ITO 10(3)(1), MUMBAI V. COMMON EFFLUENT TREATMENT PLANT ( THANE-BELAPUR) ASSOCIATION, NAVI MUMBAI

ITA 5102/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84100 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: RAJA B SINGH
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NOS. 5101 & 5102/MUM/2013 ASSESSMENT YEAR: 2006-07 & 2007-08 ITO - 10(3) ( 1 ) R.NO. 456, 4 TH FLOOR, AAYAKAR BHAVEN. M.K. ROAD, MUMBAI- 400 020 VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION MIDC, KHAIRANE, P.O. KHAIRANE, THANE BELAPUR ROAD, NAVI MUMBAI- 400 709 PAN:-AABCC 4712 H (APPELLANT) (RESPO NDENT) ASSESSEE BY : SHRI RAJA B. SINGH REVENUE BY : SHRI NEIL PHILIP DATE OF HEARING : 05.11.2014 DATE OF PRONOUNCEMENT : 12 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEALS HAVE FILED BY THE REVENUE, AGAINST SEPARATE ORDERS OF EVEN DATE, 04.04.2013 PASSED BY LD.CIT(A)-22, MUMBAI IN RELATION WITH THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE A.Y. 2006-07 AND 2007-08. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON ARISING OUT OF SIMILAR SET OF FACTS, THE REFORE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER. 2. IN A.Y. 2006-07, THE REVENUE IS AGGRIEVED BY DEL ETION OF PENALTY OF RS.20,92,925/- AND IN A.Y.2007-08, DELETION OF PENA LTY OF RS.17,21,427/- BY THE LD.CIT(A). ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN ASSOCIATION CONSTITUTED AS A NONPROFIT ORGANIZATION AND REGISTE RED U/S 25 OF COMPANIES ACT, 1956. THE ASSOCIATION WAS CONSTITUTE D FOR THE PURPOSE OF TREATMENT OF INDUSTRIAL EFFLUENTS GENERATED BY I TS MEMBERS. THE COST OF THE TREATMENT OF INDUSTRIAL EFFLUENTS IS MET BY THE CONTRIBUTION MADE BY THE MEMBERS THEMSELVES AND IT DOES NOT RENDER AN Y SERVICES TO ANY OUTSIDERS. SINCE THERE WAS A COMPLETE IDENTITY BETW EEN THE CONTRIBUTORS AND PARTICIPATORS, THEREFORE, IT HAS CLAIMED BENEFI T OF PRINCIPLE OF MUTUALITY, THAT IS, ITS INCOME IS BEYOND THE PURVI EW OF CHARGING SECTION. THE SUBJECT MATTER OF PENALTY HERE IN THESE APPEALS ARE TAXABILITY OF INTEREST INCOME EARNED BY THE ASSESSEE, COMPRISING OF INTEREST ON FIXED DEPOSIT WITH BANK AND OTHER INTEREST INCOME WHICH H AS BEEN TAXED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER. THE SAID INTEREST INCOME WAS CLAIMED AS EXEMPT UNDER THE PRINCIPLES O F MUTUALITY. 4. IT HAS BEEN STATED BEFORE US THAT THE ASSESSEE I S BEING REGULARLY ASSESSED TO TAX SINCE EARLIER YEARS AND FROM A.Y. 1 997-98 TO 2005-06, THE INCOME TAX TRIBUNAL IN ASSESSEES OWN CASE HAD HELD THAT ALL THE INTEREST INCOME INCLUDING INTEREST OTHER THAN FIX ED DEPOSITS WITH THE BANK ARE NOT EXIGIBLE TO TAX. THE COPIES OF TRIBUNA L ORDER RIGHT FROM A.YS. 1998-99 TO 2005-06 HAVE BEEN PLACED ON RECORD , WHEREIN THIS ISSUE OF TAXING OF INTEREST HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE. HOWEVER, IN THE A.YS. 2006-07 AND 2007-08, THE TRI BUNAL HAS DECIDED THE TAXABILITY OF INTEREST IN THE FAVOUR OF THE REV ENUE, HOLDING THAT INTEREST INCOME IS OUTSIDE THE PURVIEW OF MUTUALITY , VIDE JUDGMENT AND ORDER DATED 24.02.2012 PASSED IN ITA NO. 2946, 2947 AND 2948/MUM/2011. AFTER GIVING EFFECT TO THE TRIBUNAL ORDER, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE DATED 09.10.2012 , AS TO WHY THE ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 3 PENALTY U/S 271(1)(C) SHOULD NOT BE LEVIED ON THE I NTEREST INCOME WHICH WAS CLAIMED AS EXEMPT UNDER THE PRINCIPLES OF MUTU ALITY. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 18.10.2012 FILED DET AIL EXPLANATION WHICH HAS BEEN REPRODUCED AT PAGE 2 OF THE IMPUGNED PENAL TY ORDERS. THE SUM AND SUBSTANCE OF ASSESSEES EXPLANATION WAS THA T THE ITAT IN RESPECT OF ALL THE EARLIER ASSESSMENT YEARS RIGHT F ROM A.YS. 1997-97 TO 2005-06 HAD HELD THAT, ALL THE INTEREST INCOME EARN ED BY THE ASSESSEE ARE NOT EXIGIBLE TO TAX. EVEN THE HONBLE BOMBAY HI GH COURT IN THE EARLIER ASSESSMENT YEARS HAS RESTORED THE QUESTION OF TAXABILITY OF OTHER DEPOSITS AND INCOME TAX REFUNDS FOR FRESH DECISION BY THE TRIBUNAL. IN THE IMPUGNED YEARS WHICH ARE UNDER CONSIDERATION FO R PENALTY PROCEEDINGS, THE TRIBUNAL HAS CONFIRMED THE TAXABIL ITY OF INTEREST, WHICH DECISION HAD COME SUBSEQUENTLY, THAT IS MUCH AFTER THE FILING OF INCOME TAX RETURNS. THUS ASSESSEE HAD BONA FIDE BELIEF THA T INTEREST INCOME IS NOT CHARGEABLE TO TAX AT THE TIME OF FILING OF THE RETURN OF INCOME. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD.(2010) 322 ITR 158. HOWEVER, THE ASSESSING OFFICER HELD THAT ULTIMATELY THE ISSUE TAXABILITY OF INTEREST INCOME HAS BEEN DECIDED AGAINST THE ASSESS EE AS IT DOES NOT FALL WITHIN THE PRINCIPLES OF MUTUALITY. IN SUCH A SITUA TION THE PENALTY BECOMES IMPERATIVE ON THE FOLLOWING GROUNDS:- A) THOUGH THE ASSESSEE STATES THAT THE INTEREST IN COME HAS NOT BEEN CONCEALED, THE SAME HAS NOT BEEN OFFERED TO TA X UNDER THE PRETEXT THAT THE SAME IS COVERED UNDER THE PRINCIPL E OF MUTUALITY, WHICH TANTAMOUNT TO FILING OF INACCURATE PARTICULAR OF INCOME. B) THE CASE CITED BY THE ASSESSEE IS OF LITTLE HELD BECAUSE THE RECENT JUDGMENT IN THE ASSESSEE OWN CASE SUPERSEDE S THE PREVIOUS JUDGMENTS. C) ONLY BECAUSE ON A PARTICULAR ISSUE THE VIEW DIFF ERS FROM DIFFERENT AUTHORITIES DOES NOT MEAN THAT CONCEALMEN T HAS TAKEN ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 4 PLACE IS A WRONG VERSION OF THE ASSESSEE BECAUSE IN THE ASSESSEES CASE BEGINNING WITH THE A.O.S ORDER, LD .CIT(A)S ORDER, HONBLE ITATS ORDER AND HONBLE HIGH COURT ORDER ALL THE HIGHER AUTHORITIES HAS TAKEN SINGLE VIEW THAT INTER EST FROM DEPOSITS AND OTHERS SHOULD BE KEPT OUT OF THE PURVI EW OF THE PRINCIPLE OF MUTUALITY. THEREAFTER, HE REFERRED TO THE DECISION OF SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2 008) 174 TAXMAN 571 AND HELD THAT, ASSESSEE HAD FURNISHED INACCURATE P ARTICULARS OF INCOME, HENCE LIABLE FOR PENALTY U/S 271(1)(C). AC CORDINGLY HE LEVIED THE PENALTY OF RS.17,21,427/- FOR THE A.Y. 2007-08 AND OF RS.20,92,925/- FOR THE A.Y. 2006-07. 5. BEFORE THE LD.CIT(A), THE ASSESSEE REITERATED TH E SAME EXPLANATION AND SUBMITTED THAT ISSUE OF TAXABILITY OF INTEREST HAD ALWAYS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL UP TO THE A.Y. 2005-06. THEREFORE, AT THE TIME OF FILING OF RETURN OF INCOME THE ASSESSEE HAD A BONA FIDE BELIEF THAT ITS INTEREST I NCOME ALSO FALLS WITHIN THE PRINCIPLES OF MUTUALITY. SIMPLY BECAUSE ADDIT ION HAS BEEN CONFIRMED IN THE QUANTUM PROCEEDINGS IN THESE YEARS BY FOLLOWING THE SUBSEQUENT BOMBAY HIGH COURT DECISION, DOES NOT MEA N THAT THE ASSESSEE IS GUILTY OF FURNISHING INACCURATE PARTICU LARS. 6. THE LD.CIT(A) DELETED THE PENALTY ON THE GROUND THAT, IN THE EARLIER YEARS THE ISSUE OF TAXABILITY OF INTEREST W AS DECIDED IN THE FAVOUR OF THE ASSESSEE AND IT WAS ONLY AFTER THE DECISIO N OF BOMBAY HIGH COURT WHICH WAS RENDERED ON 17.06.2010, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE. THUS SO FAR AS PENALTY PROCEEDINGS U/ S 271(1)(C) ARE CONCERNED, THE ASSESSEE WAS NOT CLEAR AS TO WHETHER THE INTEREST ON DEPOSITS IS GOVERNED BY PRINCIPLE OF MUTUALITY OR NOT AND HENCE IT CANNOT BE CONSIDERED THAT THE ASSESSEE HAS FURNISHE D ANY INACCURATE ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 5 PARTICULARS OF INCOME OR FALLS IN THE CATEGORY OF A CLAIM WHICH WAS NOT SUSTAINABLE AT THE TIME OF FILING OF RETURN OF INCO ME. RELYING UPON THE SUPREME COURT DECISION IN THE CASE OF RELIANCE PETR O PRODUCTS PVT. LTD. (SUPRA), PENALTY WAS DELETED. 7. BEFORE US THE LD. DR SUBMITTED THAT, ONCE THE IS SUE HAS BEEN FINALLY DECIDED AGAINST THE ASSESSEE BY THE HONBLE BOMBAY HIGH COURT AND ALSO NOW BY THE DECISION OF THE SUPREME COURT IN THE CASE OF BANGALORE CLUB VS. CIT REPORTED IN 350 ITR 509, THE TAXABILITY OF INTEREST IN THE CASE OF MUTUALITY CONCERN HAVE BEEN DECIDED IN THE FAVOUR OF THE REVENUE. THIS INTER ALIA MEANS THAT, LAW WAS ALWAYS AGAINST THE ASSESSEE AND THEREFORE, ANY CLAIM MADE AGAINST THE LAW, TANT AMOUNTS TO FALSE CLAIM AND THEREFORE EXIGIBLE FOR PENALTY U/S 271(1) (C). 8. BEFORE US LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT, THE VERY FACT THAT IN THE EARLIER YEARS, THE TRIBUNAL I N SERIES OF DECISIONS HAVE HELD THAT INTEREST INCOME EARNED BY THE ASSESS EE FALLS WITHIN THE AMBIT OF PRINCIPLE OF MUTUALITY AND HENCE OUTSIDE T HE PURVIEW OF TAXATION, THEREFORE, IT CANNOT BE HELD THAT THE ASS ESSEE CLAIM FOR EXEMPTION OF TAX ON INTEREST INCOME IS NOT BONA FID E AS AT THE TIME OF THE FILING OF RETURN OF INCOME, ALL THE TRIBUNAL DE CISIONS FOR THE EARLIER YEARS WERE IN THE FAVOUR OF THE ASSESSEE. IT WAS ON LY FROM THE YEAR 2010 ONWARDS, THIS ISSUE HAS BEEN DECIDED AGAINST THE AS SESSEE. HE SUBMITTED THAT ONCE THERE IS A DEBATABLE ISSUE WITH REGARD TO THE TAXABILITY OF A PARTICULAR INCOME IN THE CASE OF TH E ASSESSEE, IT CANNOT BE HELD THAT PENAL PROVISION OF SECTION 271(1)(C) ARE ATTRACTED. HE SUBMITTED THAT THERE WERE THREE HIGH COURT DECISION S IN FAVOUR OF THE ASSESSEE PRIOR TO THE SUPREME COURT DECISION IN THE CASE OF BANGALORE CLUB VS. CIT (SUPRA) DECISIONS WHICH WERE AS UNDER: - ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 6 (I) DELHI HC-ALL INDIA ORIENTAL BANK OF COMMERCE W ELFARE SOCIETY [(2003) 130 TAXMAN 575 (DELHI)] (II) KARNATAKA HC- CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND [(2009) 308 ITR 202 (KARN)] (III) DELHI HC-STANDING CONFERENCE OF PUBLIC ENTERP RISES (SCOPE) [(2009) 319 ITR 179 (DEL)] IN SUCH A SITUATION EVEN THOUGH THE MATTER HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE QUANTUM PROCEEDINGS, NO PENALTY U/S 271(1)(C) CAN BE SAID TO BE LEVIABLE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT ASS ESSEE IS AN ASSOCIATION WHICH HAS BEEN CONSTITUTED AS NON-PROFIT ORGANIZATI ON U/S 25 OF THE COMPANIES ACT, 1956. THE PARTICIPATORS OF THE ASSOC IATION CONTRIBUTED TO THE COST OF ATTAINING THE OBJECT, WHICH WAS TREATME NT OF INDUSTRIAL EFFLUENTS. THROUGHOUT THE ASSESSMENT YEARS 1997-98 TO 2005-06, THE ASSESSEE WAS HAVING INTEREST INCOME FROM THE BANK D EPOSITS AND OTHER DEPOSITS, WHICH WAS CLAIM AS EXEMPT FROM TAXATION O N THE GROUND OF PRINCIPLES OF MUTUALITY, LIKE OTHER RECEIPTS. THI S CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED BY THE TRIBUNAL IN SERIES OF DECI SIONS RENDERED FROM THE A.YS. 1998-99 TO 2005-06. THE ASSESSING OFFICER AT THE TIME OF THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEARS HAS H ELD THAT SUCH A CLAIM IS NOT ALLOWABLE ON THE GROUND THAT THE QUEST ION OF LAW ON THIS ISSUE HAS BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT. ON THIS PREMISE ALONE, THE INTEREST INCOME WAS HELD TO BE T AXABLE AS INCOME FROM OTHER SOURCES. THE HONBLE BOMBAY HIGH COURT V IDE JUDGMENT AND ORDER DATED 17.06.2010 DECIDED THE ISSUE OF TAXABIL ITY OF INTEREST IN FAVOUR OF THE REVENUE. FOLLOWING THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 24.02.2012, THE TRIBUNAL HAS DECIDED THIS ISSUE OF TAXATION OF INTEREST AGAINST THE ASSESSEE. NOW ON ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 7 THIS BACKGROUND, IT HAS TO BE SEEN, WHETHER PENALTY U/S 271(1)(C) IS LEVIABLE ON SUCH A CLAIM MADE BY THE ASSESSEE. IT I S TRITE LAW THAT THE CONSIDERATIONS THAT ARISE IN THE PENALTY PROCEEDING S ARE DIFFERENT FROM THOSE IN THE ASSESSMENT PROCEEDINGS. SO FAR AS PENA LTY PROCEEDINGS ARE CONCERNED IT HAS TO BE SEEN, WHETHER AT THE TIME OF FILING RETURN OF INCOME, THE CLAIM MADE BY THE ASSESSEE IS BASED ON SOME BONA FIDE BELIEF OR NOT. A MERE MAKING OF A CLAIM WHICH MAY N OT BE FOUND SUSTAINABLE IN LAW LATER ON, CANNOT BE HELD AGAINST THE ASSESSEE, THAT HE IS GUILTY OF MAKING A FALSE CLAIM. IT IS AN ADMITTE D FACT THAT, AT THE TIME OF FILING OF RETURN OF INCOME THE ISSUE OF TAXABILI TY OF INTEREST WAS IN THE FAVOUR OF THE ASSESSEE BY VIRTUE OF SERIES OF DECIS IONS OF THE TRIBUNAL IN THE EARLIER YEARS IN ASSESSEES OWN CASE. NOT ONLY THAT, THERE WERE CERTAIN HIGH COURTS DECISIONS ALSO WHICH WERE IN TH E FAVOUR OF THE ASSESSEE AS POINTED OUT BY THE LEARNED COUNSEL. THU S THE ISSUE WHETHER INTEREST INCOME WILL FALL WITHIN THE PRINCIPLE OF MUTUALITY OR NOT ITSELF WAS DEBATABLE AS THERE WERE MANY CONFLICTING DECISI ONS. IN THIS BACKGROUND WE HOLD THAT AT THE TIME OF FILING RETUR N OF INCOME THE ASSESSEES CLAIM WAS NOT ONLY BONA FIDE BUT HAD A F OUNDATIONAL FACT IN THE FORM OF TRIBUNAL ORDERS. ACCORDINGLY, WE HOLD T HAT THE LD.CIT(A) HAS RIGHTLY DELETED THE PENALTY AS THE CLAIM OF NON TAX ABILITY OF INTEREST INCOME WAS BASED ON BONA FIDE BELIEF. IN THE RESULT THE GROUNDS RAISED BY THE DEPARTMENT IN BOTH THE YEARS ARE DISMISSED. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NOS. 5101 & 5102/MUM/2013 COMMON EFFLUENT TREATMENT PLANT ASSESSMENT YEAR: 2006-07 & 2007-08 8 MUMBAI, DATED: 12.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.