ITO 12(3)(2), MUMBAI V. RAHEJA CENTRE PREMISES CO-OP SOC. LTD, MUMBAI

ITA 4744/MUM/2010

• Counselvise Citation: 474419914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 1991-1992
• Appeal Filed On: 08-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D : MUMBAI BEFORE SHRI D.K. AGARWAL, (JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.4744/MUM/2010 ASSESSMENT YEAR : 1991-92 INCOME TAX OFFICER WARD 12(3)(2), ROOM NO.102 AAYAKAR BHAVAN M.K. MARG MUMBAI-400 020. ..( APPELLANT ) VS. M/S. RAHEJA CENTRE PREMISES CO-OP SOC. LTD. RAHEJA CENTRE, FREE PRESS JOURNAL MARG NARIMAN POINT MUMBAI-400 021. ..( RESPONDENT ) P.A. NO. (AAAAR 1054 L) APPELLANT BY : SHRI C.G.K. NAIR RESPONDENT BY : NONE DATE OF HEARING : 16.8.2011 DATE OF PRONOUNCEMENT : 24 TH AUGUST, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.3.2010 FOR ASSESSMENT YEAR 1991-92. THE ONLY D ISPUTE RAISED IS REGARDING LEVY OF PENALTY OF RS.3,40,794/- UNDER S ECTION 271(1)(C) OF THE INCOME TAX ACT. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE SOCIETY IN THE ASSESSMENT YEAR 1991-92 HAD RECEIVED A SUM OF RS.9, 69,738/- AS TRANSFER ITA NO.4744/M/10 A.Y:91-92 2 FEE FROM THE MEMBERS FOR TRANSFER OF FLATS. THE ASS ESSEE CLAIMED THE SAID INCOME AS EXEMPT ON THE PRINCIPLE OF MUTUALITY. TH E AO HOWEVER, REJECTED THE CLAIM BASED ON MUTUALITY PRINCIPLE AND TAXED TH E RECEIPT AS INCOME FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PRESIDENCY CO-OP SOCIETY (214 ITR 321). HOWEVER, IN FURTHER APPEAL, THE TRIBUNAL RESTORED THE MATTER BACK TO THE AO FOR CON SIDERING THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF WALKESHWAR TRIVENI CO-OP HSG. SOC. LTD. VS. ITO (88 ITD 159). IN THE FRESH ASSESSMENT, THE AO OBSERVED THAT THE FEES RECEIVED WAS NOT VOLUNTARY CONTRIBUTION AND HAD AN ELEMENT OF COMMERCIALITY. IT WAS ALSO OBSERVED BY HIM THAT AT THE TIME OF MAKING PAYMENT, THE TRANSFE ROR WAS NOT MEMBER OF THE SOCIETY. THE AO FURTHER OBSERVED THAT PRINCIPL E OF MUTUALITY WAS APPLICABLE ONLY TO THOSE RECEIPTS WHICH WERE BEING REGULARLY COLLECTED FROM MEMBERS. HE, THEREFORE, ADDED TRANSFER FEE TO THE T OTAL INCOME AND ALSO INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF IN COME UNDER SECTION 271(1)(C). 2.1 IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESS EE SUBMITTED THAT ADDITION MADE IN ASSESSMENT WAS WRONG AS TRANSFER F EES HAD WRONGLY BEEN TREATED AS INCOME. THE AO HOWEVER DID NOT ACCEPT T HE EXPLANATION. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY H IGH COURT IN THE CASE OF PRESIDENCY CO-OP SOCIETY (SUPRA). IT WAS ALSO O BSERVED BY HIM THAT THOUGH DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN CASE OF WALKESHWAR TRIVENI CO-OP HSG. SOC. LTD. (SUPRA), WAS IN FAVOUR OF THE REVENUE, THE SAID ITA NO.4744/M/10 A.Y:91-92 3 DECISION HAD BEEN CHALLENGED BEFORE THE HONBLE COUR T. THE AO THEREFORE, LEVIED PENALTY UNDER SECTION 271(1)(C) @ 100% OF TA X SOUGHT TO BE EVADED AMOUNTING TO RS.3,40,794/-. 2.2 THE ASSESSEE DISPUTED THE DECISION OF THE AO AN D SUBMITTED BEFORE CIT(A) THAT THE TRANSFER FEES WAS NOT TAXABLE IN VI EW OF THE RECENT JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO -OPERATIVE HOUSING SOCIETY VS. ITO (317 ITR 47). THE ISSUE AT THE RELEVANT POINT OF TIME WAS DEBATABLE AND THEREFORE CLAIM OF THE ASSESSEE HAS TO BE C ONSIDERED A BONAFIDE. CIT(A) WAS SATISFIED BY THE EXPLANATION GI VEN. IT WAS OBSERVED BY HIM THAT ON THE DATE OF FILING RETURN OF INCOME, THERE WERE CONTRARY JUDGMENTS ON THE TAXABILITY OF TRANSFER FEES. THE AO HIMSELF IN THE PENALTY ORDER MENTIONED THAT THERE WERE DECISI ONS OF THE TRIBUNAL WHICH WERE AGAINST THE REVENUE. CIT(A) FURT HER OBSERVED THAT THE PENALTY COULD NOT BE LEVIED ONLY ON THE GROUND T HAT ADDITION WAS MADE IN THE ASSESSMENT OR NO APPEAL WAS FILED AGAINST TH E QUANTUM ASSESSMENT. HE THEREFORE, DELETED THE PENALTY LEVIED AG GRIEVED, BY WHICH, THE REVENUE IS IN APPEAL. 3. BEFORE US, NO ONE APPEARED ON BEHALF OF THE ASSESSE E TO REPRESENT THE CASE THOUGH THE NOTICE HAD BEEN SENT BY R PAD WELL IN ADVANCE AND THE SAME HAS NOT BEEN RETURNED BY THE POST AL AUTHORITIES. THE NOTICE IS THEREFORE DEEMED TO HAVE BEEN SERVED. NO ADJOURNMENT ITA NO.4744/M/10 A.Y:91-92 4 APPLICATION HAS BEEN RECEIVED. WE THEREFORE, PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD A ND AFTER HEARING THE LD. DR WHO PLACED RELIANCE ON THE ORDER OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY U NDER SECTION 271(1)(C) IN RELATION TO THE ADDITION MADE IN ASSESSMENT ON ACCOUNT OF TRANSFER FEES RECEIVED BY THE ASSESSEE SOCIETY. IN THE ASSESSM ENT THE AO ASSESSED THE TRANSFER FEES AS INCOME OF THE ASSESSEE TREATIN G THE SAME AS REVENUE RECEIPT AND ALSO LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED. THE CIT(A) NOTED THAT IN VIEW OF JUD GMENT OF HONBLE BOMBAY HIGH COURT IN CASE OF SIND CO-OPERATIVE HOUSING SOCIETY VS. ITO (SUPRA), THE TRANSFER FEES WAS COVERED BY PRINCIPLE OF M UTUALITY AND WAS NOT TAXABLE. HE ALSO OBSERVED THAT AT THE POINT OF FILING OF RETURN, THE ISSUE WAS DEBATABLE AND THERE WERE SEVERAL DECISIONS O F THE TRIBUNAL AGAINST THE REVENUE. HE HAS THEREFORE HELD T HAT THE CLAIM WAS BONAFIDE AND NO PENALTY WAS LEVIABLE. ON CAREFUL CONSIDERATION OF ALL ASPECTS OF THE MATTER, WE SEE NO INFIRMITY IN THE O RDER OF THE CIT(A). A CASE FOR PENALTY HAS TO BE EVALUATED UNDER THE PROVISIONS OF EXPLANATION 1 UNDER SECTION 271(1)(C) AS PER WHICH IN RE SPECT OF ANY ADDITION TO TOTAL INCOME, IF THE EXPLANATION OF THE ASSESSEE IS FOUND TO BE BONAFIDE AND ALL NECESSARY DETAILS HAVE BEEN GIVEN, NO PENALTY IS TO BE LEVIED. IN THIS CASE, THE ASSESSEE HAD CLAIMED TRANSFER FEE AS ITA NO.4744/M/10 A.Y:91-92 5 EXEMPT BASED ON THE PRINCIPLE OF MUTUALITY AND THE S AID CLAIM IS SUPPORTED BY THE RECENT JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CASE OF SIND CO-OPERATIVE HOUSING SOCIETY (SUPRA) IN WHICH IT HAS BEEN HELD THAT TRANSFER FEE RECEIVED BY THE SOCIETY AS PER B YE-LAWS BOTH FROM INCOMING AND OUTGOING MEMBERS WHICH IS TO BE UTILI ZED EXCLUSIVELY FOR THE BENEFIT OF MEMBERS HAS NO ELEMENT O F TRADE OR COMMERCIALITY AND IS COVERED BY THE PRINCIPLE OF MUTUALI TY. EARLIER, THERE WERE SEVERAL DECISIONS OF THE TRIBUNAL INCLUDING T HE SPECIAL BENCH, WHICH WERE IN FAVOUR OF THE ASSESSEE. THE ISSUE WAS THUS DEBATABLE AND THEREFORE CLAIM MADE BY THE ASSESSEE ADOPT ING A PARTICULAR INTERPRETATION WHICH IS SUPPORTED BY THE DECI SION OF THE TRIBUNAL, HAS TO BE CONSIDERED BONAFIDE CLAIM. NO PENA LTY IN OUR VIEW CAN BE LEVIED IN SUCH CASES. WE, THEREFORE, SEE NO INFIRM ITY IN THE ORDER OF CIT(A) CANCELING THE PENALTY AND THE SAME IS T HEREFORE, UP HELD. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.8.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2011. JV. ITA NO.4744/M/10 A.Y:91-92 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.