M/s.Trivandrum Club, Trivandrum V. The Assistant Director of Incometax( Exemption), Trivandrum

ITA 138/COCH/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6081 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-01-2019
• Assessment Year: 1998-1999
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: RAJEEV R
• Keywords: Depreciation; Rectification of order
• Section: 201; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 138 / COCH/ 20 1 7 ASSESSMENT YEAR : 1998 - 99 M/S. TRIVANDRUM CLUB, VAZHUTHACAUD, TRIVANDRUM. [PAN:AABFT 4635P] VS. THE ASSISTANT DIRECTOR OF INCOME - TAX (EXEMPTION S ), TRIVANDRUM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI RAJEEV R . , CA REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 15 / 01 / 201 9 DATE OF PRONOUNCEMENT 16 / 01 /201 9 O R D E R PER CHANDRA POOJARI, AM: TH IS APPEAL FILED BY THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE CIT(A), TRIVANDRUM DATED 14/02/2017 AND PERTAINS TO TH E A SSESSMENT YEAR 1998 - 99. 2 . THE ASSESSEE HAS RAISED LENGTHY GROUNDS IN THIS APPEAL WHICH MAINLY RELATE S TO THE RECTIFICATION OF ORDER DAT ED 14/03/2007 GIVING EFFECT TO THE ORDER OF THE TRIBUNAL DATED 5.3.2004 STATING THAT THERE IS NO MISTAKE APPARENT FROM RECORD TO INVOKE THE PROVISIONS OF SECTION 154 OF THE I.T. ACT BY ADIT(EXEMPTIONS) VIDE ORDER DATED 03/06/2008. I.T.A. NO . 138 /COCH/ 201 7 2 3. THE FACTS OF THE CA SE ARE THAT THE TRIBUNAL VIDE ITS ORDER DATED 5.3.2004 DIRECTED TO TAX RECEIPTS FROM NON MEMBERS AND TMBTS OF THE ASSESSEE CLUB ON THE BASIS OF SEPARATE SETS OF BOOKS OF ACCOUNT MAINTAINED BY THEM. ACCORDINGLY, EFFECT FOR THE SAID ORDER WAS GIVEN ON 14.0 3 . 2007 TREATING THE ENTIRE AMOUNT OF INCOME DETERMINED AS EXEMPT FROM TAX. THEN, FINDING THAT NO SEPARATE SETS OF BOOKS OF ACCOUNT TO DISTINGUISH THE RECEIPTS FROM MEMBERS AND NON MEMBERS HAD BEEN MAINTAINED FOR THE YEARS PRIOR TO AY 1998 - 99 AND IN THOSE A SSESSMENTS, THE ASSESSING OFFICER TREATED ONLY 50% OF THE RECEIPTS AS EXEMPT FROM TAX, RECTIFICATION ORDER FOR THE YEAR UNDER CONSIDERATION HAS SINCE BEEN PASSED ON 03.06.2008 WITHDRAWING 50% OF THE EXCESS INCOME WHICH WAS WRONGLY ALLOWED IN THE APPEAL EF FECT GIVEN ORDER DT.14.03.2007 AS EXEMPT, DUE TO THE REASON THAT NO SEPARATE SETS OF BOOKS OF ACCOUNT SO AS TO DISTINGUISH THE RECEIPTS FROM MEMBERS AND NON MEMBERS HAD BEEN MAINTAINED FOR THE YEAR UNDER CONSIDERATION AS WELL. 4 . ON APPEAL, THE CIT(A) OBSERVED THAT T HE ASSESSING OFFICER, BY VIRTUE OF SECTION 154 OF THE ACT, CAN RECTIFY ANY MISTAKE APPARENT FROM THE RECORD. IF IT IS A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY A COMPLICATED PROCESS OF INVESTIGATION, ARGUMENT OR PROOF IT CANNOT BE REGARD ED AS A MISTAKE APPARENT FROM THE RECORD. THE CIT(A) OBSERVED THAT AFTER GIVING EFFECT TO THE ITAT ORDER VIDE ORDER DATED 14.03.200 7 , THE ENTIRE INCOME WAS EXEMPTED FROM TAX BY THE ASSESSING OFFICER WITHOUT CONSIDERING THE FACT THAT NO SEPARATE SETS OF BO OKS OF I.T.A. NO . 138 /COCH/ 201 7 3 ACCOUNT SO AS TO QUANTIFY THE RECEIPTS FROM NON - MEMBERS AND TMBT'S HAD BEEN MAINTAINED BY THE ASSESSEE. ACCORDING TO THE CIT(A), TH E MISTAKE INADVERTENTLY CREPT IN WHICH IS VERY MUCH APPARENT FROM THE RECORD AND CANNOT BE CONSTRUED AS ARGUMENTATIVE IN NATURE AND DOES NOT FURTHER INVOLVE COMPLICATED PROCESS OF INVESTIGATION, ARGUMENT AND PROOF. HENCE, THE CIT(A) HELD THAT THE RECTIFICATION ORDER PASSED ON 03.06.2008 WAS VERY WELL WITHIN THE PERMISSIBLE LIMIT OF THE ACT AND DOES NOT REQUIRE FURTHER IN TERFERENCE. ACCORDING TO THE CIT(A), IT IS NOT THE CASE OF THE ASSESSEE THAT THEY ACTUALLY HAD MAINTAINED SEPARATE SETS OF BOOKS OF ACCOUNT TO DISTINGUISH THE RECEIPTS FROM MEMBERS AND NON MEMBERS DURING THE YEAR UNDER CONSIDERATION. IT IS ALSO NOT THE CA SE OF THE ASSESSEE THAT THE PRINCIPLE OF MUTUALITY IS APPLICABLE TO THE INCOME DETERMINED IN THE RECTIFICATION ORDER PASSED. THE CIT(A) OBSERVED THAT TO THE INCOME OF RS.19,70,050/ - WHICH WAS BROUGHT TO TAX AFTER ALLOWING DIRECT AND INDIRECT/COMMON EXPENS ES AS DIRECTED BY THE ITAT, THE PRINCIPLE OF MUTUALITY WO ULD NOT APPLY SINCE IT HAS DIRECT NEXUS TO THE RECEIPTS FROM THE INDIVIDUALS WHO WERE NOT MEMBERS OF THE ASSESSEE CLUB. IN VIEW OF THE ABOVE, T HE CIT(A) CONFIRMED THE RECTIFICATION ORDER PASSED U/S. 154 OF THE ACT. 4. 1 THE CIT(A) OBSERVED THAT A NOTHER GROUND OF APPEAL THAT THE PROCEEDINGS W E RE BARRED BY LIMITATION OF TIME WAS FACTUALLY INCORRECT SINCE THE RECTIFICATION ORDER WAS RIGHTLY PASSED WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR I N WHICH THE ORDER SOUGHT TO BE AMENDED WAS PASSED. AS EFFECT TO THE ORDER OF THE I.T.A. NO . 138 /COCH/ 201 7 4 ITAT WAS GIVEN ON 14.03.2007 AND SAME WAS THE ORDER SOUGHT TO BE AMENDED, THE CIT(A) HELD THAT THE RECTIFICATION ORDER PASSED ON 03 . 06.2008 WAS WITHIN THE PRESCRIBED TIME LI MIT AND HENCE, DISMISSED THIS GROUND. 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE CONTENTION OF THE LD. A R IS THAT THE RECTIFICATION ORDER PASSED U/S. 154 OF THE ACT IS ILLEGAL AND SHOULD BE QUASHED AS THERE IS NO MISTAKE APPARENT FROM REC ORD. 6. O N THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ORIGINALL Y, THE ASSESSING OFFICER PASSED THE ORDER ON 14/03/2007 GIVING EFFECT TO THE ORDER OF THE ITAT, COCHIN BENCH IN ITA NO. 285/COCH/2003 DATED 05/03/2004 WHEREIN HE HA D GIVEN DEDUCTION AS FOLLOWS: GROSS INCOME 27,50,082 LESS: 50% OF RECEIPTS TREATED AS EXEMPT 13,75,041 GROSS TOTAL INCOME 13,75,041 LESS: DIRECT EXPENSES ALLOWED IN THE ORDER DATED 3,12,795 22/03/2002 INDIRECT EXPENSES/ COMMON EXPENSES @10% 4,55,784 DEPRECIATION 11,457 7,80,036 TOTAL INCOME 5,95,010 I.T.A. NO . 138 /COCH/ 201 7 5 7.1 HOWEVER, THE ASSESSING OFFICER PASSED THE RECTIFICATION ORDER ON 0 3 /06/2008 WITHDRAWING THE DEDUCTION TOWARDS 50% OF RECEIPTS AS EXEMPT AT RS.13,75,041/ - AND DETERMINED THE INCOME AT RS.19,70,050/ - INSTEAD OF RS.5,95,010/ - . 7.2 NOW THE CONTENTION OF THE LD. AR IS THAT DEDUCTION WAS G RANTED TO THE ASSESSEE IN TERMS OF ITAT ORDER IN ITA NO. 285/COCH/2003 DATED 05/03/2004 WHEREIN IT WAS HELD AS FOLLOWS: 7(2) AS FAR AS THE APPORTIONMENT IS CONCERNED, WE DIRECT THE ASSESSING OFFICER TO TREAT 50% AS TAXABLE AND THE BALANCE 50% AS EXEMPT. 7(6) AS FAR AS THE ASSESSMENT YEARS 1997 - 98 AND 1998 - 99 ARE CONCERNED, THE ASSESSING OFFICER MAY BRING TO TAX THE RECEIPTS FROM NON - MEMBERS AND TMBTS ON THE BASIS OF THE SEPARATE ACCOUNTING MADE BY THE ASSESSEE - CLUB. THIS IS SUBJECT TO VERIFICATION TO B E MADE BY THE ASSESSING OFFICER. THEREFORE, THERE IS NO NEED OF ANY ESTIMATION FOR THESE TWO ASSESSMENT YEARS AS FAR AS TAXABLE RECEIPTS ARE CONCERNED. 7.3 CONTRARY TO THIS, THE LD. DR MADE THE SUBMISSION THAT IN THE ASSESSMENT YEARS PRIOR TO THE AS SESSMENT YEAR 1997 - 98, THE CLUB DID NOT MAINTAIN SEPARATE ACCOUNTS FOR THE RECEIPTS FROM MEMBERS/NON MEMBERS AND IN THOSE ASSESSMENTS, 50% OF THE RECEIPTS WERE TREATED AS EXEMPT , AS THE RECEIPTS FROM NON MEMBERS WERE NOT DISCERN I BLE. THEREFORE, THE TREATM ENT OF EXEMPTED 50% OF TAXABLE RECEIPTS WAS A MISTAKE. SINCE THE ORDER DATED 14/03/2007 WAS AN ORDER GIVING EFFECT TO THE TRIBUNAL ORDER DATED 05/03/2004, THE MISTAKE IS ALSO APPARENT FROM RECORD. THIS CONTENTION OF THE LD. DR CANNOT BE ACCEPTE D AS IT IS A DEBATABLE ISSUE. U NDER SECTION 154 OF THE I.T. ACT, THE ASSESSING OFFICER CAN I.T.A. NO . 138 /COCH/ 201 7 6 R ECTIFY THE MISTAKE IF IT IS A MISTAKE APPARENT FROM RECORD. IN OTHER WORDS, IT MUST BE AN OBVIOUS PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG PROCES S OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLE TWO DIFFERENT OPINIONS AND HENCE, IT IS A DEBATABLE ISSUE. IT WAS NOT A MISTAKE APPARENT FROM RECORD. HENCE, RECTIFICATION IS NOT POSSIBLE SINCE IN THIS CASE, THE ISSUE WAS TAKEN UP BY THE ASSESS ING OFFICER IN THE PROCEEDINGS U/S. 154 OF THE ACT DATED 03/06/2008 WHICH IS A DEBATABLE ISSUE. THUS, THE ASSESSING OFFICER IS NOT JUSTIFIED IN RECTIFYING THE MISTAKE VIDE THE IMPUGNED ORDER. ACCORDINGLY, WE QUASH THE RECTIFICATION ORDER PASSED U/S. 154 DATED 03/06/2008. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH JANUARY, 2019. SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PL ACE: KOCHI DATED: 16 TH JANUARY, 2019 GJ COPY TO: 1 . M/S. TRIVANDRUM CLUB, VAZHUTHACAUD, TRIVANDRUM. 2 . THE ASSISTANT DIRECTOR OF INC OME - TAX (EXEMPTIONS), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME - TAX (AP P EALS) , T RIVANDRUM. 4. THE PR. COMMISSIONER OF INCOME - TAX, TRIVANDRUM . 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NO . 138 /COCH/ 201 7 7