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

ITA 268/Hyd/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0605 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 07-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SITHARAM
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Bad and doubtful debts
• Section: 143(3); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE S MT P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 2 68 /HYD/201 8 ASSESSMENT YEAR: 20 1 4 - 15 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 16(2 ), HYDERABAD. VS. MARGADARSI CHIT FUND PVT. LTD., HYDERABAD. PAN AABCM 4751 G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M. SITHARAM ASSESSEE BY : SHRI V. SIVA KUMAR DATE OF HEARING 02 / 0 8 /2018 DATE OF PRONOUNCEMENT 19 / 0 9 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27 / 1 1 / 201 7 OF CIT(A) 4 , HYDERABAD FOR AY 20 1 4 - 1 5 . 2. BRIEF FACTS OF THE CASE ARE, T HE A SSESSEE COMPANY ENGAGED IN CHIT FUND BUSINESS, ENTERTAINMENT, FOOD PROCESSING AND FARM MAINTENANCE, FILED ITS RETURN OF INCOME FOR AY 2014 - 15 ADMITTING TOTAL GROSS INCOME OF RS. 187,63,32,940/ - . THE CA SE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES WERE ISSUED. IN RESPONSES TO THE NOTICES, THE AR OF THE ASSESSEE FILED THE INFORMATION. AFTER GOING THROUGH THE INFORMATION, AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT, 1961 ( IN SHORT THE ACT) ASSESSING THE TOTAL INCOME AT RS. 189,12,57,780/ - BY MAKING THE FOLLOWING ADDITIONS: 1. RS. 1,45,94,323/ - TOWARDS DISALLOWANCE OF BAD DEBT S WRITTEN OFF. 2 ITA NO. 268 /HYD/1 8 MARGADARSI CHIT FUND PVT. LTD., HYD . 2. RS. 3,00,000/ - TOWARDS DISALLOWANCE OF PROPORTIONATE EXPENSES. 3. RS. 30,513/ - TOWARDS D ISALLOWANCE ON ACCOUNT OF BELATED REMITTANCE OF ESI. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH REGARD TO THE ADDITIONS OF BAD DEBTS WRITTEN OFF AND DISALLOWANCE ON ACCOUNT OF BELATED REMITTANCE OF ESI. 4. THE CIT(A), WITH REGARD TO THE ADDITION OF BAD DEBTS WRITTEN OFF, OBSERVED THAT THE DETAILS FILED BY THE ASSESSEE WERE VERIFIED AND AS PER WHICH THE ENTIRE AMOUNT TO BE ALLOWED AS BAD DEBTS AND FOLLOWING HIS EARLIER ORDERS, DIRECTED THE AO TO VERIFY AND RE WORK THE DISALLOWANCE OF BAD DEBTS ACCORDINGLY. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF BELATED REMITTANCE OF ESI, THE CIT(A) DIRECTED THE AO TO VERIFY WHETHER THE AMOUNTS WERE PAID BEFORE THE END OF FY AND IF THEY ARE PAID, THE SAME MAY BE ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOW 'BAD DEBTS' TO THE EXTENT OF INSTALMENTS DEFAULTED BY THE PRIZED SUBSCRIBERS AND WRITTEN OFF AS 'BAD DEBTS' IN THE BOOKS OF THE ASSESSEE, IGNORING THE FACT THAT THE PROVISIONS OF SEC. 36(2) ARE NOT SATISFIED BY THE ASSESSEE. 2. THE CIT(A) ERRED IN IGNORING THE FACT THAT REVENUE'S APPEAL ON IDENTICAL ISSUE FOR A.Y. 2011 - 12 IN THE CASE OF SHRIRAM CHITS PVT LTD IS PENDING BEFORE THE HON'BLE HIGH COURT. 3. THE CIT(A) ERRED IN DELETING THE AO TO DELETE THE DISALLOWANCE MADE U/S 3 6( 1 )(VA) R.W.S 2(24)(X) OF RS. 30,513/ - , IF THEY WERE PAID BEFORE THE END OF THE FINANCIAL YEAR, IGNORING THE FACT THAT THE ASSESSEE FAILED TO DEPOSIT THE SAME INTO GOVERNMENT ACCOUNT WITHIN THE DUE DATES UNDER THE RELEVANT ACTS. 4 ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE BAD DEBTS, THE CIT(A) FOLLOWING THE DECISION OF 3 ITA NO. 268 /HYD/1 8 MARGADARSI CHIT FUND PVT. LTD., HYD . ITAT IN THE CASE OF SHRIRAM CHITS (P) LTD. IN ITA NO. 651/HYD/2012, DATED 05/04/2 013, ON WHICH RELIANCE PLACED BY THE ASSESSEE, DIRECTED THE AO TO REWORK THE DISALLOWANCE OF BAD DEBTS AND ALLOW ACCORDINGLY. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF CIT(A) AND HENCE, UPHOLDING THE SAME, WE REMIT THE ISSUE TO THE FILE OF AO WITH A DIRECTION TO REWORK THE DISALLOWANCE AND ALLOW THE SAME IN ACCORDANCE WITH LAW. 6.1 AS REGARDS THE DISALLOWANCE ON ACCOUNT OF BELATED REMITTANCE OF PF AND ESI, THE ASSESSEE STATED BEFORE THE CIT(A) AMOUNTS TOWARDS PF & ESI WERE PAID BEYOND THE DUE DATES BUT PAID BEFORE THE END OF FY. THE CIT(A), THEREFORE, DIRECTED THE AO TO VERIFY WHETHER THE AMOUNTS WERE PAID BEFORE THE END OF FY AND IF THEY ARE PAID, THE SAME MAY BE ALLOWED. IT IS A SETTLED POSITION OF LAW THAT IF THE CONTRIBUTIONS TOWARDS PF & ESI ARE PAID BEYOND THE DUE DATE BUT BEFORE FILING OF THE RETURN OF INCOME U/S 13 9 (1) OF THE ACT , NO DISALLOWANCE CAN BE MADE. THEREFORE, UPHOLDING THE STAND TAKEN BY THE CIT(A), WE REMIT THIS ISSUE ALSO TO THE FILE OF THE AO TO VERIFY WHETHER THE AMOUNTS PAID BEFORE FILING OF THE RETURN OF INCOME, IF SO, DISALLOWANCE MAY BE DELETED. 6.2 ACCORDING LY, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 19 TH SEPTEMBER , 2018 KV 4 ITA NO. 268 /HYD/1 8 MARGADARSI CHIT FUND PVT. LTD., HYD . C OPY TO: - 1) DCIT , CIRCLE 16 ( 2 ), 2 ND FLOOR, B BLOCK IT TOWERS, AC GUARDS, MASAB TANK, H YDERABAD. 2) M/S MARGARSI CHIT FUND PVT. LTD., 5 - 10 - 195, CORPORATE OFFICE, OPP. POLICD CONTROL ROOM, HYDERABAD. 3) CIT(A) 4 , HYDERABAD. 4) PR. CIT 4, HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE