The DCIT, Circle-4, Ahmedabad V. Karnavati Club Ltd., Ahmedabad

ITA 288/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51093 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-12-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISHEK KUMAR
• Keywords: Assessment record; Tax effect

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , .. !', #$ # % BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI B.P.JAIN, ACCOUNTANT MEMBER 1. ./ ././ ./ I.T.A.NO.288/AHD/2010 - ' ' ' ' ' ' ' ' / A.Y.1993-94 2. ./ ././ ./ I.T.A.NO.289/AHD/2010 - ' ' ' ' ' ' ' ' / A.Y.1995-96 THE DCIT CIRCLE-4 AHMEDABAD ' ' ' ' / VS. KARNAVATI CLUB LTD. S.G. HIGHWAY AHMEDABAD ( #$ ./ ) ./ PAN/GIR NO. : AAACK 7865 Q ( (* / // / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - # / APPELLANT BY : SHRI ASHISHEK KUMAR SR.D.R. +,(* . - # / RESPONDENT BY : SHRI SUNIL TALATI, A.R. '/ . 0$ / / / / DATE OF HEARING : 28/12/2011 12' . 0$ / DATE OF PRONOUNCEMENT : 30/12/2011 #3 / O R D E R PER BENCH:- BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE ARISING FROM TWO SEPARATE ORDERS OF LD.CIT(A)-VIII AHMEDABAD BOT H IDENTICALLY DATED 04/09/2009. REVENUE HAS CHALLENGED THE DELETION OF PENALTY LEVIED U/S.271(1)(C) RESPECTIVELY OF RS.4,99,490/- AND RS. 14,48,186/- FOR AYS 1993-94 & 1995-96. 2. WHILE LEVYING THE PENALTY FOR ASSESSMENT YEAR 19 93-94 VIDE ORDER DATED 14/11/2008, THE ASSESSING OFFICER HAS MENTIO NED THAT THE ITA NOS.288 & 289/AHD/2010 (BY REVENUE) DCIT VS. KARNAVATI CLUB LTD . ASST.YEARS - 1993-94 & 199 4-95 - 2 - FOLLOWING ADDITIONS WERE CONFIRMED BY THE TRIBUNAL AND, THEREFORE, INITIATED THE PROCEEDINGS; RELEVANT PORTION IS REPR ODUCED BELOW:- THUS FOLLOWING ADDITIONS MADE BY THE ASSESSING OFF ICER STAND CONFIRMED AFTER GIVING EFFECT TO CIT(A)S ORDER AND ITATS ORDER: 1. OTHER INCOME RS.7,51,450/- 2. ANNUAL SUBSCRIPTION & ENTERTAINMENT RS. 80, 673/- ACTIVITIES 3. OTHER INCOME (LAWN & MAINTENANCE RS.1,25,500/ - CHARGES) 4. BANK INTEREST RS. 7,576/- 2.1. LIKEWISE, WHILE LEVYING THE PENALTY FOR ASSESS MENT YEAR 1995-96 VIDE ORDER DATED 14/11/2008, THE ASSESSING OFFICER HAS MENTIONED THAT THE TRIBUNAL HAS CONFIRMED THE ADDITION IN RESPECT OF THE FOLLOWING ADDITIONS:- THUS FOLLOWING ADDITIONS MADE BY THE ASSESSING OFF ICER STAND CONFIRMED AFTER GIVING EFFECT TO CIT(A)S ORDER AND ITATS ORDER: 1. INCOME FROM OTHER SOURCES RS.17,02,011/- 2. ANNUAL SUBSCRIPTION RS.11,30,675/- 3. ENTERTAINMENT & GAME ACTIVITIES RS. 3,15,512/- 3. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH T HE SIDES. WE HAVE ALSO PERUSED THE ORDER DATED 28/02/2006 OF TH E TRIBUNAL PRONOUNCED BY ITAT B BENCH AHMEDABAD IN ITA NOS.1060/AHD/1999 AND 2681&2683/AHD/2000 FOR AYS 19 96-97, 1995- 96 AND 1993-94 RESPECTIVELY TITLED AS INCOME TAX-O FFICER VS. KARNAVATI CLUB LIMITED. IT MAY NOT BE OUT OF PLACE TO MENT ION THAT THERE WAS HUGE ADDITION IN RESPECT OF LIFE MEMBERSHIP AND EN TRANCE FEES FOR BOTH THE YEARS, HOWEVER, THE RESPECTED CO-ORDINATE BENCH HAS HELD THAT ITA NOS.288 & 289/AHD/2010 (BY REVENUE) DCIT VS. KARNAVATI CLUB LTD . ASST.YEARS - 1993-94 & 199 4-95 - 3 - THOSE RECEIPTS WERE NOT A REVENUE OR TRADING RECEIP TS, HENCE NOT TO BE INCLUDED IN THE ASSESSABLE INCOME. AS FAR AS THE A DDITIONS IN RESPECT OF ANNUAL SUBSCRIPTION, OTHER INCOME, BANK INTEREST WE RE CONCERNED, VIDE PARAGRAPH NOS.14 & 15 IT WAS MENTIONED THAT THE LD. AR HAS NOT PRESSED THOSE GROUNDS ON THE PRETEXT THAT THE ASSESSABLE IN COME FOR THE YEARS UNDER CONSIDERATION HAD NO TAX EFFECT. THE LD.AR M R. TALATI HAS, THEREFORE VEHEMENTLY CONTESTED THAT MERELY BECAUSE SOME OF THE GROUNDS HAVE NOT BEEN PRESSED BEFORE THE TRIBUNAL WHILE DEA LING WITH THE QUANTUM ADDITION DID NOT MEAN THAT THE PENALTY U/S. 271(1)(C) OF THE I.T.ACT COULD AUTOMATICALLY BE LEVIED. HE HAS REFE RRED THE IMPUGNED PENALTY ORDERS TO DEMONSTRATE THAT THE ASSESSING OF FICER HAD LEVIED THE PENALTIES FOR BOTH THE YEARS AFTER RECEIVING THE O RDER OF THE TRIBUNAL MERELY ON THE PREMISE THAT CERTAIN ADDITIONS WERE CONFIRMED. REST OF THE ARGUMENTS OF LD.AR WAS THAT AFTER THE RELIEF IN RES PECT OF THE MAJOR ADDITION OF LIFE MEMBERSHIP AND ENTRANCE FEES THE RESULTANT FIGURE IS A LOSS, HENCE THERE WAS NO MALA FIDE ON THE PART OF T HE ASSESSEE TO CONCEAL THE INCOME AND THAT THE PRINCIPLE OF MUTUALITY APP LIES ON THIS ASSESSEE. HOWEVER THESE ARGUMENTS HAS NO LEGAL FORCE AND AT THE OUTSET THIS PLEA OF THE ASSESSEE HAS BEEN REJECTED. THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO PLACED RELIANCE ON CIT VS. RELIANCE PETRO PRODUCTS PVT.LTD. [2010]322 ITR 158 (SC). 4. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE LD.SR.DR MR.ABHISHEK KUMAR HAS PLEADED THAT IN ADDITION TO T HE CONFIRMATION OF THOSE ADDITIONS, THE ASSESSING OFFICER HAD ALSO HEL D THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME AND, THEREFORE LIABLE FOR CONCEALMENT PENALTY. ITA NOS.288 & 289/AHD/2010 (BY REVENUE) DCIT VS. KARNAVATI CLUB LTD . ASST.YEARS - 1993-94 & 199 4-95 - 4 - 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, FEW FACTS HAVE EMERGED FROM THE ASSESSMENT ORDERS PASSED U/S.143(3 ) R.W.S.147 OF THE I.T.ACT DATED 16/03/2000 FOR THE ASSESSMENT YEARS 1993-94 & 1995-96 THAT THE RETURNS WERE FILED DECLARING DEFICITS. SU BSEQUENTLY, THOSE CASES WERE REOPENED FOR THE REASON THAT THE EXEMPTION ON THE GROUND OF MUTUALITY DID NOT ARISE IN THE CASE OF THE ASSESSEE . THE IMPUGNED INCOME FOR WHICH THE PENALTY WAS LEVIED WERE ALREADY PART OF THE ACCOUNTS AND ASSESSMENT RECORD. IN RESPECT OF THOSE ADDITIONS INITIALLY THE ASSESSEE WAS UNDER THE IMPRESSION THAT NO TAX WAS AT ALL LEV IABLE SINCE THE ASSESSEE BEING A CLUB THEREFORE THE PRINCIPLE OF M UTUALITY WILL APPLY ON SUCH RECEIPTS. DUE TO THE CHANGE OF STAND OF THE R EVENUE DEPARTMENT BY NOT GRANTING EXEMPTION THOSE IMPUGNED RECEIPTS HAD COME WITHIN THE CLUTCHES OF THE TAX. BUT IT IS A TRAIT LAW THAT ME RELY ON THE BASIS OF CONFIRMATION OF ADDITION IN ASSESSMENT PROCEEDINGS DO NOT IPSO FACTO LEAD TO LEVY OF PENALTY U/S.271(1)(C) OF THE I.T.ACT. O UR ATTENTION HAS BEEN DRAWN ON THE EXPLANATION-1 TO SECTION 271(1)(C) OF THE I.T.ACT FOR THE LEGAL PROPOSITION THAT THE MATERIAL FACTS IN RESPEC T OF THOSE IMPUGNED ADDITIONS HAD ALREADY BEEN DULY DISCLOSED TO THE RE VENUE DEPARTMENT AS PER THE ACCOUNTS AND INCOME-TAX RETURNS. IT HAS AL SO BEEN BROUGHT TO OUR NOTICE THAT THERE WAS NO TINKERING OR FURTHER ADDIT ION IN THE RECEIPTS SO DISCLOSED. IT IS ALSO NOT THAT THE NATURE OF REC EIPT WAS FOUND TO BE FALSE OR THE EXPLANATION OFFERED ABOUT THE NATURE OF RECE IPT WAS UNTRUE. THE ASSESSEE HAD OFFERED AN EXPLANATION WHICH WAS DULY SUBSTANTIATED BY AN EXPLANATION AND THAT EXPLANATION WAS ALSO BONA FIDE . DUE TO THESE REASONS, WE HEREBY ENDORSE THE FACTUAL AS WELL AS T HE LEGAL FINDING OF THE LEARNED CIT(APPEALS), WHO HAD PLACED RELIANCE ON SH IV LAL TAK VS. CIT ITA NOS.288 & 289/AHD/2010 (BY REVENUE) DCIT VS. KARNAVATI CLUB LTD . ASST.YEARS - 1993-94 & 199 4-95 - 5 - 251 ITR 373 (GUJ) & CIT VS. BACARDI MARTINI INDIA 288 ITR 585 (DELHI). RESULTANTLY, THE DELETION OF PENALTY IS H EREBY CONFIRMED AND GROUNDS OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. SD/- SD/- ( .. !' ) ( ) #$ ( B.P. JAIN ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 30/ 12 /2011 40..', .'../ T.C. NAIR, SR. PS #3 . +5 6#5' #3 . +5 6#5' #3 . +5 6#5' #3 . +5 6#5'/ COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-VIII, AHMEDABAD 5. 5:; +' , , / DR, ITAT, AHMEDABAD 6. ;< =/ / GUARD FILE. #3' #3' #3' #3' / BY ORDER, ,5 + //TRUE COPY// > >> >/ // / ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.28/12/2011. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29/12/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.30.12.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.12.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER