M/s. India Habitat Centre, New Delhi V. CIT(E), New Delhi

ITA 2340/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6829 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Assessee Lawyers: SURESH ANANTHRAMAN
• Keywords: Cost of acquisition
• Section: 143(3); 12A; 263; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.2340/DEL/2016 A.Y. : 2011-12 INDIA HABITAT CENTRE, LODI ROAD, NEW DELHI - 110003 (PAN: AAATI0499M) VS. COMMISSIONER OF INCOME TAX (EXEMPTIONS), PRATYAKASH KAR BHAVAN, E- 2, BLOCK, 26 TH FLOOR, DR. SHYAMA PRASAD MUKHERJEEMARG, CIVIC CENTRE, JAWAHARLAL NEHRU MARG, NEW DELHI 110 002 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SURESH ANANTHRAMAN, CA DEPARTMENT BY : MS. SATPAL GULATI, CIT(DR) DATE OF HEARING : 21-09-2016 DATE OF ORDER : 19-10-2016 ORDER PER H.S. SIDHU : JM THIS APPEAL BY THE ASSESSE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (EXEMPTIONS), NEW DE LHI DATED 15/16.03.2016 PASSED U/S. 263 OF THE I.T. ACT PERTAIN ING TO ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS:- 1. THE ORDER PASSED U/S 263 OF THE ACT IS WITHOUT JURISDICTION. ITA NO. 2340/DEL/2016 2 2. THE REVISIONAL ORDER HOLDING THAT THE ORDER DATED 24.3.2014 PASSED U/S 143(3) OF THE ACT IS ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS PERVERSE AND OPPOSED TO EVIDENCES ON RECORD. 3. THE ASSESSING OFFICER IN THE REGULAR ASSESSMENT HAVING THOROUGHLY EXAMINED THE APPLICABILITY OF THE PRINCIPLE OF MUTUALITY TO THE APPELLANT, THE REVISIONAL ORDER HOLDING THE SAME TO BE ERRONEOUS AND NOT BASED ON APPLICATION OF MIND BY THE ASSESSING OFFICER IS ENTIRELY WRONG. 4. THE FINDING OF THE COMMISSIONER OF INCOME-TAX THAT IT IS CLEAR THAT IN VIEW OF LETTER OF MINISTRY OF URBAN DEVELOPMENT, THE ASSESEE DOES NOT HAVE CONTROL OVER THE ASSETS OF THE SOCIETY, IS PERVERSE AND IS OPPOSED TO EVIDENCES ON RECORD. 5. THE FINDING OF COMMISSIONER THAT THE BENEFIT OF MUTUALITY HAS BEEN GIVEN BY THE AO AFTER DUE APPLICATION OF MIND IS NOT ACCEPTABLE AS THE AO HAS NOT EVEN BROUGHT ON RECORD THE BASIC FACT W.R.T. ITA NO. 2340/DEL/2016 3 ALLOTMENT OF LAND TO THE ASSESSEE, IS OPPOSED TO EVIDENCES ON RECORD. 6. IT IS CONTENDED THAT THE ENTIRE INCOME OF THE APPELLANT IS EXEMPT ON ACCOUNT OF PRINCIPLE OF MUTUALITY. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS R ETURN OF INCOME AS NIL ON 30.9.2011. THE CASE OF THE ASSESEE WAS SELECTED FOR SCRUTINY, NOTICE U/S. 143(2)/142(1) WERE ISSUED ON 20.9.2012. IN RESPONSE TO THE SAME AUTHORISED REPRESENTATIVES OF THE ASSESSEE APPEARED AND FILED THE DETAILS OF RECORD AS REQUIRED BY THE AO FROM TIME TO TIME. IN THE ASSESSMENT ORDER DATED 24.3.201 4 PASSED U/S. 143(3) OF THE I.T. ACT, THE AO HAS STATED THAT THE ASSESSEE SOCIETY IS REGISTERED U/S. 12A OF THE INCOME TAX AC T, 1961 VIDE ORDER DATED 13.1.1989 AND HAS ALSO REPRODUCED THE AI MS AND OBJECTS OF THE ASSESSEE-SOCIETY IN HIS ASSESSMENT ORD ER. AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT THE ASSESSEE HAS CL AIMED THE EXEMPTION UNDER THE CHARITABLE CLAUSE OF THE INCOME TAX ACT STATING THEREIN THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE WITHIN THE ITA NO. 2340/DEL/2016 4 PURVIEW OF THE PRINCIPLE OF MUTUALITY. THE AO CONSID ERED THE PROVISIONS OF LAW ALONGWITH THE EVIDENCES FILED BY TH E ASSESSEE ON THIS ISSUE AND HAS HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT UNDER THE PROVISION OF PRINCIPLES OF MUTUALITY, THI S REMAINS SUBJECT TO DUE SCRUTINY OF THE ACCOUNTS FROM YEAR TO YEAR. TH E AO REJECTED THE CLAIM OF SECTION 11 & 12 OF THE I.T. ACT AND APP LIED THE PROVISIONS OF INCOME TAX ACT AND HAS HELD THAT THE A SSESSEE SEEMS TO BE COVERED BY THE PRINCIPLE OF MUTUALITY AND IS EN TITLED FOR EXEMPTION ONLY IN RESPECT OF INCOME ACCRUING FROM T HE MEMBERS IN THE TERMS OF THE PRINCIPLES OF MUTUALITY. HOWEVER, THOSE RECEIPTS OF INCOME, WHICH ARE ATTRIBUTABLE TO OUTSTANDING OR THIRD PARTIES, ARE NOT ALLOWABLE TO THE ASSESSEE, UNDER THE SAME PRINCIPL E. HE FURTHER OBSERVED THAT CERTAIN AMOUNTS, AS REFLECTED IN THE INC OME- EXPENDITURE ACCOUNT, HAVE ACCRUED TO THE ASSESSEE FRO M THIRD PARTIES BEING IN THE NATURE OF BANK INTEREST AT AN A MOUNT OF RS. 72,78,575/- AND THEREFORE, THIS AMOUNT, NOT BEING C OVERED UNDER THE PRINCIPLE OF MUTUALITY, REQUIRES TO BE SUBJECTED TO TAX UNDER THE NORMAL PROVISIONS OF THE I.T. ACT. THUS, HE COMPLETED THE ASSESSMENT IN THIS CASE U/S. 143(3) OF THE I.T. ACT ON 24.3.2014 AT AN INCOME OF RS. 72,78,580/-. 3. AFTER PERUSING THE ASSESSMENT ORDER DATED 24.3.20 14 PARTICULARLY THE BALANCE SHEET FILED BY THE ASSESSE E, THE LD. CIT(E) ITA NO. 2340/DEL/2016 5 NOTICED THAT FIXED DEPOSITS HAVE BEEN CLASSIFIED UNDE R TWO HEADS ONE UNDER THE HEAD OF IHC BUILDING COMPLEX AND OTHE R ASSETS (SCHEDULE-3) VALUED AT RS. 1,27,49,73,765/- AND ANOTH ER, UNDER THE HEAD OF FIXED ASETS (SCHEDULE-4) VALUED AT RS. 36,44 ,418/-. THE FORMER ASSETS DO NOT BELONG TO THE INDIA HABITAT CEN TRE. THESE BELONG TO VARIOUS CORPORATE MEMBERS IN PROPORTION O F THEIR RESPECTIVE CONTRIBUTION TOWARDS COST OF ACQUISITION O F LAND AND COST OF CONSTRUCTION OF BUILDING. THESE ASSETS ARE SHO WN IN THE BALANCE SHEET OF THEIR RESPECTIVE OWNERS WHO CLAIM DEPRECIATI ON THEREON IN THEIR RESPECTIVE BOOKS OF ACCOUNTS. EVEN SURPLUS ARIS ING IN THE INCOME & EXPENDITURE ACCOUNT OF THE CENTRE IS TAKEN TO THE IHC BUILDING COMPLEX AND OTHER ASSETS HEAD. THEREFORE, IT IS VERY CLEAR THAT LESS THAN ONE PERCENT OF FIXED ASSETS ARE POSSES SED BY THE CENTRE AND, MUTUALITY IF ANY IS TO BE CLAIMED BY THE ASSESSEE IN RESPECT OF INCOME OF THE SOCIETY, IT SHOULD HAVE BEEN C LAIMED ONLY W.R.T. RATIO OF ASSET ACTUALLY OWNED BY IT WHICH IS LESS THAN 1% OF THE TOTAL ASSETS. FURTHER IT WAS NOTICED BY THE LD. CI T(E) THAT AS PER THE LAND ALLOTMENT LETTER OF MINISTRY OF URBAN DEV ELOPMENT, IN THE EVENT OF DISSOLUTION OF THE CENTRE, THE LAND ALLOTTE D TO IT AND THE ASSETS CREATED THEREON WILL BE TRANSFERRED TO AN INST ITUTION HAVING SIMILAR AIMS AND OBJECTS WITH THE PRIOR APPROVAL OF THE GOVERNMENT AND FAILING WHICH, TO THE GOVT., ON PAYMEN T OF ITA NO. 2340/DEL/2016 6 COMPENSATION DETERMINED BY LESSER IN ITS ABSOLUTE D ISCRETION. THUS, THE ASSESSEE DOES NOT HAVE THE CONTROL OF THE ASSETS OF THE SOCIETY IN THE CASE OF ITS DISSOLUTION. SUCH SOCIETY CANNOT BE TREATED AS MUTUAL SOCIETY. 3.1 LD. CIT(E) HAS OBSERVED THAT THE AO GAVE THE B ENEFIT OF MUTUALITY TO THE ASSESSEE AND CHARGED ONLY INTERES T INCOME INSTEAD OF TAXING THE WHOLE EXCESS OF INCOME OVER EXPENDITUR E, WHICH RESULTED THE MISTAKE IN THE ASSESSMENT OF INCOME OF R S. 1,05,02,430/-. 3.2 THEREFORE, THE NOTICE U/S. 263 WAS ISSUED TO THE ASSESSEE ON 27.1.2015 REQUIRING IT TO SHOW CAUSE AS TO WHY THE AS SESSMENT ORDER SHOULD BE SET ASIDE TO THE MADE AFRESH. IN RES PONSE TO THE SAME, ASSESSEES AR ATTENDED THE PROCEEDINGS AND FIL ED REPLY CONTESTING THE PROPOSED ACTION U/S. 263 PRIMARILY ON THE GROUND THAT THE ASSESSMENT U/S. 143(3) IS NOT LIABLE TO BE C ANCELLED U/S. 263 BECAUSE THE SAME HAS BEEN FRAMED BY THE AO AFTER DUE APPLICATION OF MIND AND ALSO THAT NO PREJUDICE HAS B EEN CAUSED TO THE REVENUE. AFTER CONSIDERING THE REPLY FILED BY T HE ASSESSEE- SOCIETY, THE LD. COMMISSIONER OF INCOME TAX(E) HAS P ASSED THE IMPUGNED ORDER U/S. 263 OF THE I.T. ACT DATED 15/16.3 .2016 BY HOLDING THE ASSESSMENT ORDER DATED 24.3.2014 PASSED U/S. 143(3) ITA NO. 2340/DEL/2016 7 OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE BY CITING THE DECISION OF THE HONBLE KARNATAKA HIGH CO URT IN THE CASE OF INFOSYS TECHNOLOGIES LTD. REPORTED IN 341 ITR 29 3 (KAR.). THEREAFTER, LD. CIT(E) SET ASIDE THE ASSESSMENT WITH THE DIRECTIONS TO THE AO TO EXAMINE THE ISSUE IN DETAILS IN VIEW OF T HE MEMORANDUM OF ASSOCIATION AND DISSOLUTION CLAUSE. 4. AGAINST THE ABOVE ORDER OF THE LD. CIT(E) DATED 15/16.03.2016 PASSED U/S. 263 OF THE I.T. ACT, THE AS SESSEE APPEALED BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSE E HAS STATED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE OR DER DATED 18.5.2016 OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 20 10-11 PASSED IN ASSESSEES OWN CASE AND REQUESTED THAT THE ISSUE IS IDENTICAL AND SIMILAR, HENCE, THE TRIBUNALS ORDER DATED 18.5.201 6 MAY BE FOLLOWED AND APPEAL OF THE ASSESSEE MAY BE ALLOWED. 7. ON THE CONTRARY, LD. CIT(DR) RELIED UPON THE IMPUG NED ORDER OF THE LD. COMMISSIONER OF INCOME TAX (EXEMPTIONS) DA TED 15/16.3.2016. HE STATED THAT THE IMPUGNED ORDER HAS BE EN PASSED AS PER LAW. HE FURTHER STATED THAT THE AO HAS PAS SED THE ASSESSMENT ORDER WITHOUT APPLYING HIS MIND AND WITHOU T MAKING DETAILED ENQUIRY. HOWEVER, THE LD. CIT(E) HAS RIGHTLY APPLIED HIS ITA NO. 2340/DEL/2016 8 MIND AND PASSED THE ORDER UNDER SECTION 263 OF THE I .T. ACT. IN SUPPORT OF HER CONTENTION, HE FILED COPY OF THE ORDER OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MALABAR INDUSTR IES CO. LTD. 243 ITR 83 (SC). HE REQUESTED THAT THE IMPUGNED ORDER O F THE LD. CIT(E) MAY BE UPHELD AND APPEAL OF THE ASSESSEE MAY BE DISMISSED ACCORDINGLY. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS AVAILABLE WITH US, ESPECIALLY THE ORDER PASSED BY THE REVENUE AUTHORITY ALONGWITH THE DOCUMENTARY EVIDENCE AND THE CASE LAW FILED BY THE ASSESSEES COUNSEL AS WELL AS THE PROVI SIONS OF LAW REFERRED BY THE REVENUE AUTHORITY AND THE LD. COUNSEL OF THE ASSESSEE. HE STATED THAT THE ORDER PASSED BY THE AO IS NOT ERRONEOUS AT ALL, BECAUSE THE AO HAS CONSIDERED THE APPLICABILITY OF PRINCIPLE OF MUTUALITY IN HIS ORDER. AFTER CAREFU L CONSIDERATION, WE ARE OF THE CONSIDERED VIEW THAT THE ARGUMENTS ADVANCE D BY THE LD. COUNSEL OF THE ASSESSEE IS VERY MUCH PLAUSIBLE AND CONVINCING, BECAUSE THE CLAIM OF THE ASSESSEE REGARDING THE APPL ICABILITY OF PRINCIPLE OF MUTUALITY IN ITS RETURN OF INCOME HAS BEEN FILED BY THE ASSESSEE ALONGWITH THE RETURN OF STATEMENT OF ACCOUNT, MEANING THEREBY THE ASSESSEE HAS CLAIMED THE APPLICABILITY OF PRINCIPLE OF MUTUALITY IN ITS RETURN OF INCOME. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS ALSO DIRECTED THE ASSESSEE TO EXPLAIN ITA NO. 2340/DEL/2016 9 THE APPLICABILITY OF PRINCIPLE OF MUTUALITY WHICH WE HAVE SEEN AT THE ASSESSMENT PROCEEDINGS THEREBY THE ISSUE OF PRINCIPLE OF MUTUALITY HAS BEEN DISCUSSED AND DETAILED ENQUIRY HAS BEEN DON E AT THE LEVEL OF THE AO AND ASSESSEE ALSO FILED ITS DETAILS BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS WITH REGARD TO THE APPLICABILITY OF PRINCIPLE OF MUTUALITY. AFTER PERUSING THE ASSESSMENT ORDER, W E HAVE SEEN THAT AO HAS RIGHTLY CONSIDERED THE APPLICABILITY OF P RINCIPLE OF MUTUALITY IN THE ASSESSMENT ORDER. 8.1 WE ALSO FIND FORCE IN THE LD. COUNSEL OF THE ASS ESSEES SUBMISSIONS THAT EXACTLY THE SIMILAR ISSUE HAS BEEN ADJUDICATED AND DECIDED BY THE ITAT, DELHI IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEARS 2009-10 & 2010-11 PASSED IN ITA NO . 3017/DEL/2014 & 2390/DEL/2015, VIDE ORDER DATED 12. 2.2015 & 18.5.2016 RESPECTIVELY HAS DECIDED THE SIMILAR AND I DENTICAL ISSUE RELATING TO PRINCIPLE OF MUTUALITY IN FAVOUR OF THE A SSESSEE. IN VIEW OF THE ABOVE, HE STATED THAT FOLLOWING THE PRECEDENT, AS AFORESAID, THE IMPUGNED ORDER MAY BE CANCELLED AND THE APPEAL F ILED BY THE ASSESEE MAY BE ALLOWED. 8.2 KEEPING IN VIEW OF THE AFORESAID, WE ARE OF THE VIEW THAT THE AO HAS MADE THE DETAILED ENQUIRIES ON THE ISSUE OF PRINCIPLE OF ITA NO. 2340/DEL/2016 10 MUTUALITY AND PASSED THE ORDER DATED 24.3.2014 U/S . 143(3) OF THE I.T. ACT AS PER LAW. 8.3 WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GREEN WORLD CORPORATION 314 ITR 81 (SC) HAS HELD AS UNDER:- THE JURISDICTION U/S. 263 CAN BE EXERCISED ONLY WHE N BOTH THE FOLLOWING CONDITIONS ARE SATISFIED: I) THE ORDER OF THE AO SHOULD BE ERRONEOUS; AND II) IT SHOULD BE PREJUDICIAL TO THE REVENUE INTEREST. THES E CONDITIONS ARE CONJUNCTIVE. AN ORDER OF ASSESSMENT PASSED BY THE AO SHOULD NOT BE INTERFERED WITH ONLY BECAUSE ANOTHER VIEW IS POSSIBLE. AN ORDER WOULD BE ERRONEOUS ONLY WHEN THE AO MAKES N O ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDING S. THIS PRINCIPLE WAS NOTICED BY THE DELHI HIGH COURT IN GEEV EE ENTERPRISES VS. ADDL. CIT 99 ITR 375 (DEL.). IN ARR IVING AT THIS DECISION, THE DELHI HIGH COURT DREW STRENGTH FROM THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN RAMPY ARI DEVI SAROGI VS. CIT 67 ITR 84 (SC) AND TARA DEVI AGARWAL VS. CIT, 88 ITR 324 (SC). THE UNDERLYING PRINCIPLE WHICH EM ERGES FROM THESE JUDGMENTS IS THAT IF AN ASSESSMENT ORDER I S PASSED WITHOUT MAKING ANY ENQUIRIES, THEN SUCH AN ORDER WOUL D BE ERRONEOUS. 8.4 WE ALSO FIND THAT THE AO HAS CONSCIOUSLY TAKEN A VIEW WITH REGARD TO THE PRINCIPLE OF MUTUALITY. THE HONBLE SUPREME COURT IN ITA NO. 2340/DEL/2016 11 THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) HELD AS UNDER:- THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAM PLE, WHEN AN INCOME TAX OFFICER, ADOPTED ONE OF THE COUR SES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REV ENUE; OR WHERE TWO VIEWS ARE POSSIBLE IN LAW AND THE INCOM E TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 8.5 WE ALSO FIND THAT THE CASE LAWS CITED BY THE LD. CI T(DR) DOES NOT SUPPORT THE CASE OF THE REVENUE. 8.6 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENTS, WE ARE OF THE C ONSIDERED VIEW THAT THE ASSESSMENT ORDER DATED 24.3.2014 PASSED U/S.1 43(3) IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVEN UE AT ALL AND THE LD. CIT(E) HAS PASSED THE IMPUGNED ORDER DATED 15/16 .3.2016, IS CONTRARY TO THE LAW AND FACTS ON RECORD, WHICH IS NO T SUSTAINABLE IN THE EYES OF LAW. HENCE, WE CANCEL THE IMPUGNED ORDER DATED 15/16.3.2016 PASSED BY THE LD. CIT(E) U/S. 263 OF T HE I.T. ACT BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE AND UPHE LD THE ASSESSMENT ORDER DATED 24.3.2014 PASSED BY THE AO PAS SED U/S. 143(3) OF THE I.T. ACT. OUR VIEW IS SUPPORTED BY THE RAM PIARI DEVI ITA NO. 2340/DEL/2016 12 SAROGI VS. CIT 67 ITR 8 4 (SC) AND TARA DEVI AGARWA L VS. CIT 88 ITR 323 (SC). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 19/10/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES