DCIT, Circle-2(1), Hyderabad, Hyderabad V. Jeevan Shakti Chit Fund Pvt Ltd, Hyd, Hyderabad

ITA 747/HYD/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2565 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Bad and doubtful debts
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 747 & 748/HYD/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1) HYD. VS. M/S JEEVAN SHAKTI CHIT FUND PVT. LTD., HYDERABAD. PAN AAACJ 5056C APPELLANT RESPONDENT REVENUE BY: SMT. SUMAN MALIK ASSESSEE BY: SHRI S. RAMA RAO DATE OF HEARING: 30/01/2018 DATE OF PRONOUNCEMENT: 31/01/2018 O R D E R PER V. DURGA RAO, J.M: BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE ORDERS OF CIT(A) 1, GUNTUR, BOTH, DAT ED 31/01/2017 FOR AYS 2012-13 AND 2013-14. AS IDENTICA L ISSUE IS INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AND HE ARD TOGETHER AND, THEREFORE, A CONSOLIDATED ORDER IS PA SSED FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY THE FACTS AS TAKEN FROM AY 2012-13 ARE, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF CHIT FUNDS, FILED ITS RETURN OF INCOME FOR THE AY 2012-13 FOR A TAXABLE INCOME OF RS. 74,49,443/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED BY MA KING ADDITION OF RS. 68, 49,140/- CLAIMED BY THE ASSESSE E AS BAD DEBTS TO THE INCOME RETURNED. I.T.A. NOS. 747 & 748/HYD/2017 M/S JEEVAN SHAKTI CHIT FUND PVT. LTD. 2 2.1 AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE COMPANY DEBITED AN AMOUNT OF RS.76,48, 740/- TOWARDS BAD DEBTS WRITTEN OFF. ACCORDING TO THE AO, ASSESSEE DOES NOT FULFIL THE CONDITIONS LAID DOWN IN SEC.36( 2)(I) AND, HENCE, NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SU CH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTI NG THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHIC H THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR OR REPRESENTS MONEY LENT IN T HE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY-LENDING WHICH IS CARRIED ON BY THE ASSESSEE. THE AO OPINED THAT THE ASSESSEE COMPANY FAILED TO ESTABLISH THAT THE DEBTS WRITTEN OFF HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING ITS INCOME OF THE PREVIOUS YEAR OR IN ANY EARLIER YEARS AND, THEREFOR E REJECTED THE ASSESSEES CLAIM. HOWEVER, CONSIDERING THE FACT THAT THE ASSESSEE RECOVERED RS. 7,99,600/- IN AY 2014-15 AND OFFERED THE SAME TO TAX, THE AO DISALLOWED THE BAD DEBTS TO THE EXTENT OF RS. 68,49,140/- (RS. 76,48,740 7,99,600). 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED SIMILA R AROSE BEFORE THE ITAT IN ASSESSEES OWN CASES FOR AY 2009 -10 (ITA NO. 970/HYD/2014, DTD. 25/09/2014) AND 2010-11 IN ITA NO. 1529/HYD/2014, DT. 05/06/2015 WHEREIN THE COORDINAT E BENCH HELD THAT THE AMOUNT IS ALLOWABLE AS BAD DEBT AS CH IT FUND COMPANY IS A FINANCE COMPANY AND ALSO HELD THAT EVE N IF IT WERE NOT TO BE ALLOWABLE AS BAD DEBTS, THE SAME IS TO BE CONSIDERED AS BUSINESS LOSS. I.T.A. NOS. 747 & 748/HYD/2017 M/S JEEVAN SHAKTI CHIT FUND PVT. LTD. 3 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) FOLLOWING THE DECISION OF THE ITAT, DELETED THE DISALLOWANCE MADE BY THE AO. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL, WHICH ARE COMMON IN BOTH THE APPEALS UNDER CONSIDER ATION: 1. THE LD. CIT (A) ERRED BOTH ON FACTS AND IN LAW. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE HON'BLE ITAT IS CORRECT IN LAW IN HOLDING THAT THE CLAIM IS ALLOWABLE U/S. 36(2) AS BAD DEBT WHEN THE ASSESSEE ITSELF FAILED TO DISCHARGE THE ONUS OF DEB TS WRITTEN OFF ARE TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE PREVIOUS YEAR? 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 7. LD. DR RELIED ON THE ORDER OF AO WHILE LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A). 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS SUBMITTED BY THE ASSESSEE AS WELL AS ON PERUSAL OF RECORD, WE FIND THAT THE ISSUE IN DIS PUTE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASES FOR AY 2009-1 0 AND 2010-11 (SUPRA). IN AY 2009-10, THE COORDINATE BENC H HAS HELD AS UNDER: '6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE ARGUMENTS AND PAPER BOOK PLACED ON RECORD. WE ARE O F THE OPINION THAT ORDER OF 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 BAD DEBT. NOT O NLY THE BOARD CIRCULAR ALLOWS IT TO BE TREATED AS A BAD DEB T, WHICH BINDING ON THE A.O. AND ALSO CIT, SIMILAR ISSUE WAS ALSO CONSIDERED BY THE COORDINATE BENCH OF CHENNAI TRIBU NAL IN THE CASE OF SREE RAM CHIT FUNDS (TAMILNADU) P. LTD. , AND ALSO IN SHREE AM CHITS P. LTD., BY HYDERABAD BENCH. IN THE CASE OF MARGADARSI CHIT P. LTD.(SUPRA), THE COORDIN ATE I.T.A. NOS. 747 & 748/HYD/2017 M/S JEEVAN SHAKTI CHIT FUND PVT. LTD. 4 BENCH OF THE TRIBUNAL HAS CONSIDERED SIMILAR ISSUE AND HELD AS UNDER : '5. AFTER PERUSING THE ARGUMENTS OF THE LD. COUNSEL AND LD. D.R. AND EXAMINING THE PAPER BOOK PLACED ON RECORD, WE ARE OF THE OPINION THAT THE ORDER OF LD. CIT UNDER SECT ION 263 CANNOT BE UPHELD. AS FAR AS THE PRINCIPLES ARE CONC ERNED, THE CLAIM IS ALLOWABLE UNDER SECTION 36(2) AS A BAD DEB T. IN ASSESSEE'S OWN CASE IN EARLIER YEARS AS WELL AS IN THE CASE OF SHRIRAM CHITS . LTD., (SUPRA), IT WAS HELD THAT THE DEBTS ARISING IN THE CHITS BEING CONDUCTED BY ASSESSEE AR E ALLOWABLE AS BAD DEBT/ LOSS. EVEN IF THE SAME ARE T O BE CONSIDERED AS LOSS IN BUSINESS, THERE IS NO PREJUDI CE CAUSED TO REVENUE ON THAT. AS FAR AS EXAMINATION BY A.O. IN T HE COURSE OF ASSESSMENT IS CONCERNED, THE A.O. DID ASK THE AS SESSEE THE DETAIL OF BAD DEBTS CLAIMED AND ASSESSEE FURNISHED DETAILS VIDE LETTER DATED 24.11.2011 AS ITEM 3 WITH FOLLOWI NG EXPLANATION. 'IN CONTINUATION OF THE HEARING HELD ON 9TH NOVEMBE R, 2011 AND AS REQUIRED BY YOU DURING THE SAID HEARING, WE ARE SUBMITTING HEREWITH THE FOLLOWING INFORMATION FOR T HE SAID ASSESSMENT YEAR. 1. . ........ 2. .......... 3. BAD DEBTS OF RS.53,17,158/- WRITTEN OFF INCLUDES ARREARS 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 PAGE S 15 (2-16 IN PAPER BOOK) REVEAL THAT ASSESSEE HAS FURNISHED C OMPLETE 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 AN D MECHANICALLY ALLOWED THE CLAIM. 7. BOTH ON FACTS AND ON LAW, THE PROCEEDINGS INITIA TED BY LD. CIT UNDER SECTION 263 CANNOT BE SUSTAINED. TWIN CON DITIONS REQUIRED FOR INITIATING THE PROCEEDINGS ARE (1) ORD ER IS ERRONEOUS AND (2) PREJUDICIAL TO THE INTEREST OF RE VENUE HAVE NOT BEEN SATISFIED. SINCE A.O. ENQUIRED AND ALLOWED THE CLAIM, THE CONTENTION OF LD. CIT THAT A.O. ALLOWED MECHANICALLY CANNOT BE SUPPORTED. FOR THESE REASONS , WE SET ASIDE THE ORDER OF LD. CIT AND RESTORE THE ORDER OF A.O. DATED 29.12.2011 ON THIS ISSUE'. I.T.A. NOS. 747 & 748/HYD/2017 M/S JEEVAN SHAKTI CHIT FUND PVT. LTD. 5 6.1. FACTS BEING SIMILAR AND CONTENTIONS OF THE CIT BEING SIMILAR, WE ARE OF THE OPINION THAT A.O. IS CORRECT IN ALLOWING THE AMOUNT AS BAD DEBT. NOT ONLY THAT, EVEN IF IT I S NOT ALLOWABLE AS BAD DEBT THE AMOUNT CAN ALSO BE CONSID ERED AS BUSINESS LOSS AND THEREFORE, THERE IS NO PREJUDICE CAUSED TO THE REVENUE ON THIS ISSUE. BOTH ON FACTS AND ON LAW , THE PROCEEDINGS INITIATED BY LD. CIT UNDER SECTION 263 CANNOT BE SUSTAINED. TWIN CONDITIONS REQUIRED FOR INITIATING THE PROCEEDINGS ARE (1) ORDER IS ERRONEOUS AND (2) PREJ UDICIAL TO THE INTEREST OF REVENUE HAVE NOT BEEN SATISFIED. SI NCE A.O. ENQUIRED AND ALLOWED THE CLAIM, THE CONTENTIONS OF LD. CIT CANNOT BE SUPPORTED. IN VIEW OF THIS, WE SET ASIDE THE ORDER OF CIT AND RESTORE THE ORDER OF A.O. DATED 09.11.2011. ' 8.1. THE SAID DECISION WAS FOLLOWED IN AY 2010-11 A LSO. SINCE THE FACTS AND GROUNDS ARE SIMILAR TO THE EARL IER YEARS, FOLLOWING THE DECISION OF THE COORDINATE BENCH IN T HOSE YEARS, WE UPHOLD THE ORDER OF THE CIT(A) AS THE DECISION O F THE CIT(A) IS IN CONSONANCE WITH THE DECISION OF THE IT AT AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 9. AS THE ISSUE IN AY 2013-14 IS MATERIALLY IDENTI CAL TO THAT OF AY 2012-13, FOLLOWING THE DECISION THEREIN, WE D ISMISS THE APPEAL OF THE REVENUE IN THIS AY ALSO. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018. SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER SD/- (V. DURGA RAO) JUDICIAL MEMBER HYDERABAD, DATED 31 ST JANUARY, 2018 KV I.T.A. NOS. 747 & 748/HYD/2017 M/S JEEVAN SHAKTI CHIT FUND PVT. LTD. 6 COPY FORWARDED TO: 1. DCIT, CIRCLE 2(1), 5 TH FLOOR, ROOM NO. 514, SIGNATURE TOWERS, KONDAPUR, HYD. 2. M/S JEEVAN SHAKTI CHIT FUND PVT. LTD., 207, 2 ND FLOOR, PANCOM BUSINESS CENTRE, AMEERPET, HYD. 3. CIT(A) - 1, GUNTUR, HYDERABAD 4 PR. CIT - 2, HYDERABAD 5 THE DR, ITAT, HYDERABAD 6 GUARD FILE