JEEVAN SHAKTI CHIT FUND PRIVATE LIMITED,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CIRCLE-2(1), HYDERABAD

Brief facts of the case are that the assessee company, engaged in the business of chits, filed its return of income for the A.Y 2014-15 on 27.11.2014 admitting total income of Rs.81,05,940/-. The case was selected for scrutiny u/s 143(3) of the Act through CASS and the assessee was asked to furnish certain information. The representative of the assessee appeared and filed the details called for. On perusal of the same, the AO observed that the assessee company has claimed bid loss to the tune of Rs.87,59,297/- during the F.Y 2013-14. When the assessee was asked for justification, the assessee submitted as follows: “4. … The Company M/s Jeevan Shakthi Chit Fund Put. Ltd. has incurred expenditure towards Bid loss to the tune of Rs. 87, 59,297/- during the year 2013-14. A detailed statement of Bid loss contains name of Chit Member, amount paid, date and mode of payment is enclosed herewith for your ready reference. Further it is to submit that M/s. Jeevan Shakthi Chit Fund Pvt Ltd. is engaged in the business of chit fund for the past 28 years. In the chit fund business, differed payments/ default of payments by subscribers occur frequently due to which the company will not be in a position to meet the committed prized money to the prized bidder. To fill the gap in bid moneys payable, the company with the permission from prized subscriber will postpone the payment due to subsequent months. The difference between the payable amount and the money actually paid to subscriber (i.e. the actual payment shall be the prize money in the month of payment as per chit bye laws.) is accounted as bid loss for the month. These payments are commercial- in. nature and not necessitated by virtue of any law or legal obligation. "

The AO however, was not convinced with the assessee’s contention and held as under:

He accordingly disallowed the bid loss and brought it to tax. Further, he also made other additions u/s 36(2)(i) and 40A(3) of the Act and completed the assessment.

Aggrieved, the assessee preferred an appeal before the CIT (A) who deleted the additions other than the disallowance of bid loss. Against the addition confirmed by the CIT (A), the assessee is in second appeal before the Tribunal.

The learned Counsel for the assessee submitted that the assessee had filed detailed written submissions before the CIT (A) but could not appear before the CIT (A) to make personal submissions. He submitted that the CIT (A) has passed the order ex-parte and the assessee prayed for another opportunity to present his case before the authorities below.

The learned DR was also heard who opposed the remand.

After hearing both the parties and after perusal of the material placed on record, we find that before the AO as well as the CIT (A), the assessee has made similar detailed submissions, but failed to file the necessary documentary evidence relating to the loss which has arisen on account of chit bidding. We find that the order of the CIT (A) is ex-parte the assessee and mainly on the ground that the assessee has not filed any details/break up for the bid loss. The learned Counsel for the assessee has submitted before us, that had personal hearing been given to the assessee, he would have produced all the relevant details. Taking his contention into consideration and in the peculiar circumstances of the case and to give the assessee one more opportunity only in the interest of natural justice, we deem it fit and proper to remand the issue to the file of the AO for de novo consideration of this issue alone in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing.

In the result, assessee’s appeal is treated as allowed for statistical purposes. Order pronounced in the Open Court on 29th September, 2020.