DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD vs. MARGADARSI CHIT FUND PRIVATE LIMITED, HYDERABAD

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ITA 1662/HYD/2019Status: DisposedITAT Hyderabad28 May 2021AY 2016-175 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal agreed that the CIT(A) no longer has 'set aside' jurisdiction to remand issues. However, it adopted the same approach on merits and restored the issue of bad debts to the Assessing Officer for adjudication.

What were the facts?

The Revenue appealed against the CIT(A)'s order which restored the disallowance of bad debts written off. The CIT(A) had relied on previous tribunal orders to remit the issue back to the Assessing Officer for re-examination.

What were the issues?

Whether the CIT(A) has the jurisdiction to remand an issue back to the Assessing Officer, and the allowability of bad debts written off in the context of chit fund business.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 251(1)(a)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD

Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU

PER S.S.GODARA, J.M. :

This Revenue’s appeal for AY.2016-17 arises from the CIT(A)-4, Hyderabad’s order dated 29-08-2019 passed in appeal No.10259/2018-19/ACIT,Cir.16(2)/CIT(A)-4/Hyd/19- 20, involving proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2.

The Revenue’s sole substantive ground raised in the instant appeal seeks to reverse the CIT(A)’s action allegedly restoring the issue of disallowance of bad debts written-off

:- 2 -: amounting to Rs.41,28,63,386/- for the sole reason that the ‘set aside’ juri iction u/s.251(1)(a) of the Act stands omitted vide Finance Act, 2001 w.e.f.01-06-2001. 3. The assessee’s case on the other hand is that the CIT(A)’s detailed discussion in paras 4.2 to 4.4 to this effect has followed the tribunal’s order itself in ITA No.268/Hyd/2018, AY.2014-15 to re-work the amounts involved qua the instant issue as follows:

“4.2 I have carefully considered the assessment order, submissions of the AR and the case laws relied upon. In this regard, I would like to refer to the appellate order passed by my predecessor in the appellant company's own case for the Asst. Years 2012-13, 2013-14, and 2014-15, wherein the following observations were made.

5.

2 During the course of appeal proceedings, the appellant submitted that it is engaged in the business of chit funds and acts as a foreman for various groups of chits conducted by them. In the course of chit business, chit holders draw money in auction of chits conducted every month in advance which they have to pay-back in instalments. Appellants gets commission of 5% of the "face value of chit for conducting the chit activity which is their main income apart from various other amounts collected from chit holders during the course of this business. As it happens in every business some of chit holders who draw money may not pay monthly instalments and become defaulters thus making them appellant's debtors. Some of such chit holders pay their dues in full though late, some may pay part of the dues and some may not pay such dues. Appellant tries to collect such dues by taking all possible steps legally and at times will not be able to collect some of such dues inspite of its best efforts. It is these unpaid dues which are written off after evaluating the possibility of their recoverability. Thus, non recoverability of dues in chit business is an inherent business risk and arises in the course of carrying on chit business. Appellant also submit that such write offs will be in few cases whereas it has chit holders numbering about 3.08 lakhs. The appellant submitted that in their own case for the A.Y. 1993-94, the CIT(A), allowed the appeal in favour of the appellant. Further, the appellant submits that similar issue came up recently before the Hon'ble ITAT, Hyderabad Bench, in the case of Shriram Chits(P) Ltd. for the A.Y. 2009-10 wherein the Hon'ble ITAT vide its order in ITA No.651/Hyd/2012 dt. 05-04-2013

:- 3 -: "remitted the issue back to the file of the Assessing Officer to re- examine the issue in the light of the order of earlier years and allowed the appellant's appeal on this ground for statistical purpose". Reference is also made to the decision pronounced by the Hon'ble ITAT, Hyderabad in the appellant company's own case vide ITA No. 268/Hyd/18 dated 19th September, 2018, wherein it was held that "Considered the rival submissions and perused the material on record. As regards the bad debts, the CIT(A) following the decision of ITAT in the case of Shriram Chits (P) Ltd in ITA No. 651/Hyd/2012 dated 05.04.2013, 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."

4.

4 In view of the above, going by the decision of my predecessor and the decision of the Hon'ble ITAT, Hyderabad in the appellant's own case, the issue is remitted back to the AO with a direction to verify the same and rework the disallowance of bad debts and allow the same in accordance with law. The ground of appeal is partly allowed”.

4.

We have heard rival submissions. We are of the opinion that the Revenue’s arguments indeed deserve to be accepted in principle since the CIT(A) no more holds “set aside” juri iction to remand any issue back to the Assessing Officer. The fact also remains that the impugned issue of bad debts is a recurring one in assessee’s case which has been restored back to the Assessing Officer in preceding assessment years. We therefore reverse the CIT(A)’s findings regarding the legal aspect but adopt the very approach on merits and restore the instant issue back to the file of Assessing Officer for his appropriate adjudication as per law in light of his findings in said earlier assessment years. The assessee is directed to :- 4 -: appear before the Assessing Officer on or before 30-09-2021 with all the relevant details in consequential proceedings.

5.

This Revenue’s appeal is treated as partly allowed for statistical purposes in foregoing terms.

Order pronounced in the open court on 28th May, 2021 (LAXMI PRASAD SAHU) JUDICIAL MEMBER Hyderabad, Dated: 28-05-2021 TNMM

:- 5 -: Copy to : 1.Dy.Commissioner of Income Tax, Circle-16(2), Hyderabad. 2.M/s.Margadarshi Chitfund Pvt. Ltd., D.No.5-10-195, Fateh Maidan Road, Opp: Police Control room, Hyderabad. 3.CIT(Appeals)-4, Hyderabad. 4.Pr.CIT-4, Hyderabad. 5.D.R. ITAT, Hyderabad. 6.Guard File.

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