SHUBHANANDII CHIT FUNDS PRIVATE LIMITED,WARANGAL vs. INCOME TAX OFFICER, WARD-1, WARANGAL

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 1636/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2021-22) Shubhanandii Chit Funds Vs. ITO Private Limited, Ward – 1 WARANGAL Warangal PAN: AAVCS2049D (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Advocate S. Rama Rao राज� व �ारा/Revenue by: Shri Gaurav Sharma, CIT(DR) सुनवाई की तारीख/Date of hearing: 22/07/2026 घोषणा की तारीख/Pronouncement: 05/08/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by Shubhanandii Chit Funds Private Limited (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 24.09.2025 for the A.Y. 2021-22. 2. The assessee has raised the following grounds of appeal: “1. The order of the learned CIT (Appeals) is erroneous both on facts and in law to the extent it is prejudicial to the appellant.

2 2. The learned CIT (Appeals) erred in confirming the addition of Rs.1,66,07,215/- out of Rs.41,07,92,437/- made by the Assessing officer towards explained cash deposits into the bank account. 3. The learned CIT (Appeals) ought to have considered the fact that the entire deposits made into the bank account is explained by the appellant herein and no part of the deposits would represent the unexplained income. 4. The learned CIT (Appeals) erred in confirming the addition of Rs.63,42,03,720/- out of Rs.253,35,21,855/- made by the Assessing officer u/s 69A of the I.T. Act. 5. The learned CIT (Appeals) ought to have considered the fact that all the credits are properly explained by the appellant as represent the business receipts and, therefore, no part of the amount could have been treated as the income of the appellant. 6. The learned CIT (Appeals) erred in confirming disallowance of Rs.4,78,198/- u/s 40(a)(ia) of the I.T. Act, out of the amount added of Rs.1,41,07,658/-. 7. Any other ground that may be urged at the time of hearing. 3. The brief facts of the case are that the assessee is a chit fund company, filed its return of income for Assessment Year 2021-22 on 31.12.2022, declaring a total income of ₹30,55,573. The case of the assessee was selected for complete scrutiny and accordingly notice under section 143(2) of the Income-tax Act, 1961 (“the Act”) dated 01.06.2023 was issued by the Learned Assessing Officer (“Ld. AO”). During the course of assessment proceedings, the Ld. AO observed that during the year under consideration, the assessee had deposited cash of ₹41,07,92,437 in its bank accounts. The Ld. AO further observed that apart from the cash deposits, there were other deposits aggregating to ₹253,35,21,855 in the bank accounts of the assessee. Since, according to the Ld. AO, the assessee failed to explain the source of the aforesaid deposits, he treated the entire cash deposits as well as the other deposits as

3 unexplained under section 69A of the Act. The Ld. AO also made an addition of ₹62,89,136 on account of interest income and addition of ₹1,41,07,658 on account of disallowance of expenditure. Accordingly, the assessment was completed by the Ld. AO under section 143(3) read with section 144B of the Act vide order dated 23.03.2024, determining the total income of the assessee at ₹296,77,66,659. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT (A), who partly allowed the appeal of the assessee. 5. Aggrieved by the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. Ground Nos. 1 and 7 raised by the assessee are general in nature. No specific arguments were advanced by the Learned Authorized Representative (“Ld. AR”) in support of these grounds. Accordingly, the said grounds are dismissed as not requiring any separate adjudication. 6. Ground Nos. 2 to 5 of the assessee relate to the addition of ₹16,60,72,158 sustained by the Ld. CIT (A) out of the addition of ₹41,07,92,437 made by the Ld. AO on account of cash deposits in the bank account and the addition of ₹63,42,03,720 sustained by the Ld. CIT (A) out of the addition of ₹253,35,21,855 made by the Ld. AO on account of deposits, other than cash deposits, in the bank accounts of the assessee. In this regard, the Ld. AR submitted that the assessee is engaged in the business of running chit funds and the entire amounts deposited in the bank accounts, whether by cash or through banking channels, represent business receipts received from the subscribers of various chit groups. He

4 submitted that the assessee had maintained regular books of account, which were duly audited, and had furnished the books of account along with the audited financial statements before the lower authorities. However, according to him, the lower authorities failed to appreciate the true nature of the business and proceeded to sustain the additions merely on the ground that the identity of each subscriber was not established. The Ld. AR further submitted that the assessee has filed additional evidence before this Tribunal in the form of sample chit agreements entered into with the subscribers, containing their names, addresses and other relevant particulars, in support of its contention that the impugned deposits represent receipts from subscribers of the chit fund business. It was submitted that owing to the faceless assessment proceedings and the voluminous nature of the records, the assessee could not furnish the entire set of agreements before the lower authorities. He submitted that these documents go to the very root of the controversy involved in the appeal and, therefore, prayed that the additional evidence may kindly be admitted. He further prayed that the additions sustained by the Ld. CIT (A) be deleted. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) invited our attention to para no. 4.4 of the assessment order and submitted that the Ld. AO has categorically recorded that the assessee failed to furnish any satisfactory explanation regarding the cash deposits as well as other deposits in the bank accounts. Therefore, according to him, the Ld. AO rightly invoked the provisions of section 69A of the Act. The Ld. DR further invited our attention to para no. 5.4 of the order of the Ld. CIT (A) wherein the remand report

5 submitted by the Ld. AO has been reproduced. He submitted that even during the remand proceedings, the assessee had merely furnished summaries of deposits in various bank accounts and failed to furnish the complete particulars of the subscribers, including their names, addresses and other relevant details, corresponding to the deposits made in the bank accounts. Accordingly, he submitted that the additions sustained by the Ld. CIT (A) are fully justified. The Ld. DR, however, fairly submitted that the additional evidence filed before the Tribunal requires proper verification at the level of the Ld. AO. He further submitted that only sample chit agreements have been filed before the Tribunal, whereas the assessee has a large number of subscribers and, therefore, the genuineness of the claim can be verified only by examining a larger number of agreements and connected records. Accordingly, he prayed that the issue may be restored to the file of the Ld. AO for proper verification. 8. We have heard the rival submissions and perused the material available on record. At the outset, we find that the assessee has filed additional evidence before us in the form of sample chit agreements entered into with its subscribers containing their names, addresses and other relevant particulars. The assessee has explained that the said documents could not be produced before the lower authorities due to the faceless mode of assessment proceedings and the voluminous nature of the records. In our considered opinion, the additional evidence filed by the assessee goes to the very root of the controversy involved in the present appeal, namely, the source and nature of the deposits made in the bank accounts of the assessee. Therefore, in the interest of

6 substantial justice, the additional evidence deserves to be admitted. Accordingly, the petition for admission of additional evidence is allowed and the additional evidence is admitted on record. We have gone through para no. 4.4 of the assessment order, which is to the following effect:

7 the remand report, the Ld. CIT (A) has already granted substantial relief to the assessee by reducing the additions made by the Ld. AO. We have further examined para nos. 5.6.1 and 5.6.2 of the order of the Ld. CIT (A), which is to the following effect:

8 The consistent stand of the assessee is that the deposits made in the bank accounts represent subscription amounts received from the subscribers of various chit groups and that the commission income has been earned from such chit fund activities. Therefore, in our considered opinion, the source of the deposits cannot be examined in isolation without verifying the subscriber-wise details, the corresponding bank deposits and the commission income recognized by the assessee in its books of account. This aspect also goes to the root of the matter and requires detailed verification by the Ld. AO. Before us, the assessee has also produced additional documentary evidence in the form of some samples of chit agreements executed with the subscribers in support of its contention that the impugned deposits represent business receipts received from its subscribers in the ordinary course of carrying on its chit fund business. In our considered view, these documents are highly relevant and require detailed verification by the Ld. AO. At the same time, we also find merit in the submission of the Ld. DR that only some sample agreements have been filed before us and that the correctness of the assessee’s claim can be verified only after examining a larger number of agreements and the corresponding books of account and supporting records. Considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to set aside the impugned findings of the Ld. CIT (A) on this issue and restore the matter to the file of the Ld. AO for de novo adjudication. The Ld. AO shall examine the additional evidence admitted by us along with all other documentary evidence already filed before the lower authorities, including the books of account, audited financial statements and other relevant records. The Ld. AO shall verify the genuineness of the

9 assessee’s claim that the deposits in the bank accounts represent business receipts from the subscribers of the chit fund business. The assessee is directed to furnish before the Ld. AO the complete details of the subscribers from whom the subscription amounts have been received, including their names, addresses and PAN, wherever available. The assessee shall also reconcile the aggregate subscription receipts as per the subscriber-wise details with the deposits made in the respective bank accounts and further reconcile the same with the commission income of ₹85,05,299 disclosed in the Profit and Loss Account. The Ld. AO shall verify the correctness of such reconciliation and thereafter decide the issue in accordance with law. For the aforesaid purpose, the Ld. AO shall be at liberty to call for and examine such number of chit agreements, subscriber details, books of account, ledgers, receipts and any other supporting documents as may be considered necessary for satisfying himself regarding the source and nature of the deposits. The assessee shall extend full cooperation and furnish all such information and documentary evidence as may be called for by the Ld. Ld. AO. Accordingly, the additions of ₹16,60,72,158 sustained on account of cash deposits and ₹63,42,03,720 sustained on account of other deposits in the bank accounts are set aside to the file of the Ld. AO for fresh adjudication in accordance with law after affording adequate opportunity of being heard to the assessee. Thus, Ground Nos. 2 to 5 of the assessee’s appeal are allowed for statistical purposes. 11. Ground No. 6 of the assessee relates to the addition of ₹4,78,198 sustained by the Ld. CIT (A) under section 40(a)(ia) of the Act out of the total disallowance of expenditure

10 ₹1,41,07,658 made by the Ld. AO. In this regard, the Ld. AR submitted that the Ld. AO has made the aforesaid disallowance on account of non-deduction of tax at source by the assessee on certain payments. Inviting our attention to the provisions of section 40(a)(ia) of the Act, the Ld. AR submitted that only 30% of the amount on which tax was deductible but was not deducted is liable to be disallowed. He, therefore, prayed that suitable directions may be issued to the Ld. AO to restrict the disallowance accordingly. 12. Per contra, the Ld. DR fairly submitted that he has no objection if the issue is decided in accordance with the provisions of section 40(a)(ia) of the Act. 13. We have heard the rival submissions and perused the material available on record. We have also gone through the provisions of section 40(a)(ia) of the Act, which is to the following effect: “Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— (a) XXX XXX XXX XXX XXX

(ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: “ 14. On a plain reading of the above provision, we find that only 30% of the amount on which tax was deductible but has not been deducted or, after deduction, has not been paid within the prescribed time is liable to be disallowed while

11 computing the total income of the assessee. Accordingly, we direct the Ld. AO to restrict the disallowance under section 40(a)(ia) of the Act to 30% of the amount on which tax was deductible but was not deducted by the assessee during the year under consideration, after due verification of the relevant facts and records. Accordingly, Ground No. 6 of the assessee is allowed for statistical purposes.

Order pronounced in the Open Court on 5th August, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 5th August, 2026. Vinodan/sps Copy to: S.No Addresses 1 Shubhanandii Chit Funds Private Ltd, 2-4-161 Ramnagar, Hanamkonda, Warangal 506001 2 Income Tax Officer Ward-1, Warangal 3 Pr. CIT, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.08.05 14:32:12 +05'30'