ITO 16(1)(2), MUMBAI V. DARBHANGA MANSION CO-OP HSG SOC. LTD, MUMBAI

ITA 2808/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7486 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 01-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA RAMKRISHNAN
• Keywords: Bonafide belief; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 2808/MUM/2009 (ASSESSMENT YEAR: 2001-02) INCOME TAX OFFICER 16(1)(2) M/S. DARBHANGA MANSION CO-OP MATRU MANDIR HOUSING SOCIETY LTD. MUMBAI 400007 VS. 12, M.L. SAHANUKAR MARG MUMBAI 400026 PAN AAAAD 0382 M APPELLANT RESPONDENT APPELLANT BY: SHRI CHANDRA RAMKRISHNAN RESPONDENT BY: SHRI NISHANT THAKKAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CTA XVI, MUMBAI DATED 29.01.2009 CANCELLING THE PENALTY LEVI ED UNDER SECTION 271(1)(C). 2. THE BASIC FACTS ARE THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.42.8 LAKHS ON TRANSFER OF FLATS AND THESE WERE C REDITED TO THE BUILDING HEAVY- REPAIR FUND. THE RECEIPTS WERE NOT OFFERED T O TAX ON THE BELIEF THAT PRINCIPLE OF MUTUALITY WOULD APPLY AS THESE ARE REC EIVED FROM OUTGOING/ INCOMING MEMBERS. THE A.O. HAS NOT ACCEPTED THE CON TENTION AND THE SAID AMOUNT WAS BROUGHT TO TAX. THE MATTER WAS CARRIED T O THE TRIBUNAL WHICH CONFIRMED THE ADDITION MADE BY THE A.O. CONSEQUENTL Y THE A.O. FINALISED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C), EVEN T HOUGH IT WAS SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND THEY WERE UNDER THE BONAFIDE BELIEF THAT THE TRANSFER FUNDS HAS BEEN CO NSIDERED AS EXEMPT UNDER THE PRINCIPLE OF MUTUALITY AND EVEN IF THE SAME WA S CONSIDERED AS TAXABLE RECEIPT, THE NECESSARY EXPENDITURE INCURRED ON BUIL DING HEAVY REPAIR FUNDS SHOULD BE ALLOWED AS DEDUCTION. THE A.O. DID NOT AC CEPT. THE CIT(A) CONSIDERED THE SUBMISSION OF THE ASSESSEE AND DELET ED THE PENALTY BY STATING AS UNDER: - ITA NO. 2808/MUM/2009 M/S. DARBHANGA MANSION CO-OP HSG. SOC. LTD. 2 12. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAD CLAIMED THAT IT WAS UNDER THE BONA FI DE BELIEF THAT THE AMOUNTS RECEIVED FROM OUTGOING/INCOMING MEMBERS ARE NOT ASSESSABLE TO TAX. IN ORDER TO ARRIVE AT THIS CONCLUSION, IT H AD RELIED ON CERTAIN DECISIONS OF THE HIGH COURT AND SUPREME COURT AND A LSO SOME DECISIONS OF THE ITAT. MOREOVER, WHEN IT HAD OBTAINED LEGAL O PINION THAT WAS ALSO TO THE EFFECT THAT THE CONTRIBUTIONS RECEIVED WERE IN THE NATURE OF CAPITAL AND THAT THESE WERE BEING TREATED AS CONTRIBUTIONS TO THE CORPUS OF THE SOCIETY. THE APPELLANT HAS STATED THAT IT HAD CLEAR LY DISCLOSED THE RECEIPT OF THESE CONTRIBUTIONS AS A LINE ITEM IN THE BALANC E SHEET IN TUNE WITH THE EXISTING ACCOUNTING STANDARDS. IT WAS DISCLOSED AS A RESERVE FUND IN THE BALANCE SHEET. AS REGARDS THE OBSERVATION OF TH E AO, THAT IF NOT FOR THE ISSUE OF THE NOTICE U/S. 133B, THE APPELLANT WO ULD NOT HAVE FILED THE RETURN AND THE CONTRIBUTIONS WOULD HAVE ESCAPED ASS ESSMENT, THE REPLY OF THE APPELLANT IS THAT IT HAD FILED THE RETURN VO LUNTARILY. WHEN ALL THINGS ARE CONSIDERED TOGETHER, THE APPELLANT CANNOT BE FA ULTED FOR ITS BELIEF THAT THE CONTRIBUTIONS RECEIVED BY IT FROM OUTGOING /INCOMING MEMBERS ARE COVERED BY PRINCIPLE OF MUTUALITY. THERE IS ALS O MERIT IN THE SUBMISSION THAT THE ASSESSMENTS HAVE BEEN DONE BASE D ON DECISIONS WHICH HAVE BEEN RENDERED AFTER THE TRANSFER OF THES E FLATS. IT IS TRUE THAT THE ASSESSMENT TO TAX THE RECEIPTS OF THE AMOUNTS R ECEIVED BY THE APPELLANT FROM OUTGOING/INCOMING MEMBERS HAS BEEN C ONFIRMED BY THE HIGHER APPELLATE AUTHORITIES, BUT AT THE SAME TIME WHEN IT FILED THE RETURN OF INCOME, THERE EXISTED A DIFFERENCE OF OPI NION WHICH WAS EVIDENT FROM THE CASE LAWS CITED BY THE APPELLANT. MOREOVER , THE APPELLANT HAD DISCLOSED ALL THESE INFORMATION IN ITS STATEMENTS O F ACCOUNTS CLEARLY. THEREFORE, IT IS DIFFICULT TO HOLD THAT THE APPELLA NT HAD CONCEALED ITS INCOME OR FILED INACCURATE PARTICULARS OF INCOME. I N VIEW OF THIS CONCLUSION WHICH HAS BEEN ARRIVED AT, THE PENALTY L EVIED U/S. 271(1)(C) IS DELETED. 3. THE LEARNED D.R. RELIED ON THE ORDER OF THE A.O. WH EREAS THE LEARNED A.R. SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT H ELD THAT THE TRANSFER FEE AMOUNT IS NOT TAXABLE AND SINCE THERE DIFFERENCE OF OPINION ON THE TAXABILITY OF THE CLAIM PENALTY UNDER SECTION 271(1)(C) IS NOT WARRANTED. HE RELIED ON THE ORDER OF THE ITAT IN ITA NO. 1883/MUM/2006 IN THE C ASE OF MAERSK INDIA PRIVATE LIMITED WHEREIN ON SIMILAR FACTS IT WAS HEL D AS UNDER: - 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES, MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. IT IS N OTED THAT THE ASSESSEE HAS CLAIMED THESE EXPENSES AS OF REVENUE NATURE ON THE BASIS OF CERTAIN JUDICIAL DECISIONS AVAILABLE AT THE TIME OF FILING THE RETURN AND THE FACTS REGARDING THIS CLAIM ARE DULY DISCLOSED, IN THE BAC KGROUND OF THESE FACTS AND ALSO HAVING REGARD TO THE FACT THAT THE SPECIAL BENCH WAS CONSTITUTED ON THIS VERY ISSUE, WE HOLD THAT IT IS A CASE OF LEGAL CLAIM MADE BY THE ASSESSEE WHICH HAS BEEN REJECTED BY THE REVENUE AUTHORITIES, HENCE, THIS CASE IS NO FIT FOR LEVY OF PENALTY U/S 271(1)(C) OF ITA NO. 2808/MUM/2009 M/S. DARBHANGA MANSION CO-OP HSG. SOC. LTD. 3 THE ACT. THUS, GROUND NO. 1 OF THE ASSESSEE IS ACCE PTED AND, THEREFORE, GROUND NO. 2.1 AND 2.2 ARE DISMISSED AS INFRUCTUOUS . 4. WE HAVE CONSIDERED THE ISSUE. THE ISSUE OF TAXABILI TY OF TRANSFER FUNDS RECEIVED FROM INCOMING AND OUTGOING MEMBERS HAS NOT ATTAINED FINALITY AT THE TIME OF PASSING ORDERS AND RECENTLY ONLY, THE HON'B LE BOMBAY HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE AMOUNTS ARE NOT TAXABLE. EVEN THOUGH ON THE BASIS OF THE SPECIAL BE NCH DECISION AVAILABLE AT THAT POINT OF TIME THE AMOUNTS WERE CONFIRMED BY TH E ITAT, THE ISSUE WAS NOT FREE FROM DOUBT AT THE TIME OF FILING THE RETURN AS WELL AS AT THE TIME OF COMPLETION OF ASSESSMENT. THERE IS A GENUINE BELIEF THAT THE AMOUNTS ARE NOT TAXABLE. CONSIDERING THE BACKGROUND OF THE FACTS OF THE CASE, WE HOLD THAT IT IS A CASE OF BONAFIDE BELIEF ON THE PART OF THE ASSESS EE AND ACCORDINGLY NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). T HE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY MODIFICATION. ACCORDINGLY THE GROUN D IS REJECTED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON19TH MARCH 201 0. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH MARCH 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XVI, MUMBAI 4. THE CIT XVI, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.