ASST CIT 15(1)(2), MUMBAI vs. DESH CONSULTANCY SERVICES P. LTD, NAVI MUMBAI

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ITA 7315/MUM/2014Status: DisposedITAT Mumbai20 July 2016AY 2011-123 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) misappreciated the AO's reasoning, which was based on lack of evidence, not the accounting method. Therefore, the issue requires fresh examination by the CIT(A).

What were the facts?

The assessee claimed a deduction of Rs. 4.05 crores as chit discount on pro rata basis for its investment in chit fund schemes. The Assessing Officer disallowed this claim due to lack of evidence. The CIT(A) deleted the disallowance, relying on the assessee's consistent accounting method and a previous assessment order.

What were the issues?

Whether the CIT(A) was justified in deleting the disallowance of chit discount without addressing the AO's primary reason of lack of evidence.

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Income Tax Appellate Tribunal, “D” Bench, Mumbai

For Appellant: Shri S.L. Jain
For Respondent: Shri Nitin Waghmode
Hearing: 12.7.2016Pronounced: 20.7.2016

O R D E R Per B.R. Baskaran (AM) :-

The appeal filed by the Revenue is directed against the order dated 26.9.2014 passed by learned CIT(A)-22, Mumbai and it relates to A.Y. 2011-12.

2.

The Revenue is aggrieved by the decision of learned CIT(A) in deleting the disallowance of chit discount claimed by the assessee.

3.

We have heard the parties and perused the record. The assessee company has subscribed to chit fund schemes floated by M/s. Shriram Chits (Maharashtra) Limited. It had claimed chit discount on pro rata basis and accordingly claimed a sum of ` 4.05 crores as deduction. The Assessing Officer disallowed the said claim by holding that the assessee has not brought any evidence on record to show that it has invested in chit fund schemes and has incurred such a huge discount of ` 4.05 crores. Accordingly, the Assessing Officer disallowed the above said claim. In the appellate proceedings, learned CIT(A) took the view that the disallowance has been made by the Assessing

2 Desh Consultancy Services P. Ltd.

Officer, as he did not accept the method of accounting followed by the assessee. The assessee had claimed discount of chit fund on pro rata basis following the decision taken by the Assessing Officer in the assessment year 2003-04. Learned CIT(A) took the view that the Assessing Officer should not have disturbed the said method followed by the assessee as per decision taken by the Assessing Officer himself in A.Y. 2003-04. Accordingly, by following the decision rendered by Hon'ble Supreme Court in the case of CIT Vs. Bilahari Investments (P) Ltd. (299 ITR 1), learned CIT(A) took the view that there is no reason to disturb the method consistently adopted by the assessee.

4.

We noticed that learned CIT(A) has misdirected himself in appreciating the reasons on which disallowance was made by the Assessing Officer. As noticed earlier the Assessing Officer disallowed the claim on the reasoning that the assessee has not furnished any evidence. From the assessment order, we noticed that the Assessing Officer has not discussed anything about the method of accounting on chit discount and hence we are of the view that this issue requires fresh examination at the end of learned CIT(A). Accordingly, we set aside the order of learned CIT(A) and restore this issue to his file with the direction to adjudicate the same afresh after hearing the assessee on the ground on which the disallowance was made by the Assessing Officer.

5.

In the result, appeal filed by the Revenue is treated as allowed for statistical purposes.

Order has been pronounced in the Court on 20.7.2016

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