Margadarsi Chit Fund Pvt.Ltd., Hyd, Hyderabad V. DCIT, Circle-16(2), Hyderabad, Hyderabad

ITA 732/HYD/2015

• Counselvise Citation: 73222514 RSA 2015
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2015
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Bad and doubtful debts
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 732/HYD/2015 ASSESSMENT YEAR: 2010-11 M/S. MARGADARSI CHIT FUND PRIVATE LIMITED, HYDERABAD [PAN: AABCM4751G] VS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. SIVA KUMAR, AR FOR REVENUE : SMT NIVEDITA BISWAS, CIT-DR DATE OF HEARING : 01-09-2015 DATE OF PRONOUNCEMENT : 09-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER U/ S 263 OF THE PRINCIPAL COMMISSIONER OF INCOME TAX-4, HYDERABAD D ATED 24-03-2015 ON THE ISSUE OF DIRECTIONS GIVEN TO ASSESSING OFFIC ER (AO) TO DISALLOW THE CLAIM OF BAD DEBTS. ASSESSEE WHILE ACCEPTING PART OF THE ORDER ON DISALLOWANCE OF RS. 33,16,000/- INCURRED ON COMMUNI TY SOCIAL RESPONSIBILITY, HOWEVER, IS AGITATED ON THE ISSUE O F BAD DEBTS DIRECTED BY PR. CIT TO BE DISALLOWED. I.T.A. NO. 732/HYD/2015 MARGADARSI CHIT FUND PVT. LTD., :- 2 -: 2. LD. COUNSEL SUBMITTED THAT ASSESSEE IS IN THE CH IT FUND BUSINESS FOR THE LAST FIFTY YEARS AND THE ISSUE OF CLAIM OF BAD DEBTS HAD COME UP FOR THE FIRST TIME IN AY. 1974-75 AND SUBSEQUENTLY, THE ISSUE IS BEING AGITATED BY THE REVENUE INTERMITTENTLY. HE PLACED O RDERS OF THE ITAT NOT ONLY IN ASSESSEES OWN CASE BUT ALSO IN THE CASE OF M/S. SHRIRAM CHITS (P) LTD., IN ITA NO. 651/HYD/2012 DT. 05-04-2013 IN SUPPORT OF ASSESSEES CLAIM OF BAD DEBTS WHICH WERE ALLOWED BY THE AO IN THE ASSESSMENT ORDER U/S. 143(3) DT. 30-01-2012. IT IS ALSO BROUGHT TO OUR NOTICE THAT THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN AY. 2009-10 UNDER SAME CIRCUMSTANCES UNDER SECTION 263 PRONOUN CED ON 28-08- 2014 WAS ALSO BROUGHT TO THE NOTICE OF PR.CIT AND D ESPITE THAT LD. CIT, INVOKED THE PROVISIONS OF SECTION 263 TO DIRECT THE AO TO DISALLOW THE BAD DEBTS. 3. LD. DR HOWEVER, SUPPORTED THE ORDERS OF THE LD. CIT. 4. WE HAVE CONSIDERED THE ISSUE AND FIND THAT CIT D ID NOT HAVE ANY JURISDICTION TO DIRECT THE AO TO DISALLOW THE BAD D EBTS CLAIM. AS FAR AS CLAIM OF BAD DEBTS IS CONCERNED, BOTH ON LAW AND ON FACTS, THE CLAIM IS ALLOWABLE AND THIS WAS CONSIDERED IN EARLIER ASSESS MENT YEAR BY THE CO-ORDINATE BENCH ELABORATELY AND HELD AS UNDER: 5. AFTER PERUSING THE ARGUMENTS OF THE LD. COUNSEL AND LD. D.R. AND EXAMINING THE PAPER BOOK PLACED ON REC ORD, WE ARE OF THE OPINION THAT THE ORDER OF LD. CIT UNDER SECTION 263 CANNOT BE UPHELD. AS FAR AS THE LEGAL PRINCIPLES ARE CONCERNE D, THE CLAIM IS ALLOWABLE UNDER SECTION 36(2) AS A BAD DEBT. IN ASS ESSEES OWN CASE IN EARLIER YEARS AS WELL AS IN THE CASE OF SHR IRAM CHITS P. LTD., (SUPRA), IT WAS HELD THAT THE DEBTS ARISING IN THE CHITS BEING CONDUCTED BY ASSESSEE ARE ALLOWABLE AS BAD DEBT/ LO SS. EVEN IF THE SAME ARE TO BE CONSIDERED AS LOSS IN BUSINESS, THER E IS NO PREJUDICE CAUSED TO REVENUE ON THAT. AS FAR AS EXAMINATION BY A.O. IN THE COURSE OF ASSESSMENT IS CONCERNED, THE A.O. DID ASK THE ASSESSEE I.T.A. NO. 732/HYD/2015 MARGADARSI CHIT FUND PVT. LTD., :- 3 -: THE DETAIL OF BAD DEBTS CLAIMED AND ASSESSEE FURNIS HED DETAILS VIDE LETTER DATED 24.11.2011 AS ITEM 3 WITH FOLLOWING EX PLANATION. IN CONTINUATION OF THE HEARING HELD ON 9 TH NOVEMBER, 2011 AND AS REQUIRED BY YOU DURING THE SAID HEARING, WE ARE SUB MITTING HEREWITH THE FOLLOWING INFORMATION FOR THE ABOVE SA ID ASSESSMENT YEAR. 1. .... 2. . 3. BAD DEBTS OF RS.53,17,158/- WRITTEN OFF INCLUDES AR REARS OUTSTANDING BELOW RS.300/- OVER A PERIOD OF 12 MONT HS IN CHIT CLOSED SERIES AND DOUBTFUL DEBTS IN SUITS FILE D IN CIVIL COURTS OF RESPECTIVE JURISDICTION. DETAILS FOR SUCH DEBTS BRANCH-WISE IS HEREWITH ENCLOSED. 6. ON PERUSAL OF ENCLOSED DETAILS RUNNING INTO PAG ES 15 (2- 16 IN PAPER BOOK) REVEAL THAT ASSESSEE HAS FURNISHE D COMPLETE DETAILS TO A.O. IN THE COURSE OF ASSESSMENT PROCEED INGS. JUST BECAUSE A.O. HAS NOT DISCUSSED ISSUE IN ASSESSMENT ORDER, IT DOES NOT MEAN THAT A.O. HAS NOT APPLIED HIS MIND AND MEC HANICALLY ALLOWED THE CLAIM. 7. BOTH ON FACTS AND ON LAW, THE PROCEEDINGS INITIA TED BY LD. CIT UNDER SECTION 263 CANNOT BE SUSTAINED. TWIN CONDITIONS REQUIRED FOR INITIATING THE PROCEEDINGS ARE (1) ORD ER IS ERRONEOUS AND (2) PREJUDICIAL TO THE INTEREST OF REVENUE HAVE NOT BEEN SATISFIED. SINCE A.O. ENQUIRED AND ALLOWED THE CLAIM, THE CONT ENTION OF LD. CIT THAT A.O. ALLOWED MECHANICALLY CANNOT BE SUPPORTED. FOR THESE REASONS, WE SET ASIDE THE ORDER OF LD. CIT AND REST ORE THE ORDER OF A.O. DATED 29.12.2011 ON THIS ISSUE. 5. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DEC ISION IN ASSESSEES OWN CASE NOT ONLY IN THAT YEAR BUT ALSO IN EARLIER YEARS ON THE SAME ISSUE, WE DO NOT FIND ANY MERIT IN THE ACTION OF PR.CIT AND THEREFORE HIS DIRECTION TO THAT EXTENT IS SET ASIDE AND ORDER OF THE AO U/S. 143(3) IS RESTORED. I.T.A. NO. 732/HYD/2015 MARGADARSI CHIT FUND PVT. LTD., :- 4 -: 6. WE ALSO NOTICE THAT THE LD. CIT, IN SPITE OF ORD ER OF THE ITAT IN THE SIMILAR PROCEEDINGS U/S. 263 IN EARLIER AY. 2009-10 , HAS NOT ONLY FAILED TO FOLLOW THE SAME BUT SURPRISINGLY STATES THAT ITA T DID NOT ADJUDICATE MERITS OF THE ISSUE. HIS ORDER IN PARA 28 IS AS UN DER: 28. IT IS CLEAR FROM ABOVE THAT THE ORDER OF THE CIT U/S. 263 HAS BEEN SET ASIDE BECAUSE THE ASSESSEE HAD SUBMITT ED FULL DETAILS TO THE ASSESSING OFFICER WHO HAD APPLIED HIS MIND A ND HAD COME TO A CONCLUSION THAT THE BAD DEBTS DEBITED BY THE ASSE SSEE AS AN ALLOWABLE EXPENDITURE. THE ISSUE IS THAT OF APPLIC ATION OF MIND OF THE ASSESSING OFFICER AND THE JURISDICTION OF THE C IT IN PASSING ORDER U/S. 263. THIS ORDER DOES NOT DISCUSS THE MERITS O F THE ISSUE OF WHETHER THE BAD DEBTS WERE ALLOWABLE OR NOT. IN FA CT IN THE VERY FIRST SENTENCE THE HONOURABLE ITAT STATES THAT THE SUBJECT MATTER OF APPEAL IS WHETHER THE AO HAD EXAMINED THE CLAIM OF BAD DEBTS ARISING IN THE CHIT BUSINESS OR NOT. THEREFORE, TH IS ORDER DOES NOT HELP THE CASE OF THE ASSESSEE. 7. THIS YEAR ALSO ASSESSEE HAD SUBMITTED FULL DETAI LS TO THE AO WHO HAD APPLIED HIS MIND AND HAD COME TO A CONCLUSION T HAT THE BAD DEBTS DEBITED BY THE ASSESSEE WAS AN ALLOWABLE EXPENDITUR E. IN SPITE OF NOTICING THE SAME, HOW LD. PR.CIT COULD INVOKE THE JURISDICTION U/S. 263 IN THIS YEAR IS NOT EXPLAINED BY HIM. ASSESSEE DI D IN FACT SUBMIT ALL THE INFORMATION TO AO IN COURSE OF ASSESSMENT PROCEEDIN GS AND THEREFORE, ANY OPINION BY THE CIT CAN ONLY BE CONSIDERED AS CH ANGE OF MIND. FURTHER, ASSESSEE HAD RELIED ON VARIOUS CASE LAW IN CLUDING THE ORDERS OF THE ITAT AND HON'BLE HIGH COURT IN ASSESSEES OWN C ASE IN EARLIER YEARS. THIS SORT OF DELIBERATE AND MISLEADING ORDER BY PR. CIT IS NOT EXPECTED FROM A SENIOR OFFICER LIKE HIM. WE ONLY WISH THAT THE AUTHORITIES OF REVENUE FOLLOW THE ORDERS OF ITAT IN LETTER AND SPI RIT. IN CASE THEY WANT TO DIFFER THEY CAN DIFFER ONLY ON THE REASON THAT T HE ORDER IS EITHER APPEALED AGAINST IN THE HIGH COURT (WHICH, HOWEVER, DOES NOT EMPOWER THEM TO IGNORE THE ORDERS) AND THE ORDER WAS STAYE D BY JURISDICTIONAL HIGH COURT. IN THOSE CIRCUMSTANCES ONLY THE AUTHOR ITIES CAN DIFFER FROM I.T.A. NO. 732/HYD/2015 MARGADARSI CHIT FUND PVT. LTD., :- 5 -: THE ITATS ORDER. THIS DELIBERATE DISOBEDIENCE TO THE ORDERS OF HIGHER JUDICIAL FORUMS CALLS FOR CONTEMPT PROCEEDINGS, BUT WE ARE NOT CONSIDERING THE SAME. HOWEVER WE WISH TO STATE THAT ANY FURTHER NOTICE OF SUCH DISOBEDIENCE WILL CERTAINLY INVITE SERIOUS ACTION INCLUDING LEVY OF COST. FOR THE TIME BEING WE LEAVE THE MATTER THERE, WITH A DIRECTION THAT THE AUTHORITIES SHOULD FOLLOW THE ORDERS OF ITAT/ H IGH COURT, WHEN THEY WERE BROUGHT TO THE NOTICE IN THE RESPECTIVE PROCEE DINGS. AS ALREADY STATED ORDER OF THE CIT U/S 263 TO THAT EXTENT IS SET ASIDE. 8. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH SEPTEMBER, 2015 TNMM COPY TO : 1. MARGADRASI CHIT FUND PRIVATE LIMITED, 5-10-195, FATEH MAIDAN ROAD, HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HY DERABAD. 3. PRINCIPAL COMMISSIONER OF INCOME TAX-4, HYDERABA D. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.