M/S CHANNAPALA CHIT FUND ,DAVANGERE vs. INCOME TAX OFFICER WARD-1(1), DAVANGERE

The assessee has filed this appeal challenging the order dated 26/3/2018 passed by ld CIT(A), Davangere and it relates to the asst. year 2015-16.

The appeal is barred by limitation by 65 days. The assessee has moved a petition requesting the bench to condone the delay. We heard the parties on this preliminarily issue. Having regard to the submissions made in the petition we condone the delay and admit the appeal.

We heard the parties and perused the record. The assessee is engaged in the business of running chit funds. The AO noticed that the assessee has shown a sum of Rs.15.91 lakhs as liability under the head ‘current liabilities – chits payable”. Since the assessee did not produce books of account or any other material to prove the genuineness of the liability, the AO treated the same as unproved liability and added the same to the total income of the assessee. The ld CIT(A) also confirmed the same.

The ld AR submitted that the AO was not correct in observing that there was no books of account. He submitted that the assessee has been maintaining the books of account. He further submitted the amount of Rs.15.91 lakhs consisted of chit amount payable to the subscribers and also includes a sum of Rs.11.19 lakhs received from chit members as advance payment. Since the assessee has maintained books of account, he submitted that the assessee would be in a position to furnish all the details that may be required by the AO to prove the liability. The Ld A.R submitted that he has also brought the books of account. Accordingly he submitted that the assessee may be provided with an opportunity in this regard.

We heard the ld DR and perused the record. Since the assessee has maintained books of account, we are of the view that the assessee may provided with an opportunity, in the interest of natural justice, to explain the issue before the AO. Accordingly we set aside the order passed by ld CIT(A) and restore this issue to the file of AO for examining it afresh.

In the result, all the appeal of the assessee is treated as allowed for statistical purposes.