NISA CHITS INDIA PVT. LTD.,COIMBATORE vs. ITO, CORPORATE WARD-1,, COIMBATORE

ITA 2868/CHNY/2025Status: DisposedITAT Chennai25 September 2026AY 2017-189 pages
AI SummaryDismissed

What were the facts?

The assessee, NISA CHITS INDIA PRIVATE LIMITED, filed its return of income for Assessment Year 2017-18, declaring an income of Rs. 9,53,230/-. The assessment was completed accepting the returned income. However, during assessment proceedings, the Assessing Officer (AO) observed that the assessee violated Section 269T of the Income Tax Act, 1961, by repaying deposits exceeding Rs. 20,000/- otherwise than through account payee cheques, drafts, or electronic clearance systems, aggregating to Rs. 8,83,61,572/-. A show cause notice was issued, and the assessee responded by stating it runs small chit businesses for street vendors and small businessmen. The AO levied a penalty under Section 271E of Rs. 8,83,61,571/-. The Commissioner of Income Tax (Appeals) [NFAC] confirmed the penalty, relying on the Madras High Court decision in M.Sougoumarin Vs. ACIT. The assessee appealed this order to the ITAT.

What did the Tribunal hold?

The Tribunal held that the Learned Commissioner of Income Tax (Appeals) was justified in confirming the levy of penalty under Section 271E for the violation of Section 269T. The Tribunal noted that during the assessment proceedings, the assessee merely explained its business activity and customer base but did not provide any reasonable cause for violating Section 269T. The assessee did not deny the violation nor pleaded for a reasonable cause under Section 273B. Even before the Tribunal, although the assessee argued that the amounts repaid were not loans or deposits and relied on judicial precedents, no evidence was filed to demonstrate that the amounts repaid were indeed chit bid amounts to successful bidders. Furthermore, no compelling circumstances were shown for repaying such a large sum in cash, otherwise than through prescribed electronic modes. Consequently, the Tribunal found no illegality or perversity in the findings of the Learned CIT(A) and held that the assessee's submissions could not be accepted. The appeal filed by the assessee was dismissed.

What were the issues?

1. Whether the Learned Commissioner of Income Tax (Appeals) was justified in confirming the levy of penalty under Section 271E of the Income Tax Act, 1961, for violation of Section 269T of the Act. Assessee's contentions: - The payments made by the Foreman to the Subscriber are not deposits or loans, as chit fund companies are mere intermediaries. - The receipts are subscriber bid amounts payable on the principles of the doctrine of mutuality. - The Assessing Officer failed to appreciate the definition of 'deposit' under Section 45 I(bb) of the RBI Act, 1934. - The payment of chit bidding amount as repayment of deposits is not applicable to the provisions of Section 269T. - The chit company functions under the principles of the doctrine of mutuality. - The subscription received is not a deposit, loan, or advance. - The 'Chit' Company does not attract the provisions of Section 269T, and repayment of bidders' subscription is not a violation. - Reliance was placed on the Supreme Court judgment in CIT Vs. Shriram Chits Pvt Ltd. Revenue's contentions: - The assessee had not offered any explanation showing the existence of a reasonable cause for the violation of Section 269T. - The order passed by the Learned CIT(A) is reasoned and requires no interference.

Which sections of the Income-tax Act were involved?

Section 269T,Section 271E,Section 273B,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI

Pronounced: 25.09.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This appeal filed by the Assessee directed against the order of the Learned Commissioner of Income Tax(Appeals)[NFAC], dated 19.08.2025 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2017-18. 2. The Assessee raised the following grounds of appeal : “a) The order of the Learned Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case.

b) The Learned Commissioner of Income

The order continues below.

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