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

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ITA 2440/BANG/2018Status: DisposedITAT Bangalore26 December 2019AY 2015-164 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal, noting that the assessee maintained books of account, set aside the CIT(A)'s order. The issue was restored to the AO for a fresh examination to provide the assessee an opportunity to explain the liability.

What were the facts?

The assessee, a chit fund company, had outstanding liabilities of Rs. 15.91 lakhs shown as 'current liabilities – chits payable'. The AO added this amount to the income as an unproved liability due to lack of supporting documents.

What were the issues?

Whether the AO was justified in treating the outstanding liability as unproved without allowing the assessee an opportunity to produce books of account and explain the genuineness of the liability.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C’’ BENCH : BANGALORE

Before: SHRI B.R BASKARAN & SHRI PAVAN KUMAR GADALE

For Appellant: Shri R Chandrashekar, Advocate
For Respondent: Shri Karuppusamy, Addl. CIT (DR)
Hearing: 18.12.2019Pronounced: 26.12.2019

Per B.R Baskaran, Accountant Member :

1.

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.

3.

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.

3. The assessee is aggrieved by the decision of ld CIT(A) in confirming the addition of Rs.15.91 lakhs relating to outstanding current liability.

4.

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.

5.

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.

6.

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.

7.

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

Order pronounced in the open court on 26th December, 2019.

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