Income Tax Appellate Tribunal - Hyderabad
Jeevan Shakti Chit Fund Private ... vs Department Of Income Tax on 5 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER
AND SHRI V.DURGA RAO, JUDICIAL MEMBER
ITA No.1529/Hyd/2014
(Assessment year 2010-11)
Dy. Commissioner of Income- V/s. M/s. Jeevan Shakti Chit Fund Pvt.
tax, Circle 2(1), Hyderabad Ltd., Hyderabad
( PAN - AAACJ 5056 C)
(Appellant) (Respondent)
Appellant by : Shri N.H.Naik DR
Respondent by : Shri P.Ravi Seshagiri Rao
Date of Hearing 03.06.2015
Date of Pronouncement 05.06.2015
ORDER
Per V.Durga Rao, Judicial Member :
This appeal filed by the Revenue is directed against the order passed by the learned Commissioner of Income-tax (Appeals) III, Hyderabad dated 28.7.2014 for the assessment year 2010-11.
2. Solitary issue involved in this appeal relates to disallowance of assessee's claim for bad debts of Rs.1,11,60,000 made by the Assessing Officer, which has been deleted the learned CIT(A).
3. Assessee in the present case is a company engaged in the business of chits. For the assessment year 2010-11, it has filed return of income on 14.10.2011 admitting total income of Rs.65,82,980. Though the said return has initially been processed under S.143(1), in the course of regular assessment that ensued, the Assessing Officer noticed that the assessee company has 2 ITA No.1529/Hyd/2014 M/s. Jeevan Shakti Chit Fund Pvt. Ltd., Hyderabad debited an amount of Rs.1,11,60,000 towards ad debts written off. The Assessing Officer has required the assessee to furnish the details with supporting documentary evidence with regard to these bad debts. Upon verification of such details furnished, the Assessing Officer issued summons dated 5.2.2013 to the concerned nine persons, for verifying the genuineness of the bad debts written off by the assessee company. Those persons were also required to furnish the following details, so as to verify that the amounts shown as bad debts are actually non-repayment of lifted chit amount by the concerned parties and to establish gap between liabilities of chit holders and repayments made by them so that exact bad debts could be quantified.
(a) Details of investment in chits of Jeevan Shakti Chit Funds;
(b) Bank account statements for the year in which investment was made
(c) PAN card copy and jurisdictional Assessing Officer details In response to the summons issued, none of them appeared before the Assessing Officer. It was explained by the authorized representative for the assessee before the Assessing Officer that four of the persons to whom summons were issued, were reluctant to receive notices and out of four persons have taken notice, but not appeared, two persons, viz. one V.Chowdary and V.Suresh Reddy, have sent their confirmations in writing. In the circumstances, it was requested that considering the amount of Rs.61,78,000 covered by the confirmation letters, disallowance if any, may be restricted only to the disallowance may be restricted to the balance Rs.59,89,000. The Assessing Officer, not satisfied 3 ITA No.1529/Hyd/2014 M/s. Jeevan Shakti Chit Fund Pvt. Ltd., Hyderabad with the explanation of the assessee, and relying on the provisions of S.36(2)(i) observed that the explanation of the assessee proved that the bad debts written off are not properly booked in the books of account and revenue recognition in earlier years was also not clear, and disallowed the entire claim of Rs.1,11,60,000 made by the assessee towards bad debts. After making inter-alia this addition of Rs.1,11,60,000, completed the assessment on a total income of Rs.1,77,67,980, vide order of assessment dated 25.3.2013 passed under S.143(3) of the Act.
4. Aggrieved by the above disallowance, assessee preferred an appeal before the learned CIT(A), who after considering the submissions of the assessee in detail, relying on the decision of the coordinate bench of the Tribunal in the case of Shriram Chits & Investments Ltd. V/s. JCIT (ITA No.651/Hyd/2012 dated 5.4.2013), deleted the addition made by the Assessing Officer.
5. Aggrieved by the relief granted by the learned CIT(A), Revenue has preferred this appeal before us.
6. At the outset, the learned counsel for the assessee, strongly supporting the order of the learned CIT(A), submitted the issue in dispute relating to disallowance of bad debts written off is covered in favour of the assessee by the decision of the coordinate bench of the Tribunal in assessee's own case for the assessment year 2009-10, vide order dated 25.9.2014 in ITA No.970/Hyd/2014, duly furnishing a copy thereof before us.
7. The Learned Departmental Representative, on the other hand, though did not controvert the position canvassed by the 4 ITA No.1529/Hyd/2014 M/s. Jeevan Shakti Chit Fund Pvt. Ltd., Hyderabad learned counsel for the assessee, relied on the order of the Assessing Officer and submitted that the learned CIT(A was not justified in deleting the disallowance made by the Assessing Officer.
8. We have considered the rival submissions and perused the impugned orders of the revenue authorities and other material available on record. We find that the issue of allowab lity of bad debts in question is covered by the coordinate bench decision of the Tribunal in assessee's own case, cited supra, in favour of the assessee and against the Revenue. Relevant portion of the said order of the Tribunal dated 25.9.2014 reads as follows-
"6. We have considered the issue and examined the arguments and paper book placed on record. We are of the opinion that order of CIT under section 263 cannot be upheld. As far as the legal principles are concerned, the clai is allowable under section 36(2) as bad debt. Not only the Board Circular allows it to be treated as a bad debt, which binding on the A.O. and also CIT, similar issue was also considered by the Coordinate Bench of Chennai Tribunal 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 Marg arsi Chit P. Ltd.(supra), the Coordinate 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 section 263 cannot be upheld. As far as the principles are concerned, the claim is allowable under section 36(2) as a bad debt. 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 are allowable as bad debt/ loss. Even if the same are to be considered as loss in business, there 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 the detail of bad debts claimed and assessee furnished details vide letter dated 24.11.2011 as item 3 with following explanation.5 ITA No.1529/Hyd/2014
M/s. Jeevan Shakti Chit Fund Pvt. Ltd., Hyderabad "In continuation of the hearing held on 9th November, 2011 and as required by you during the said hearing, we are submitting herewith the following information for the 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 months in Chit Closed series and doubtful debts in suits filed in Civil Courts of respective jurisdiction. Details for such debts Branch-wise is herewith enclosed."
6. On perusal of enclosed details running into pages 15 (2-16 in paper book) reveal that assessee has furnished complete details to A.O. in the course of assessment proceedings. Just because A.O. has not discussed issue in assessment order, it does not mean that A.O. has not applied his mind and mechanically allowed the claim.
7. 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) prejudicial to the interest of Revenue 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".
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 is not allowable as bad debt the amount can also be considered 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) prejudicial to the interest of Revenue have not been satisfied. Since 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. "
9. Facts and circumstances of the case in the year under consideration, being identical to those considered by e Tribunal in 6 ITA No.1529/Hyd/2014 M/s. Jeevan Shakti Chit Fund Pvt. Ltd., Hyderabad assessee's own case assessment year 2009-10, which in fact, followed the ratio laid down in similar matters, and consistent with the view taken by the Tribunal in similar matters, inc in assessee's own case, we find no infirmity in the order of the learned CIT(A). Accordingly, upholding the impugned order of the learned CIT(A), we reject the grounds of the revenue in this appeal.
10. In the result, Revenue's appeal is dismissed.
Order pronounced in the court 5th June, 2015 Sd/- Sd/-
(P.M.Jagtap) (V.Durga Rao)
Accountant Member Judicial Member
Dt/- 5th June, 2015
Copy forwarded to:
1. M/s. Jeevan Shakti Chit Fund Pvt. Ltd., 207, 2nd Floor, Pancom Business Center, Ameerpet, Hyderabad
2. Dy. Commissioner of Income-tax Circle-2(1), Hyderabad
3. Commissioner of Income-tax(Appeals) III, Hyderabad
4. Commissioner of Income-tax II , Hyderabad
5. Departmental Representative, ITAT, Hyderabad.
B.V.S