M/s The Koramangala Club, Bangalore V. ITO, Bangalore

ITA 1030/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5416 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: P DINESH
• Keywords: Bonafide belief; Earning of tax free income; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI SHAILENDRA KUMAR YADAV, JM ITA NO.1030 & 1031(BNG.)/2009 (ASSESSMENT YEAR : 2005-06 & 2006-07) THE KORAMANGALA CLUB, CA-17, 6 TH CROSS, 6 TH BLOCK, KORAMANAGALA, BANGALORE-560 034. APPELLANT VS THE INCOME-TAX OFFICER, WARD-7(3) BANGALORE RESPONDENT ASSESSEE BY : SHRI P.DINESH, ADVOCATE REVENUE BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CIT O R D E R PER SHAILENDRA KUMAR YADAV, JM : BOTH THESE APPEALS ARE BEING FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) ON THE POINT OF PENALTY LEVIED U/S 271B OF THE IT ACT. 2. AT THE OUTSET OF HEARING, IT WAS POINTED OUT T HAT THIS ISSUE IS COVERED IN ITAT, BANGALORE BENCH IN ASSESSEES OWN CASE IN ITA NO.391(BNG.)/2008 FOR THE AY: 2004-05, WHEREIN THE TRIBUNAL HAS DISCUSSED AND DECIDED THE ISSUE AS UNDER; WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CASE LAWS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE VIZ. CENTURY CLUB ITA NOS.1030 & 1031(B)/09 2 (SUPRA) IS ON THE ISSUE OF BONAFIDE BELIEF AS A REASONABLE CAUSE FOR NOT GETTING ACCOUNTS AUDITED U NDER THE PROVISIONS OF SEC.44AB. WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED DR THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE BONAFIDE BELIEF IT H AS WHEN THE VERY FACT THAT THE ASSESSEE HAD GOT ITS ACCOUNTS AUDITED UNDER OTHER STATUTORY PROVISIONS B UT FAILED TO GET THE ACCOUNTS AUDITED UNDER THE PROVIS IONS OF SEC.44AB HAVING BELIEVED THAT THE ENTIRE SALES A ND OTHER INCOME WAS NOT TAXABLE. THE AO HAD NOTED THA T THE COMMERCIAL TAX AUTHORITIES CONSIDERED THE ASSES SEE AS RENDERING BUSINESS OF SALE OF LIQUOR, SOFT DRI NKS, CIGARETTES ETC. WAS THEREFORE, CARRYING ON THE BUSI NESS SUPPLYING THE SAME TO ITS MEMBERS. EVEN THE CONCEPT OF MUTUALITY RENDERED ASSESSEE EARNING OTHER INCOME AMOUNTING TO RS.50,01,052/- WHICH THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH EXEMPT INCOME UNDER THE PROVISIONS OF CHAPTER III, THEREFORE, WOULD FALL U NDER THE CATEGORY OF CARRYING ON BUSINESS FOR PROFIT MOTIVE TILL ASSESSED. THE AO, THEREFORE, CLEARLY ESTABLISHED TH AT THE ASSESSEE HAD BEEN CARRYING ON BUSINESS OF SUPPLYING FOOD ARTICLES, SOFT DRINKS, CIGARETTES ET C. TO ITS MEMBERS ON THE CONCEPT OF MUTUALITY WHICH CONCLUDES THAT THE ASSESSEE WAS CARRYING ON BUSINESS TO BE VISITED BY THE PROVISIONS OF SEC.44AB WHEN THE TURN OVER EXCEEDED RS.40.00 LACS IN CASE ASSESSEE WAS ONLY DOING BUSINESS OF SALES AND RS.10.00 LACS WHEN IT RENDERED SERVICES TO ITS MEMBERS ON THE CONCEPT OF MUTUALITY. WE DO NOT FIND ANY MERIT IN THE CONCEPT OF ITA NOS.1030 & 1031(B)/09 3 MUTUALITY. WE DO NOT FIND ANY MERIT IN THE CONTENT ION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTIR E INCOME SO RENDERED OR COMPUTED DULY AUDITED UNDER OTHER PROVISIONS OF OTHER ACTS COULD, THEREFORE, ULTIMATELY BE THE SOURCE OF BONAFIDE BELIEF IN AS F AR AS THE AO WAS TO COMPUTE THE SAME ON THE BASIS OF OBTAINING AUDIT REPORT UNDER THE PROVISIONS OF SEC. 44AB. FACTS OF THE ASSESSEES CASE ARE, THEREFORE, NOT APPLICABLE TO THE FACTS OF THE CASE AS BROUGHT ON R ECORD IN THE CASE OF CENTURY CLUB(SUPRA) WHO HAD IN TURN RELIED ON THE ITAT, MUMBAI BENCH DECISION IN THE CA SE OF MAGNUM FUNDS(SUPRA) WHICH WAS GOVERNED BY THE PROVISIONS OF SECTION 10(23B) UNDER CHAPTER III WHI CH RELATED TO INCOMES EXEMPT. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE TO INDICATE THAT THE ASSESSEE WAS CONTINUE D HAVING A BONAFIDE BELIEF THAT THE ASSESSEE WAS GOVERNED BY THE CONCEPT OF MUTUALITY AND IT WAS NOT CARRYING ON BUSINESS ACTIVITY BEING SALE OF LIQUOR, CIGARETTES ETC. AND OTHER SERVICES TO ITS MEMBERS RESULTING SURPLUS TO BE VISITED BY THE PROVISIONS O F SEC.44AB OF THE IT ACT. ON THE FACTS AND CIRCUMSTA NCES BROUGHT ON RECORD, WE ARE INCLINED TO HOLD THAT THE AO HAD RIGHTLY PROCEEDED TO LEVY PENALTY THAT HAS BEEN RIGHTLY CONFIRMED BY THE LEARNED CIT(A). IN VIEW O F THEREOF, WE HAVE NO HESITATION IN DISMISSING THE AP PEAL FILED BY THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED ITA NOS.1030 & 1031(B)/09 4 3. NOTHING CONTRARY WAS BROUGHT ON BEHALF OF THE A SSESSEE IN THIS REGARD. FACTS BEING SAME, WE ARE NOT INCLINED TO IN TERFERE WITH THE FINDINGS OF THE CIT(A) WHEREBY THE PENALTY UNDER TH E PROVISIONS OF SEC.271B OF THE ACT HAS BEEN CONFIRMED. WE UPHOLD THE SAME. 4. SIMILAR ISSUE AROSE IN ITA NO.1031(B)09 I.E ISS UE OF PENALTY U/S 271B. FACTS BEING SIMILAR, SO FOLLOWING THE SAME RE ASONING, AS NO INTERFERENCE IS CALLED IN THE ORDER OF CIT(A), WHO HAS CONFIRMED PENALTY U/S 271B OF THE IT ACT. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE 01-04-2010 (DR. O.K.NARAYANAN) (SHAILENDRA KUMAR YADAV) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 01-04-2010 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR, ITAT, BANGALORE