Andhra Social & Cultural Association, CHENNAI V. ACIT Non Corporate Circle 1, CHENNAI

ITA 1424/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0330 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-05-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P RANGA RAMANUJAM
• Keywords: Source of fund; Set aside
• Section: 271(1)(c); 12A; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.1421, 1422, 1423, 1424 & 1425/CHNY/2018 & '& / ASSESSMENT YEARS : 2005-06 TO 2009-10 M/S ANDHRA SOCIAL & CULTURAL ASSOCIATION, NEW NO.22, OLD NO.4, VIJAYARAGHAVA ROAD, T. NAGAR, CHENNAI - 600 017. PAN : AAAAA 0221 A V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 1,, CHENNAI. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SH. P. RANGA RAMANUJAM, CA +,)* - . / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT / - 0# / DATE OF HEARING : 14.08.2019 12' - 0# / DATE OF PRONOUNCEMENT : 03.09.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE FIVE APPEALS OF THE ASSESSEE ARE DIRECTE D AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS) -2, CHENNAI, DATED 28.02.2018 AND PERTAIN TO ASSESSMENT YEARS 2005-06, 2 I.T.A. NOS.1421 TO 1425/CHNY/18 2006-07, 2007-08, 2008-09 AND 2009-10. THEREFORE, WE HEARD THESE APPEALS TOGETHER AND DISPOSING THE SAME BY THIS COM MON ORDER. 2. SH. P. RANGA RAMANUJAM, THE LD. REPRESENTATIVE F OR THE ASSESSEE, SUBMITTED THAT THE APPEALS OF THE ASSESSE E ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFI CER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT'). REFERRING TO THE PENALTY ORDER, THE LD. REPRESENTATIVE SUBMITTED THA T THE ASSESSEE IS ADMITTEDLY A CULTURAL ASSOCIATION KNOWN AS CLUB. B Y MISTAKE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE FILED THE RETU RN OF INCOME CONTINUOUSLY BEFORE THE EXEMPTION CIRCLE CLAIMING E XEMPTION UNDER SECTION 11 OF THE ACT AS IF IT WAS REGISTERED UNDER SECTION 12A OF THE ACT. REFERRING TO THE PAPER-BOOK, MORE PARTICULARLY PAGE S 73-77, THE LD. REPRESENTATIVE SUBMITTED THAT THE CHARTERED ACCOUNT ANT AT THAT POINT OF TIME WAS SHRI V. ANANTHARAMAN. ON HIS ADVICE, THE RETURN WAS FILED BEFORE EXEMPTION CIRCLE. SUBSEQUENTLY, FOR THE ASS ESSMENT YEAR 2005- 06, THE PRESENT AUDITOR WAS ENGAGED TO FILE THE RET URN OF INCOME. ACCORDING TO THE LD. REPRESENTATIVE, THERE WAS A CH ANGE IN THE MANAGEMENT COMMITTEE OF THE ASSOCIATION ALSO. THE EARLIER MISTAKE COMMITTED BY THE PREVIOUS COMMITTEE MEMBERS AND CHA RTERED ACCOUNTANT WAS CONTINUED DURING THIS YEAR ALSO. TH EREFORE, ACCORDING TO 3 I.T.A. NOS.1421 TO 1425/CHNY/18 THE LD. REPRESENTATIVE, THE PRESENT CHARTERED ACCOU NTANT WAS ALSO UNDER THE IMPRESSION THAT THE ASSOCIATION WAS REGISTERED UNDER SECTION 12A OF THE ACT AND ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 3. SH. P. RANGA RAMANUJAM, THE LD. REPRESENTATIVE F OR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE IS A C LUB, THEREFORE, ELIGIBLE FOR EXEMPTION UNDER THE PRINCIPLE OF MUTUALITY. IN OTHER WORDS, ACCORDING TO THE LD. REPRESENTATIVE, WHEN A GROUP O F PEOPLE JOINED TOGETHER TO FORM AN ASSOCIATION FOR HAVING THEIR OW N ENGAGEMENTS, THERE CANNOT BE ANY PROFIT ACCRUED IN RESPECT OF TRANSACT IONS AMONG THE MEMBERS OF THE ASSOCIATION. THEREFORE, ACCORDING T O THE LD. REPRESENTATIVE, INCOME OF THE ASSOCIATION IS ELIGIB LE FOR EXEMPTION IN VIEW OF THE MUTUALITY INVOLVED IN THE TRANSACTIONS. ACC ORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE-ASSOCIATION MADE FIXED DEPOSIT IN THE BANKS AND INTEREST INCOME THEREFROM WAS DISCLOSED TO THE DEPARTMENT AND CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. ACC ORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS DISCLOSED ENTIRE T RANSACTIONS, ENTIRE INCOME AND ITS SOURCES AND CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER REJECTED THE CLAIM OF T HE ASSESSEE ON THE GROUND THAT ASSESSEE-ASSOCIATION WAS NOT A REGISTER ED ONE UNDER SECTION 12A OF THE ACT, THEREFORE, NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. REFERRING TO THE CLAIM OF T HE ASSESSEE THAT IT IS A 4 I.T.A. NOS.1421 TO 1425/CHNY/18 MUTUAL ASSOCIATION, THEREFORE, PRINCIPLE OF MUTUALI TY WOULD BE APPLICABLE, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT THE PRINCIPLE OF MUTUALITY MAY NOT BE APPLICABLE IN RES PECT OF INTEREST INCOME AND RENTAL INCOME FROM LAND AND STD BOOTH. THEREFO RE, SHE DISALLOWED THE CLAIM OF THE ASSESSEE AND ALSO LEVIED PENALTY U NDER SECTION 271(1)(C) OF THE ACT. THE LD. REPRESENTATIVE PLACED HIS RELI ANCE ON VARIOUS JUDGMENTS OF HIGH COURTS AND APEX COURT AND SUBMITT ED THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED UNLESS THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME BY THE ASSESSEE. IN THIS CASE, ACCORDING TO THE LD . REPRESENTATIVE, ENTIRE INCOME WAS DISCLOSED AND THERE WAS NO CONCEALMENT O F INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE NCE, ACCORDING TO THE LD. REPRESENTATIVE, THE LEVY OF PENALTY IS NOT JUST IFIED. 4. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE-ASSOCIA TION IS A CLUB AND IT IS NOT REGISTERED UNDER SECTION 12A OF THE ACT. AC CORDING TO THE LD. D.R., THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION11 OF T HE ACT AND ALSO CLAIMED EXEMPTION ON PRINCIPLE OF MUTUALITY. SINCE THE INTEREST INCOME AND RENTAL INCOME WERE RECEIVED FROM THIRD PARTIES, WHO ARE NOT MEMBERS OF THE ASSOCIATION, THE ASSESSING OFFICER BY PLACIN G RELIANCE ON THE VARIOUS JUDGMENTS OF THE HIGH COURT AND SUPREME COU RT, FOUND THAT THE 5 I.T.A. NOS.1421 TO 1425/CHNY/18 ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER LEVIED PENALTY UNDER SE CTION 271(1)(C) OF THE ACT FOR NOT OFFERING THE INCOME FOR TAXATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-ASSOCIATION / CLUB IS NOT REGISTERED U NDER SECTION 12A OF THE ACT. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE F OR EXEMPTION UNDER SECTION 11 OF THE ACT. HOWEVER, IT IS AN ORGANIZAT ION WHERE MUTUALITY IS INVOLVED IN THE TRANSACTIONS. WHENEVER THERE WERE TRANSACTIONS AMONG THE MEMBERS OF THE SAME ASSOCIATION, THERE CANNOT B E ANY PROFIT AVAILABLE FOR TAXATION. IN THIS CASE, THE ASSESSEE RECEIVED INTEREST INCOME FROM BANK AND RENTAL INCOME FROM THIRD PARTI ES. THE BANK AND THE LESSEE ARE NOT MEMBERS OF THE ASSOCIATION, THER EFORE, THE RENTAL INCOME AND INTEREST INCOME CANNOT BE CLAIMED AS EXE MPTION UNDER THE PRINCIPLE OF MUTUALITY. THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT PRINCIPLE OF MUTUALITY IS AVAILABLE ONLY IN RESPECT OF MEMBERS OF THE CLUB OR ASSOCIATION AND NOT IN RESPECT OF INCOME ACCRUED FROM THIRD PARTIES. THE ASSESSEE HAS DISCLOSED THE RENTAL INCOME AND IN TEREST INCOME. HOWEVER, THE SAME WAS NOT OFFERED FOR TAXATION CLAI MING THE SAME AS EXEMPTION EITHER UNDER SECTION 11 OR UNDER THE PRIN CIPLE OF MUTUALITY. 6 I.T.A. NOS.1421 TO 1425/CHNY/18 6. THE QUESTION ARISES FOR CONSIDERATION IS WHEN TH E ASSESSEE HAS DISCLOSED THE ENTIRE INCOME AND ITS SOURCES AND CLA IMED THE SAME AS EXEMPTION EITHER UNDER SECTION 11 OR UNDER THE PRIN CIPLE OF MUTUALITY, WHETHER ANY PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE LEVIED? WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SE CTION 271(1)(C) OF THE ACT, WHICH READS AS FOLLOWS:- 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (A PPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS U NDER THIS ACT, IS SATISFIED THAT ANY PERSON-- (B) .. .. .. .. .. .. .. .. .. . (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D).. . . HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY,-- 7. THE ASSESSING OFFICER MAY LEVY PENALTY UNDER SEC TION 271(1)(C) OF THE ACT IF HE IS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF SUCH INCOME. IN THIS CASE, THE ASSESSEE HAS FURNISHED ENTIRE DET AILS OF INCOME INCLUDING ITS SOURCES AND CLAIMED EXEMPTION UNDER S ECTION 11 OF THE ACT AND UNDER THE PRINCIPLE OF MUTUALITY. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE HAS FURNISHED EN TIRE DETAILS OF 7 I.T.A. NOS.1421 TO 1425/CHNY/18 INCOME AND ITS SOURCES AND CLAIMED EXEMPTION EITHER UNDER SECTION 11 OF THE ACT OR UNDER THE PRINCIPLE OF MUTUALITY, CAN WE SAY THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME OR FURN ISHED INACCURATE PARTICULARS OF SUCH INCOME? IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS O F THE SOURCES OF INCOME OR RENTAL INCOME. IT IS ALSO NOT THE CASE O F THE REVENUE THAT THE ASSESSEE HAS CONCEALED ANY PART OF ITS INCOME. IT IS THE DEFINITE CASE OF THE REVENUE THAT THE ASSESSEE BY CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT AND UNDER THE PRINCIPLE OF MUTUALITY HAS NOT OFFERED THE INTEREST INCOME AND RENTAL INCOME FOR TAXATION. THEREFORE, MERE CLAIM OF EXEMPTION UNDER SECTION 11 OR UNDER PRINCIPLE OF MU TUALITY, CANNOT BE CONSTRUED AS FURNISHING INACCURATE PARTICULARS OF I NCOME OR CONCEALING THE PARTICULARS OF INCOME. THEREFORE, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. 8. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL I S UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE PENALTY LEV IED BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT(APPEALS) IS DELETED . 9. IN THE RESULT, ALL THE FIVE APPEALS FILED BY THE ASSESSEE STAND ALLOWED. 8 I.T.A. NOS.1421 TO 1425/CHNY/18 ORDER PRONOUNCED IN THE COURT ON 3 RD SEPTEMBER, 2019 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 3 RD SEPTEMBER, 2019. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-2, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.