMPANY'S OWN CASE FOR THE ASST. YEARS 20 12-13, 2013-14, AND 2014-15, WHEREIN THE FOLLOWING OBSERVATIONS WER E MADE. 5.2 DURING THE COURSE OF APPEAL PROCEEDINGS, THE AP PELLANT SUBMITTED THAT IT IS ENGAGED IN THE BUSINESS OF CHI T FUNDS AND ACTS AS A FOREMAN FOR VARIOUS GROUPS OF CHITS CONDUCTED BY THEM. IN THE COURSE OF CHIT BUSINESS, CHIT HOLDERS DRAW MONEY IN AUCTION OF CHITS CONDUCTED EVERY MONTH IN ADVANCE WHICH THEY HAVE TO PAY-BACK IN INSTALMENTS. APPELLANTS GETS COMMISSION OF 5% OF TH E 'FACE VALUE OF CHIT FOR CONDUCTING THE CHIT ACTIVITY WHICH IS THEI R MAIN INCOME APART FROM VARIOUS OTHER AMOUNTS COLLECTED FROM CHIT HOLD ERS DURING THE COURSE OF THIS BUSINESS. AS IT HAPPENS IN EVERY BUS INESS SOME OF CHIT HOLDERS WHO DRAW MONEY MAY NOT PAY MONTHLY INS TALMENTS AND BECOME DEFAULTERS THUS MAKING THEM APPELLANT'S DEBT ORS. SOME OF SUCH CHIT HOLDERS PAY THEIR DUES IN FULL THOUGH LAT E, SOME MAY PAY PART OF THE DUES AND SOME MAY NOT PAY SUCH DUES. AP PELLANT TRIES TO COLLECT SUCH DUES BY TAKING ALL POSSIBLE STEPS LEGA LLY AND AT TIMES WILL NOT BE ABLE TO COLLECT SOME OF SUCH DUES INSPI TE OF ITS BEST EFFORTS. IT IS THESE UNPAID DUES WHICH ARE WRITTEN OFF AFTER EVALUATING THE POSSIBILITY OF THEIR RECOVERABILITY. THUS, NON RECOVERABILITY OF DUES IN CHIT BUSINESS IS AN INHERENT BUSINESS RISK AND ARISES IN THE COURSE OF CARRYING ON CHIT BUSINESS. APPELLANT ALSO SUBMIT THAT SUCH WRITE OFFS WILL BE IN FEW CASES WHEREAS IT HAS CHIT HOLDERS NUMBERING ABOUT 3.08 LAKHS. THE APPELLANT SUBMITTED THAT IN THEIR OWN CASE FOR THE A.Y. 1993-94, THE CIT(A), ALLOWED THE APPEAL IN FAVOUR OF THE APPELLANT. FURTHER, THE APPELLANT SUB MITS THAT SIMILAR ISSUE CAME UP RECENTLY BEFORE THE HON'BLE ITAT, HYD ERABAD BENCH, IN THE CASE OF SHRIRAM CHITS(P) LTD. FOR THE A.Y. 2 009-10 WHEREIN THE HON'BLE ITAT VIDE ITS ORDER IN ITA NO.651/HYD/2012 DT. 05-04-2013 ITA NO. 1662/HYD/2019 :- 3 -: 'REMITTED THE ISSUE BACK TO THE FILE OF THE ASSESSI NG OFFICER TO RE- EXAMINE THE ISSUE IN THE LIGHT OF THE ORDER OF EARL IER YEARS AND ALLOWED THE APPELLANT'S APPEAL ON THIS GROUND FOR S TATISTICAL PURPOSE'. REFERENCE IS ALSO MADE TO THE DECISION PRONOUNCED B Y THE HON'BLE ITAT, HYDERABAD IN THE APPELLANT COMPANY'S OWN CASE VIDE ITA NO. 268/HYD/18 DATED 19 TH SEPTEMBER, 2018, WHEREIN IT WAS HELD THAT 'CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. AS REGARDS THE BAD DEBTS, THE CIT(A) FOLLOW ING THE DECISION OF ITAT IN THE CASE OF SHRIRAM CHITS (P) LTD IN ITA NO. 651/HYD/2012 DATED 05.04.2013, ON WHICH RELIANCE PLACED BY THE A SSESSEE, DIRECTED THE AO TO REWORK THE DISALLOWANCE OF BAD D EBTS AND ALLOW ACCORDINGLY. WE DO NOT FIND ANY INFIRMITY IN THE FI NDINGS OF CIT(A) AND HENCE, UPHOLDING THE SAME, WE REMIT THE ISSUE TO TH E FILE OF AO WITH A DIRECTION TO REWORK THE DISALLOWANCE AND ALLOW TH E SAME IN ACCORDANCE WITH LAW.' 4.4 IN VIEW OF THE ABOVE, GOING BY THE DECISION OF MY PREDECESSOR AND THE DECISION OF THE HON'BLE ITAT, HYDERABAD IN THE APPELLANT'S OWN CASE, THE ISSUE IS REMITTED BACK TO THE AO WITH A D IRECTION TO VERIFY THE SAME AND REWORK THE DISALLOWANCE OF BAD DEBTS A ND ALLOW THE SAME IN ACCORDANCE WITH LAW. THE GROUND OF APPEAL I S PARTLY ALLOWED. 4. WE HAVE HEARD RIVAL SUBMISSIONS. WE ARE OF THE O PINION THAT THE REVENUES ARGUMENTS INDEED DESERVE TO BE ACCEPTE D IN PRINCIPLE SINCE THE CIT(A) NO MORE HOLDS SET ASIDE JURISDICTION TO REMAND ANY ISSUE BACK TO THE ASSESSING OFFICER. THE FACT ALSO REMAINS THAT THE IMPUGNED ISSUE OF BAD DEBTS IS A RECURRING ONE IN ASSESSEES CASE WHICH HAS BEEN R ESTORED BACK TO THE ASSESSING OFFICER IN PRECEDING ASSESSMENT YEARS. WE THEREFORE REVERSE THE CIT(A)S FINDINGS REGARDING THE LEGAL ASPECT BUT ADOPT THE VERY APPROACH ON MERITS AND RESTORE THE INSTANT ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR HIS APPROPRIATE ADJUDICATION AS PER LAW IN LIGHT OF HIS FI NDINGS IN SAID EARLIER ASSESSMENT YEARS. THE ASSESSEE IS DIRE CTED TO ITA NO. 1662/HYD/2019 :- 4 -: APPEAR BEFORE THE ASSESSING OFFICER ON OR BEFORE 30- 09-2021 WITH ALL THE RELEVANT DETAILS IN CONSEQUENTIAL PROCEEDI NGS. 5. THIS REVENUES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN FOREGOING TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY, 2021 SD/- S D/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 28-05-2021 TNMM ITA NO. 1662/HYD/2019 :- 5 -: COPY TO : 1.DY.COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD. 2.M/S.MARGADARSHI CHITFUND PVT. LTD., D.NO.5-10-195 , FATEH MAIDAN ROAD, OPP: POLICE CONTROL ROOM, HYDERA BAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.PR.CIT-4, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.