The Kesava Hanuman Mutually Aided Co -Operative Society Ltd, Visakhapatnam V. The ITO, Visakhapatnam

ITA 275/VIZ/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3917 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V APPALA RAJU
• Keywords: Source of fund; Ignorance of law; Set aside
• Section: 143(3); 133A; 148; 139

Judgement Text

ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NOS.275 TO 278/VIZAG/2017 ( / ASSESSMENT YEARS: 2006-07 TO 2009-10) THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCIETY LTD. VISAKHAPATNAM ITO, WARD - 3(1), VISAKHAPATNAM [PAN NO. AAABT2898R ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI V. APPALA RAJU DR / DATE OF HEARING : 23.04.2018 / DATE OF PRONOUNCEMENT : 2 5.04.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 1 {CIT(A)}, VISAKHAPATNAM VIDE APPEAL NOS.156 TO 159/2012-13 DA TED 30.3.2017 FOR THE ASSESSMENT YEARS 2006-07 TO 2009-10. SINCE , THE FACTS ARE ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 2 IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. IN THIS CASE A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS CONDUCTED BY THE A.O. AND OBSERVED THAT THE ASSESSEE HAS NOT FILED THE RETURN OF INCOM E THOUGH CERTAIN SOURCES OF INCOME SUCH AS INTEREST FROM BANK IN IT S HANDS.. THE ASSESSEE IS A MUTUALLY AIDED CO-OPERATIVE SOCIETY R EGISTERED UNDER THE A.P. MUTUALLY AIDED CO-OPERATIVE SOCIETIES ACT, 199 5. THE SOURCE OF INCOME OF THE ASSESSEE IS INTEREST ON LOANS, ADVANC ES TO ITS MEMBERS AND INTEREST ON FIXED DEPOSITS HELD WITH THE KARNAT AKA BANK LIMITED. AFTER CONDUCTING THE SURVEY ON 31/10/2011, THE ASSE SSEE FILED THE RETURNS OF INCOME FOR THE A.YS 2006-07 TO 2009-10 ON 4.11.2011 ADMITTING THE INCOME AS UNDER: 2006-07 - ` 1,31,271/- 2007-08 - ` 3,25,759/- 2008-09 - ` 7,26,413/- 2009-10 - ` 5,97,509/- THE A.O. REOPENED THE ASSESSMENTS BY ISSUE OF N OTICES U/S 148 OF THE ACT AND THE ASSESSEE SUBMITTED THE REPLY STA TING THAT THE RETURNS OF INCOME FILED ON 4.11.2011 MAY BE TREATED AS A RE TURNS IN RESPONSE TO NOTICES ISSUED U/S 148 OF THE ACT ON 22.11.2011. A SSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 ACCEPTING THE INCOM E RETURNED. ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 3 3. THE ASSESSEE FILED APPEAL AGAINST THE ORDER PASS ED U/S 143(3) R.W.S. 147 OF THE ACT BEFORE THE CIT(A) STATING THA T THE AO IS NOT JUSTIFIED IN INITIATING THE PROCEEDINGS U/S 147 OF THE ACT AND THE AO IS NOT JUSTIFIED IN ASSESSING THE INCOME OF THE ASSESSEE A S CHARGEABLE TO INCOME TAX. THE LD.AR ARGUED BEFORE THE LD.CIT(A) T HAT THE ASSESSEE IS MUTUAL COOPERATIVE CREDIT SOCIETY AND ITS INCOME IS EXEMPT AND NOT TAXABLE AND THERE IS NO OBLIGATION ON THE ASSESSEE TO FILE THE RETURN OF INCOME UNDER THE PROVISIONS OF SECTION 139 OF THE A CT AS ITS ENTIRE INCOME BEING INTEREST INCOME EARNED DURING THE PREV IOUS YEAR IS NOT LIABLE TO INCOME TAX ON THE PRINCIPLE OF MUTUALITY AS ALL ITS TRANSACTIONS ARE WITH THE MEMBERS. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE STATING THAT THOUGH THE NOTICE U/S 148 WAS ISSUED IN THIS CASE, THE A.O HAS NOT MADE ANY ADDITION TO THE RETURNED INCOME AND THE NOTICE ISSUED U/S 148 OF THE ACT WAS CLOSED ONCE TH E REPLY HAS RECEIVED FROM THE ASSESSEE. THE CIT(A) FURTHER OBSERVED THA T EVEN IF THE ASSESSMENT PROCEEDINGS INITIATED U/S 148 OF THE ACT ARE HELD TO BE DECLARED INVALID, THE RETURNED INCOME STANDS, AS IT IS BECAUSE NO ADDITIONS HAVE BEEN MADE TO THE RETURNED INCOME. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 4 5. DURING THE APPEAL HEARING, THE LD. A.R. ARGUED T HAT THE SOCIETY HAS FILED THE RETURN OF INCOME OFFERING THE INCOME AND PAID THE TAX, THE INCOME OFFERED WAS ACCEPTED AND THE ORDER WAS PASSE D. THE ASSESSEE IS MUTUALLY AIDED CO-OPERATIVE SOCIETY AND ITS INCO ME WAS NOT LIABLE FOR TAX, WHICH WAS NOT REALIZED BY THE ASSESSEE AT THE TIME OF FILING THE RETURN OF INCOME AND ARGUED THAT THERE IS NO CONCES SION UNDER LAW TO TAX THE INCOME WHICH CANNOT BE TAXED. THE ASSESSEE ALSO PLACED RELIANCE ON CIRCULAR NO.14 OF 1955 DATED 11.4.1955 WHERE CBDT STATED THAT THE A.O. SHOULD NOT TAKE THE ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE. THE ASSESSEE ALSO RELIED ON THE CASE OF SRIKANT G. SHAH VS. ITO (BOMBAY TRIBUNAL) 108 ITD 577 AND NIRMALA L. ME HTA VS. A. BALASUBRAHMANIAM, CIT & ORS (HIGH COURT OF BOMBAY) 269 ITR 1. THE LD. A.R. FURTHER ARGUED THAT ARTICLE 265 OF THE CON STITUTION OF INDIA DECLARED THAT NO TAX CAN BE COLLECTED EXCEPT BY AUT HORITY OF LAW. FURTHER, HONBLE SUPREME COURT IN THE CASE LAW IN ( 1965) 56 ITR 67 HELD THAT IF A PARTICULAR INCOME IS NOT TAXABLE UNDER TH E ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPLELS OR ANY OTHER EQUIT ABLE DOCTRINE. THEREFORE, THE LD. A.R. PLEADED THAT THOUGH ASSESSE E HAS FILED THE RETURN OFFERING THE INCOME FOR TAX, AT THE SAME TIM E, THE ASSESSEE IS NOT PRECLUDED FROM MAKING CLAIM BEFORE THE APPELLATE AU THORITIES STATING ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 5 THAT THE INCOME IS NOT TAXABLE AND RELIED ON THE DE CISION OF HONBLE A.P. HIGH COURT IN THE CASDE OF CWT VS. N.B. ATAULLA REP ORTED IN 217 ITR 17. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE WAS DERIVING THE INCOME FROM THE MEMBERS A ND INTEREST FROM KARNATAKA BANK LTD. THE AO CONDUCTED THE SURVEY AND OBSERVED THAT THE ASSESSEE IS EARNING THE INTEREST FROM KARNATAKA BAN K LTD IT HAS NOT FILED THE RETURN OF INCOME. THE ASSESSEE FILED THE RETURN OF INCOME IMMEDIATELY AFTER THE SURVEY AND THE AO HAS COMPLET ED THE ASSESSMENT ACCEPTING THE INCOME RETURNED AND NO ADDITION WAS M ADE TO THE RETURNED INCOME. THE ASSESSEE IS MUTUAL COOPERATIV E SOCIETY, AND ENGAGED IN (I) TO ENCOURAGE THRIFT, SELF HELP AND M UTUAL AID AMONG MEMBERS AND AFFORD ALL FACILITIES FOR CULTIVATING T HE HABIT OF THRIFT AND SAVING AMONG MEMBERS IN ACCORDANCE WITH THE PRINCIP LES OF CO- OPERATION AS ENUNCIATED UNDER THE PROVISIONS OF SEC TION 3 OF THE ANDHRA PRADESH MUTUALLY AIDED CO-OPERATIVE SOCIETIES ACT, 1995; (II) TO ACCEPT DEPOSITS OF MONEY FROM THE MEMBERS REPAYABLE ON DEM AND OR OTHER WISE AND WITHDRAWAL BY CHEQUE, DRAFT, ORDER OR OTHE RWISE FOR THE PURPOSE OF LENDING OR INVESTMENT; AND (III) TO BORR OW OR RAISE MONEY AND TO RECEIVE ALL TYPES OF SHORT, MEDIUM AND LONG TERM DEPOSITS AND IN ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 6 PARTICULAR THRIFT, RECURRING, FIXED AND OTHER DEPOS ITS FROM ITS MEMBERS ETC., AS PER THE OBJECTIVES OF THE SOCIETY. 7. THE AO HAS COMPLETED THE ASSESSMENT ACCEPTIN G THE RETURNED INCOME AND THE ASSESSEE HAS NOT MADE ANY CLAIM REGA RDING THE EXEMPTION OF INCOME ON MUTUALITY BASIS BEFORE THE A O. HOWEVER THE ASSESSEE RAISED THE ISSUE BEFORE THE CIT(A) BUT THE LD.CIT(A) DISMISSED THE ASSESSEES CONTENTION STATING THAT THE PROCEEDI NGS U/S 148 ARE AIMED AT INCOME ESCAPING THE ASSESSMENT. IN THIS CA SE THE ASSESSEE HAS FILED THE RETURN OF INCOME AFTER CONDUCTING THE SUR VEY. THE ASSESSING OFFICER HAS ISSUED NOTICE U/S 148 AND INITIATED THE ASSESSMENT PROCEEDINGS AND ASSESSED THE INCOME. THEREFORE THE LD. CIT(A) IS NOT PREVENTED FROM TAKING UP THE ISSUE OF EXEMPTION IN APPEAL. THE APPELLATE AUTHORITIES ARE BOUND TO TAKE UP THE ISSU ES AND ADJUDICATE ON THE GROUNDS RAISED BY THE ASSESSEE. THE LD.AR RELIE D ON SRIKANT G. SHAH VS. ITO (BOMBAY TRIBUNAL) 108 ITD 577 WHERE IN THE COORDINATE BENCH HELD AS UNDER 18. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US. WE HAVE ALSO CAREFULLY GONE THROUGH THE RELEVANT FACTS AND THE JUDICIAL PR ONOUNCEMENTS CITED BEFORE US. IN OUR VIEW, THE GROU NDS RAISED BY THE ASSESSEE IN APPELLATE PROCEEDINGS TO THE EFF ECT THAT THE INTEREST INCOME DISCLOSED BY HIM IN TH E RETURNS OF INCOME FILED IN RESPONSE TO NOTICES ISSUED UNDER SE CTION 148 MUST BE EXCLUDED FROM HIS TOTAL INCOME, H AS TO BE ENTERTAINED AND DEALT WITH ON MERITS. SIMILARLY PUNE B BENCH IN ITA NOS.288 TO 291/PN/2014 FOR THE A.YS. : 2006-07, 2007-08, 2007-08 & 2008-09 IN THE CASE OF THE ASST. ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 7 COMMISSIONER OF INCOME TAX,CIRCLE-8, PUNE VS BAJAJ FINANCE LIMITED, HELD THAT AFTER SECTION 143(3) OF THE ACT WAS AMENDED BY THE FINANCE ACT (NO.2) 1998 W.E.F. 01.10.1998, AS PER THE AMENDMEN T, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, INTER-ALIA, ENVISAGES THE ASSESSING OFFICER TO GRANT REFUND OF ANY AMOUNT DUE TO THE ASSESSEE CONSEQUENT TO THE ASSESSMENT AND THEREFORE, THE ASS ESSING OFFICER IS STATUTORILY EMPOWERED TO DETERMINE THE REVISED INCO ME WHICH CAN BE LOWER THAN THE RETURNED INCOME. 8. THE LD.AR RELIED ON TH CBDT CIRCULAR NO.14 OF 19 55 DATED 11.4.1955 AND STATED THAT THE A.O. SHOULD NOT TAKE THE ADVANTAGE OF THE ASSESSEESS IGNORANCE OF LAW TO HIS ADVANTAGE. LD.AR ALSO TAKEN THE REFERENCE OF HONBLE SUPREME COURT DECISION IN THE CASE OF V. MR. P. FIRM, MUAR * 56 ITR 67 (SC) AND ARGUED THAT THAT IF A PARTICULA R INCOME IS NOT TAXABLE UNDER THE INCOME TAX ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPELS OR ANY OTHER EQUITABLE DOCTRINE. THOUG H THE FACTS OF THE CASE LAW RELIED ON BY THE ASSESSEE IS QUITE DIFFERE NT AND THE ISSUE IS NOT RELATED TO VOLUNTARY FILING OF RETURN OF INCOME, TH E OBSERVATION IN THE CASE IS STILL RELEVANT. THEREFORE FOLLOWING THE JUD ICIAL PRECEDENTS AND THE FACTS OF THE CASE WE ARE OF THE VIEW THAT IN THE IN TEREST OF JUSTICE THE AO IS EMPOWERED DETERMINE THE TRUE AND CORRECT INCOME WHICH CAN BE LESSER THAN THE RETURNED INCOME. ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 8 9. THE ASSESSEE IS A MUTUALLY AIDED CO-OPERATIVE CR EDIT SOCIETY AND THE ENTIRE INCOME OF THE SOCIETY IS NOT EXEMPT AND ONLY THAT PART OF THE INCOME WHICH IS DERIVED BY THE ASSESSEE FROM THE ME MBERS IS NOT TAXABLE ON THE PRINCIPLE OF MUTUALITY. FOR THIS PUR POSE THERE SHOULD BE COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATORS. HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB 29 TAXMANN.COM 29 CONSIDERED THE ISSUE OF MUTUALITY AND TAKEN VIEW THAT THE PRINCIPLE OF MUTUALITY RELATES TO THE NOTION THAT A PERSON CA NNOT MAKE A PROFIT FROM HIMSELF. AN AMOUNT RECEIVED FROM ONESELF IS NO T RECORDED AS INCOME AND IS THEREFORE IS NOT SUBJECT TO TAX. ONL Y THE INCOME WHICH COMES WITHIN THE DEFINITION OF SECTION 2(24) OF THE ACT IS SUBJECT TO TAX. UNDER THE INCOME TAX ACT, IN THE CASE OF COOPERATIV E SOCIETIES THE INTEREST INCOME OF THE ASSESSEE IS ALLOWED AS DEDUC TION U/S 80P(2)(D) OF THE ACT, WHICH READS AS UNDER: IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DI VIDEND DERIVED BY THE CO-OPERATIVE SOCIETY FROM INVESTMENTS WITH A NY OTHER CO OPERATIVE SOCIETY, THE WHOLE OF SUCH AMOUNT. 10. THE INTEREST INCOME DERIVED BY THE ASSESSEE FRO M THE KARNATAKA BANK IS STILL TAXABLE. AS HELD BY HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB CITED (SUPRA) AND TOTGARS CO-OPERATI VE SALE SOCIETY LTD. V. ITO (2010) 322 ITR 283, THE INTEREST ON DEPOSIT S IS NOT THE BUSINESS ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 9 INCOME BUT INCOME FROM OTHER SOURCES AND THE SOCIET Y IS NOT ENTITLED TO SPECIAL DEDUCTION U/S 80P(2)(D) OF THE ACT. IN THE INSTANT CASE, THE ASSESSEE HAS MADE DEPOSITS WITH THE KARNATAKA BANK LIMITED, WHICH IS NOT MEMBER OF THE SOCIETY AND THE SAME IS NOT TO BE ALLOWED AS A DEDUCTION U/S 80P(2)(D) OF THE ACT. THEREFORE, THE ENTIRE INTEREST INCOME DERIVED BY THE ASSESSEE FROM THE KARNATAKA B ANK LIMITED IS TAXABLE. THIS VIEW IS SUPPORTED BY THE HONBLE SUP REME COURT JUDGEMENT CITED (SUPRA) IN 322 ITR 283 AND THE BANG ALORE CLUB 29 TAXMANN.COM 29. THE ASSESSEE IN THE PAPER BOOK FUR NISHED IN THE RETURNS OF INCOME BUT NOT FURNISHED THE ACTUAL AMOU NT OF INTEREST RECEIVED BY THE ASSESSEE FROM THE KARNATAKA BANK LI MITED. THE A.O ALSO HAS NOT GIVEN ANY FINDING ON THE INTEREST RECEIVED BY THE ASSESSEE FROM THE BANKS. EVEN THOUGH THE INTEREST RECEIVED ON MAN DATORY DEPOSITS THE SAME IS TAXABLE. THEREFORE, IN THE INTEREST OF JUST ICE, WE ARE OF THE CONSIDERED OPINION THAT THE CASE SHOULD BE REMITTED BACK TO THE FILE OF THE A.O. TO EXAMINE THE NATURE OF RECEIPTS WHICH AR E EXEMPT ON PRINCIPLE OF MUTUALITY BASIS AND TAXABLE RECEIPTS S UCH AS INTEREST RECEIVED FROM KARNATAKA BANK AND ANY OTHER RECEIPTS AND DETE RMINE THE TRUE AND CORRECT INCOME AS PER LAW. ACCORDINGLY, THE ASSESS MENT IN THIS CASE IS SET ASIDE DE NOVO TO REDO THE ASSESSMENT. ITA NOS.275 TO 278 /VIZAG/2017 THE KESAVA HANUMAN MUTUALLY AIDED CO-OPERATIVE SOCI ETY LTD., VSKP 10 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 TH APR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 25.04.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE KESAVA HANUMAN MUTUALLY AIDE D CO-OPERATIVE SOCIETY LTD., D.NO.9-1-222/1, RAMA TALKIES ROAD, CB M COMPOUND, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-3(1), VISAKHAPATN AM 3. + / THE PR. CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A)-1, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM