P. Manickam & Co, CHENNAI V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 10

ITA 270/CHNY/2022

AI Insights

The case involves M/s. P. Manickam & Company, a firm engaged in civil construction, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of a chit loss of Rs.1,37,950 by the Assistant Commissioner of Income Tax. The assessee had claimed this loss as a deduction while computing its business income for the Assessment Year 2017-2018. The primary legal issue was whether the chit loss incurred by the assessee could be considered an admissible deduction under the Income Tax Act. Both the lower authorities and the Tribunal found that the chit funds were not related to the business activities of the assessee, and hence, the loss was rightly disallowed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128406 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2022
• Appeal Filed By: Assessee
• Order Result: DismissedDismissed
• Bench Allotted: A
• Next Hearing Date: 14-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 27-04-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

आयकर अपीलȣय अͬधकरण, ‘ए’ Ûयायपीठ,चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A No.:270/CHNY/2022 िनधाᭅरण वषᭅ/ Assessment Year 2017 - 2018 M/s. P. Manickam & Company, No.41/21, Perambur Barracks Road, Pattalam, Chennai – 600 012. PAN : AAAFP 0680R Vs . The ACIT, Non-Corporate Circle – 10(1), Chennai – 600 034 (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : None ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Mr. P. Sajit Kumar, JCIT स ु नवाई कȧ तारȣख/Date of Hearing : 08.09.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 08.09.2022 आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi in Appeal No.CIT(A), Chennai – 12/10175/2019-20 dated 22.03.2022. The assessment was framed by the Assistant Commissioner of Income Tax, Non-Corporate Circle – 10(1), Chennai, u/s.143(3) of the Income Tax Act, 1961 - 2 - ITA No.:270/CHNY/2022 (hereinafter “the Act”) for the Assessment Year 2017 – 2018 vide order dated 22.11.2019. 2. The only issue in this appeal of the assessee is as regards to the order of the CIT(A) in confirming the action of the AO in disallowing the chit loss of Rs.1,37,950/- as not an admissible deduction while computing the business income of the Assessee. For this, the assessee has raised various grounds which are exhaustive but the only effective Ground No.1 reads as under: “1. The authorities below erred in disallowing the chit loss of Rs.1,37,950/- as not an admissible deduction while computing the business income of the Appellant.” 3. The brief facts of the case are that the assessee firm is in the business of civil construction and has e-filed its revised return of income for the assessment year 2017 –18 on 27.07.2018 declaring a total income of Rs.4,63,05,250/- under the head “Business”. The case was selected for a complete scrutiny assessment under Computer Aided Scrutiny Selection [CASS] and a notice u/s.143(2) of the Act dated 22.09.2019 was issued and served on the assessee. Subsequently, another notice u/s.142(1) of the Act was issued on 30.10.2019 requiring to furnish details regarding the variation in the revised return of income as compared to the original return of - 3 - ITA No.:270/CHNY/2022 income along with supporting document evidences for which the assessee submitted his responses online. Further, a notice u/s.142(1) of the Act was also issued to the assessee on 11.11.2019 to provide reconciliation of receipts shown in the returns with Form No.26AS receipts and to furnish further details regarding the other expenses claimed in its income-tax returns. The AO noted that the investment in chit is nowhere connected with the business of the assessee and hence, the claim of assessee representing chit loss was not allowed by AO amounting to Rs.1,39,950/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also dismissed the claim of assessee. Aggrieved, now assessee is in appeal before the Tribunal. 4. We have heard ld. Senior DR and gone through facts and circumstances of the case. We noted that the assessee’s claim before AO and CIT(A) was that the assessee participated in chit funds for requirement of funds for running the firm and in this chit fund, the assessee incurred loss as members should take the money earlier from the chits will necessarily have to contribute more. But, it seems that this is not the business of the assessee and once the assessee’s business is not of chit, it cannot be treated as business - 4 - ITA No.:270/CHNY/2022 loss and hence, the same is rightly disallowed by lower authorities. We confirm the order of CIT(A) and dismiss this appeal of assessee. 5. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the court on 8 th September, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 8 th September, 2022 RSR आदेशकᳱᮧितिलिपअᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ )अपील(/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.