MALBAR HILL CLUB LTD, MUMBAI V. ACIT RG 5(2), MUMBAI

ITA 517/MUM/2010

• Counselvise Citation: 51719914 RSA 2010
• Duration Of Justice: 5 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 24-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2010
• Court: TRIBUNAL
• Assessee Lawyers: NIRAJ D SHETH K K VED
• Keywords: Business income; Income from undisclosed sources; Rectification of order; Rule of consistency; Source of fund; Additional evidence; Capital receipt
• Section: 143(3); 5(2); 148; 144

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - G , BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PARTHASARATHY CHOUDHURY ,JU DICIAL MEMBER /. ITA NO. 517 & 518 /MUM/20 1 0 , / ASSESSMENT YEAR - 20 05 - 06 AND 20 06 - 07 MALABAR HILL CLUB B.G. KHER MARGMALABAR HILL MUMBAI - 400 006. PAN: AAACW 3868 M VS THE ACIT, RANGE - 5(2) AAYKAR BHAVAN,M K ROAD, MUMBAI - 20 /. ITA NO.1560/MUM/2012, / ASSESSMENT YEAR - 2004 - 05 /. ITA NO.803/MUM/2010, / ASSESSMENT YEAR - 2005 - 06 /. ITA NO.808/MUM/2010, / ASSESSMENT YEAR - 20 06 - 07 /. ITA NO.4274/MUM/2012, / ASSESSMENT YEAR - 2007 - 08 THE DY./ASTT. CIT, RANGE - 5(2) AAYKAR BHAVAN,M K ROAD, MUMBAI - 20. VS MALABAR HILL CLUB MUMBAI - 6. / C.O.NO.52 & 152/MUM/2013 (ARISING OUT OF ITA NO.1560 & 4274/M/12), . . / A.Y.2004 - 05 &2007 - 08) MALABAR HILL CLUB MUMBAI - 400 006. PAN:AAACW 3868 M VS THE DY. /ASTT. CIT, RANGE - 5(2) AAYKAR BHAVAN,M K ROAD, MUMBAI - 20 ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : S/ SHRI NIRAJ D. SHETH, K.K. VED / REVENUE BY :SHRI MALLIKARJUN UTTURE -- DR / DATE OF HEARING : 24 - 0 8 - 2015 / DATE OF PRONOUNCEMENT : 26 - 0 8 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS OF COMMISSIONERS OF INCOME TAX APPEAL THE ASSESSING OFFICERS(AO . S) AND THE ASSESSEE H AVE FILED CROSS - APPEALS/CROSS OBJECTIONS ( CO .S) RAISING FOLLOWING GROUNDS OF APPEAL FOR VARIOUS ASSESSMENT YEARS(AY.S) : ITA/517/MUM/2010 - AY. 2005 - 06 : 1 : 0 RE.: ENHANCEMENT OF INCOME BY THE COMMISSIONER OF INCOME - TAX (APPEALS): 1 : 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN ENHANCING THE APPELLANT'S TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION BY RS. 47,22,382/ - . 1 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE ENHANCEMENT MADE BY THE COMMISSIONER OF INCO ME - TAX (APPEALS) IS IN EXCESS OF THE POWERS PRESCRIBED U/S. 251 (1) OF THE INCOME - TAX ACT, 1961. 1 : 3 THE APPELLANT SUBMITS THAT THE ENHANCEMENT MADE BY THE COMMISSIONER OF INCOME - TAX (APPEALS) BE STRUCK DOWN AS ILLEGAL, INVALID AND IN EXCESS OF JURISDIC TION AND THE ASSESSING OFFI CER BE DIRECTED TO RECOMPUTE TH E APPELLANT' S TOTAL INCOME IGNORING THE SAME. WITHOUT PREJUDICE TO THE FOREGOING: 2: 0 RE.: TREATING THE APPELLANT AS A 'MUTUAL CONCERN': 517 & ORS. MALABAR HILL CLUB 2 2: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT THE APPELLANT IS A 'MUTUAL CONCERN' AND HENCE ITS INCOME FOR THE YEAR NEEDS TO BE COMPUTED BY APPLYING THE PRINCIPLES OF MUTUALITY. 2 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILIN G ON THE SUBJECT THE PRINCIPLES OF MUT UALITY DO NOT APPLY TO IT AND / OR HAVE BEEN ERRONEOUSLY APPLIED TO IT. FURTHER THE ASSESSEE HAS ALWAYS BEEN TREATED BY THE TAX DEPARTMENT DE HORS THE PRINCIPLES OF MUTUALITY SINCE THE LAST 60 Y EARS AND THAT THE STAND T AKEN BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IN THIS REGARDS IS INCORRECT, ERRONEOUS, MISCONCEIVED AND OUGHT TO BE STRUCK DOWN. 2 : 3 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THAT THE PRINCIPLE OF MUTUALITY COULD NOT BE T HRUST UPON THE APPELLANT 2 : 4 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO RE - COMPUTE ITS TOTAL INCOME TREATING IT AS A 'TRADING CONCERN' IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE INCOME - TAX ACT, 1961. WITHOU T PREJUDICE TO THE FOREGOING: 3: 0 RE.: TREATMENT OF INTEREST OF RS. 47,22,382/ - EARNED BY THE APPELLANT DURING THE YEAR 3: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT INTEREST INCOME OF RS. 47,22, 382/ - RECEIVED BY THE APPELLANT DURING THE YEAR UN DER CONSIDERATION IS NOT GOVERNED BY THE PRINCIPLES OF MUTUALITY AND HENCE OUGHT TO BE TAXED SEPARATELY , 3 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT, IN THE EVENT IT IS HELD THAT THE APPELLANT IS A 'MUTUAL CONCERN' THEN THE PRINCIPLES OF MUTUALITY SHOULD ALSO BE APPLIED EVEN ON THE INTEREST INCOME OF RS. 47,22,382/ - EARNED BY IT DURING THE YEAR. ' 3 : 3 THE APPELLANT SUBMITS THAT, IN CASE IT IS HELD THAT THE APPELLANT IS A 'MU TUAL CONCERN' THEN THE ASSESSING OFFICER SHOULD BE DIRECTED TO RE - COMPUTE ITS TOTAL INCOME FOR THE YEAR INCLUDING THE INTEREST EARNED AS BEING GOVERNED BY THE PRINCIPLES OF MUTUALITY AND THERE BY NOT BEING TAXABLE. 4 : 0 RE.: GENERAL: 4 : 1 THE APPELLAN T CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. ITA NO.518/M/10(06 - 07): 1 : 0 RE.: ENHANCEMENT OF INCOME BY RS. 1,69,07.816/ - BY THE COMMISSIONER OF INCOME - TAX (APPEALS): 1 : 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS EARNED IN ENHANCING THE TOTAL INCOME OF THE APPELLANT BY RS. 1,69,07,816/ - FOR THE YEAR UNDER CONSIDERATION. 1 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE ENHANCEMENT MADE BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IS IN EXCESS OF THE POWERS AVAILABLE TO HIM U/S. 251 (1) OF THE INCOME - TAX ACT, 1961. 1 : 3 THE APPELLA NT SUBMITS THAT THE ENHANCEMENT MADE BY THE COMMISSIONER OF INCOME - TAX (APPEALS) BE STRUCK DOWN AS ILLEGAL, INVALID AND IN EXCESS OF JURISDICTION AND THE ASSESSING OFFICER BE DIRECTED TO RECOMPUTE THE APPELLANT'S TOTAL INCOME IGNORING THE SAME. WI THOUT PREJUDICE TO THE FOREGOING: 2 : 0 RE.: TREATIN2 THE APPELLANT AS A 'MUTUAL CONCERN': 2: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT THE APPELLANT IS A 'MUTUAL CONCERN' AND HENCE ITS INCOME FOR THE YEAR NEEDS TO BE COMPUTED BY APPLYING THE PRINCIPLES OF MUTUALITY. 2 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE PRINCIPLES OF MUTUALITY DO NOT APPLY TO IT AND .I OR HAVE BEEN ERRONEOU SLY APPLIED TO IT. FURTHER THE ASSESSEE HAS ALWAYS BEEN TREATED BY THE TAX DEPARTMENT DE HORS THE PRINCIPLES OF MUTUALITY SINCE THE LAST 60 YEARS AND THAT THE STAND TAKEN BY THE 517 & ORS. MALABAR HILL CLUB 3 COMMISSIONER OF INCOME - TAX (APPEALS) IN THIS REGARDS IS INCORRECT, ERRONEO US, MISCONCEIVED AND OUGHT TO BE STRUCK DOWN. 2: 3 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THAT THE PRINCIPLE OF MUTUALITY COULD NOT BE THRUST UPON THE APPELLANT. 2 : 4 THE APPELLANT SUBMITS THAT THE ASSESSING OFFI CER BE DIRECTED TO RE - COMPUTE ITS TOTAL INCOME TREATING IT AS A 'TRADING CONCERN' IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE INCOME - TAX ACT, 1961. WITHOUT PREJUDICE TO TILE FOREGOING: 3: 0 RE.: TREATMENT OF INTEREST OF RS. 1,69,07,816/ - EARNED B Y THE APPELLANT DURING THE YEAR: 3: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT INTEREST INCOME OF RS. 1,69,07,816/ - RECEIVED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS NOT GOVERNED BY THE PRINCIPLES OF MUTUALI TY AND HENCE OUGHT TO BE TAXED SEPARATELY. 3 : 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT, IN THE EVENT IT IS HELD THAT THE APPELLANT IS A 'MUTUAL CONCERN' THEN THE PRINCI PLES OF MUTUALITY SHOULD ALSO BE APPLIED ON THE INTEREST INCOME EARNED BY IT DURING THE YEAR. 3 : 3 THE APPELLANT SUBMITS THAT, IN CASE IT IS HELD THAT THE APPELLANT IS A 'MUTUAL CONCERN' THEN THE ASSESSING OFFICER SHOULD BE DIRECTED TO RE - COMPUTE ITS TOTAL INCOME FOR THE YEAR INCLUDING THE INTEREST EARNED AS BEING GOVERNED BY THE PRINCIPLES OF MUTUALITY AND THEREBY NOT BEING TAXABLE. 4 : 0 RE.: GENERAL: 4 : 1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. ITA NO.1560/M/12((04 - 05): 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTION THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.52,08,840/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MEMBERSHIP FEE TREATED AS REVENUE RECEIPTS WITHOUT APPRECIATING THAT THE HON'BLE JURISDICTIONAL HIGH COURT DECIDED THE SAID ISSUE IN FAVOUR OF THE REVENUE FOR EARL IER YEARS IN ASSESSEES OWN CASE? THE APPELLANT PRAYS THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GR OUNDS WHICH MAY BE NECESSARY. ITA NO.803/M/10 (05 - 06) 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD.CIT(A) HAS ERRED IN ALLOWING THE SHORT TERM CAPITAL LOSS AND CARRY FORWA RD OF LOSS TO THE SUBSEQUENT YEARS FOR ADJUSTMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD.CIT(A) HAS ERRED IN ALLOWING THE LONG TERM CAPITAL LOSS AND CARRY FORWARD OF LOSS TO THE SUBSEQUENT YEARS FOR ADJUSTMENT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CI T(A) HAS ERRED IN ALLOWING THE LOSS OF SALE OF FIXED ASSETS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,95, 171/ - . 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THE ORDER OF THE A.O. BE RESTORED AS THE ASSESSEE DID NOT COMPLY WITH THE OPPORTUNITY GIVEN BY THE A.O. DURING THE ASSESSMENT PROCEEDING AND THE ASSESSMENT WAS COMPLETED U/S.144 THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY.' ITA NO.808/M/10(06 - 07): 517 & ORS. MALABAR HILL CLUB 4 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,20,91,000/ - MADE ON ACCOUNT OF ENTRANCE FEE RECEIVED FROM LIFE MEMBERS IGNORING THEIR DETAILED REASONING GIVEN BY THE ASSESSING OFFICER IN HIS ORDER. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. ITA NO.4274/M/12 (07 - 08) 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DEL ETING THE ENTIRE ADDITION OF RS.93,50,900/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MEMBERSHIP FEE TREATED AS REVENUE RECEIPTS AND FURTHER IGNORING THAT THE HON'BLE JURISDICTIONAL HIGH COURT DECIDED THE SAID ISSUE IN FAVOUR OF THE REVENUE FOR EARLIER YEARS IN ASSESSEES OWN CASE? THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. C. O.NO.52 & 152 /MUM/2013 (04 - 05) AND (07 - 08) : 1: 0 RE.: VALIDITY OF RE - ASSESSMENT PROCEEDINGS: 1: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT THE RE - ASSESSMENT PROCEEDINGS WERE IN ACCORDANCE WITH LAW. 1: 2 THE APPEL LANT SUBMITS THAT THE RE - OPENING U/S. 148 WAS III EXCESS OF JURISDICTION AND OTHERWISE BAD IN LAW. 1: 3 THE APPELLANT SUBMITS THAT THE PROCEEDINGS U/S. 148 OF THE ACT WERE NOT IN ACCORDANCE WITH LAW AND THE PROVISIONS OF THE ACT AND CONSEQUENTL Y THE ORDER PASSED BY THE ASSESSING OFFICER IS ALSO VOID AND OF NO LEGAL EFFECT AND HENCE THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE STRUCK DOWN THE IMPUGNED ORDER. 2: 0 RE.: GENERAL: 2: 1 THE APPELLANT CRAVES LEAVE TO ADD, AL TER, AMEND, SUBSTITUTE AND/OR OTHERWISE MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF CROSS OBJECTION AT OR BEFORE THE HEARING. REPRESENTATIVE OF BOTH THE SIDES AGREED THAT THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY (FAA) FOR THE AY 2005 - 06 W AS THE LEAD YEAR. THEREFORE ,FIRST, WE WILL DECIDE THE CROSS APPEALS FOR THAT YEAR. ITA/517/MUM/2010 - AY. 20 05 - 06 : ASSESSEE CO MPANY FILED ITS RETURN OF INCOME 28.10.2005 DECLARING LOSS AT RS.1.50 CRORES . THE AO COMPLETED THE ASSESSMENT ON 14.12 2007 U/S. 144 OF THE ACT DECLARING THE INCOME AT RS.( - ) 1.46 CRORES. 2. F IRST G ROUND OF APPEAL IS ABOUT ENHANCEMENT OF INCOME BY THE FAA AMOUNTING TO RS. 47.22 LACS. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE FAA OBSERVED THAT THE ASSESSEE WAS PRO VIDING SERVICES TO ITS MEMBERS, THAT THOSE FACILITIES WERE NOT AVAILABLE TO OUTSIDE MEMBERS , THAT IT WAS SPECIES OF MUTUAL UNDERSTANDING, THAT IT WAS PROVIDING FACILITIES TO ITS MEMBERS WHO WERE ALSO ENTITLED TO PARTICIPATE IN THE SURPLUS OF FUNDS, THAT IT HAD RECEIVED CERTAIN PAYMENTS WHICH WERE NOT COVERED BY THE CONCEPT OF MUTUA LITY NAMELY INTEREST RECEIVED FROM BANKS ( RS. 40.46 LACS), DIVIDEND ON SHARES ( RS. 65.55 LACS) AND INTEREST ON TDS REFUNDS ( RS.6.76 LACS ). HE FURTHER OBSERVED THAT THE ASSESSEE BEING A MUTUAL CONCERN WAS NOT ENTITLED TO SET OFF ITS LOSS AGAINST INCOME FROM NON - MUTUAL ACTIVIT IES, THAT IT WAS INCURRING LOSSES FROM PROVIDING SERVICES TO ITS MEMBERS, THAT IT WAS EARNING INTEREST INCOME/DIVIDEND ON S HARES FROM BANKS AND COMPANIES,THAT THO SE ENTITIE S WERE NOT MEMBERS OF THE CLUB.ACCORDINGLY, HE ISSUED A NOTICE FOR ENHANCEMENT OF 517 & ORS. MALABAR HILL CLUB 5 INCOME OF THE ASSESSEE .HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY IT SHOULD NOT BE TREATED AS MUTUAL CONCERN AND THAT WHY ITS INCOME/LOSS THROUGH MUTUAL ACTIVITY SH OULD NOT BE EXCLUD ED TO COMPUTE ITS TOTAL INCOME.IN ITS REPLIES, DATED 11.8.2009 AND 31. 8.2009 , THE ASSESSEE ARGUED THAT IT WAS IN BUSINESS OF CLUB FACILITY FOR THE USE OF ITS ME MBERS AS WELL AS FOR OUTSIDERS, THAT IT COULD NO T BE TREATED AS MUTUAL CONCERN, THAT THE HON'BLE BOMBAY HIGH COURT HAD ALSO IN THE AY.S 1955 - 56 - 1959 - 60 HELD IT WAS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES TO ITS MEMBERS. CHALLENGING THE PROPOSED ACTION OF ENHANCEMENT OF INCOME , THE ASSESSEE ARGUED THAT THE FAA HAD NO POWER T O ENHANCE INCOME TO CONSIDER THE ITEM OF INCOME WHICH HAD NOT BEEN CONSIDERED BY AO WHILE FRAMING ASSESSMENT. THE ASSESSEE RELIED UPON THE CASES OF S HAP OO RJ I PALLONJI MISTRY(44 ITR 891), RAI BAH ADUR HARDUTROY MOTILAL CHAMARIA (66 ITR 443) . IT WAS CONTENDED THA T PRINCIPLES OF MUTUALITY COULD BE APPLIED WHERE THERE IS A COMPLETE IDENTITY WITH CONTRIBUTORS TO THE COMMON FUND AND THE PERSONS ENTITLED T O PARTICIPATE IN THE SURPLUS OF FUNDS, THAT ALL THE MEMBERS WHO WERE CONTRIBUTING TO THE FUND WERE NOT ENTITLED TO PARTICIPATE IN THE SURPLUS, THERE WERE 13 TYPE OF MEMBERS, THAT OUT OF THEM MEMBERS OF ONLY 5 CATEGORIES WERE ENTITLED TO SHARE THE SURPLUS IN CAS E OF WINDING UP OF THE COMPANY, THAT IT COULD NOT BE TREATED AS MUTUAL ORGANI S ATION ON THE GROUND NON MEMBERS WE RE NOT ENTITLED TO USE THE FACILITIES OF THE COMPANY, THAT IT HAD NOT CLAIME D THE STATUS OF MUTUAL CONCERN.IT RELIED UPON THE CASES OF SECUND E RABAD CLUB ( 97 ITD 541 ) AND CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND (308 ITR 202) . 2.1 . AFTER CONSIDERING T HE SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT HE HAD GONE THROUGH THE ORDERS OF THE HON'BLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF THE ASSESSEE FOR THE AY.S 19 55 - 56 TO 1959 - 60, THAT IN THOSE YEARS THE DEP ARTMENT HAD NOT DISPUTED THE CLAIM OF THE ASS ESSEE ABOUT ITS BEING A TRADING COMPANY , THAT THE ASSESSEE HAD FILED NO EVIDENCE THAT I TS ACTIVITIES CONTINUED TO BE THE SAME IN THE YEAR UNDER APPEAL , THAT IT DID NOT FILE EVIDENCE TO PROVE THAT IT WAS PROVIDING SERVICES TO MEMBERS AND NON - MEMBERS OF COM MERCIAL BASIS , THAT IT HAD NOT MADE OUT ANY CASE THAT I T WAS STILL A TRADING CONCERNS, THAT IT WAS A MEMBERS CLUB PROVIDING FACILITIES TO ITS MEMBERS ONLY, THAT OUTSIDERS WERE NO ENTITLED TO AVAIL THE FACILITY OF THE ASSESSEE COMPANY WITHOUT BECOMING A MEMB ER, THAT IT FAILED TO PROVE THAT IT WAS CONDUCTING A BUSINESS, THAT IT WAS IMMATERIAL WHETHER A CONCERN WAS TRADING OR NON TRADING IF PRINCIPLE OF MUTUALITY WERE APPLICABLE, THAT THERE WAS A COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPATORS IN THE FU ND/COMMON FUND THAT THE ACTIVITIES OF THE ASSESSEE WERE COVERED BY THE CONCEPT OF MUTUALITY, THAT EVEN IF IN THE EARLIER YEARS THE ASSESSEE WAS TREATED AS TRADI NG CONCERN THE FACTS OF THE YEAR UNDER CONSIDERATION ARE TO BE LOOKED IN T O , THAT IF IT HAD EARN ED ANY INCOME FROM MUTUAL ACTIVITIES/OR HAD SUFFERED ANY LOSS FROM MUTUAL ACTIVITY SUCH INCOME/LOSS WAS NOT TAXABLE, THAT WHILE COMPUTING THE TAXABLE INCOME FOR THE YEAR UNDER APPEAL SUCH INCOME OR LOSS WAS TO BE IGNORED, THAT HE HAD NOT CONSIDERED ANY NEW ITEM OF INCOME, THAT THE ENHANCEMENT WAS PROPOSED ABOUT A SOURCE THAT HAD BEEN CONSIDERED BY THE AO, THAT THE ENHANCEMENT WAS PROPOSED ON THE GROUND THAT THE ASSESSEE IS A MUTUAL CONCERN AND THAT IT WAS COVERED BY THE CONCEPT OF MUTUALITY, THAT INCOME/LOSS OF THE ASSESSEE FROM MUTUAL ACTIVITY WAS TO BE IGNORED , THAT EVEN IF THE ASSESSEE WAS PROVIDING FACILITY TO OUTSIDERS INCOME EARNED FROM THEM WAS TO BE TAXED AS PER PROVISIONS OF THE ACT , THAT ON DISSOLUTION OF THE CLUB CERTAIN MEMBERS WE RE ENTITLED TO SH ARE THE SURPLUS, THAT ON THAT BASIS IT COULD NOT BE HELD THAT IT WAS A MUTUAL CONCERN, THAT MEMBERS AS A CLASS WERE ENTITLED TO SHARE THE SURPLUS OF FUNDS, THAT THE POWER OF SHARING SURPLUS ON DISSOLUTION HAD TO BE SEEN AS A CLASS AND NOT BY LOOKING WHETHE R A PARTICULAR MEMBER WAS ENTITLED TO SHARE THE SURPLUS OR NOT, HE REFERRED TO THE CASE OF B ANKIPUR CLUB LTD. (226 ITR 97), THAT NO DEDUCTION/ALLOWANCE WHICH THE ASSESSEE WAS ENTITLED TO AND HAD NOT BEEN CLAIMED WAS BEING THRUST ON IT, THAT THE ASSESSEE IS A 517 & ORS. MALABAR HILL CLUB 6 MUTUAL CLUB AND THAT ITS INCOME/LOSS OUT OF MUTUAL ACTIVITIES WOULD NOT FORM PART OF TAXABLE INCOME, THAT RECEIPT ACCRUED TO THE ASSESSEE UNDER THE HEAD INTEREST INCOME WERE SUBSTANTIAL, THAT THE SUBSCRIPTION RECEIVED WAS RS. 63.87 LACS ,THAT OTHER INCOME I NCLUDING INTEREST INCOME AND D IVIDEND INCOME AM OUNTED TO RS. 1.29 CRORES, THAT THE ASSESSEE HAD F IXED D EPOSIT IN BANK OF RS.9.8 C R ORES , THAT IT HAD MADE INVESTMENT NOT FOR SAFE DEPOSIT BUT FOR EARNING INTEREST INCOME, THAT THE INCOME HAD BEEN EARNED BY IT F ROM THE BANKS WHO WERE NOT ITS MEMBERS . IN V IE W OF ABOVE FACTS, THE FAA HELD THAT INTEREST RECEIVED OF RS. 47.44 LACS WERE NOT COVERED BY PRINCIPLES OF MUTUALITY AND WAS TAXABLE IN THE HANDS OF THE ASSESSEE . 2.2. BEFORE US, THE A UTHORIS ED R EPRESENTATIVE (AR) CONTENDED THAT WHILE MAKING THE ADDITION THE FAA HAD USED A NEW SOURCE OF INCOME, THAT THE AO HAD NOT DEALT WITH THE PRINCIPLE OF MUTUALITY WHILE DECIDING THE APPEAL, THAT IT HAD SOLD THE DEPRECIABLE ASSET WHICH PROVED THE BUSINESS ACTIVITIES OF THE ASSES SEE THAT IT HE EARLIER YEARS AND SUBSEQUENT YEARS THE AO HAD TREATED THE INCOME UNDER THE HEAD BUSINESS, THAT THE RULE OF CONSISTENCY WAS NOT FOLLOWED WITHOUT ASSIGNING ANY REASON, THAT THERE WERE 13 DIFFERENT TYPES OF MEMBERS .HE REFERRE D TO PAGES NO.206, 207, 234 AND 235 OF THE PAPER BOOK. HE RELIED UPON THE CASES OF . THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD COMPLETED THE ASSESSMEN T U/S.144 OF THE ACT FOR THE YEAR UNDER APPEAL,THAT HE HAD NOT DISCUSSED ANYTHING ABOUT MUTUALITY,THAT THE FAA HAD HELD THAT THE ASSESSEE WAS NOT CARRYING OUT BUSINESS ACTIVITIES,THAT HE FURTHER HELD THAT THE PROFIT EARNED OR LOSS SUFFERED BY THE ASSESSEE OUT OF THE MUTUAL HAD TO BE IGNORED,THAT THE INTEREST RECEIVED BY THE ASSESSEE WAS NOT COVERED BY THE PRINCIPLES OF MUTUALITY AND THAT SAME WAS TAXABLE.WE FIND THAT THE ASSESSEE HAD OPPOSED THE ENHANCEMENT PROPOSED BY THE FAA ON THE GROUND THAT HE COULD N OT TAX INCOME FROM A NEW SOURCE OF INCOME AND THAT RULE OF CONSISTENCY STIPULATED THAT INCOME FOR THE YEAR HAD TO BE TAXED UNDER THE INCOME BUSINESS INCOME.FIRST WE WOULD LIKE TO DISCUSS THE PRINCIPLE OF CONSISTENCY - ONE OF THE PRECEDENTS FOLLOWED BY IN JU DICIAL PROCEEDINGS. RULE OF CONSISTENCY IS NOT NEW.AS EARLY AS 1956,THE RULE OF CONSISTENCY WAS DELIBERATED AT LENGTH BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF H.A. SHAH AND CO. ( 30 ITR618 ) AS UNDER: AS A GENERAL RULE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO DECISION OF INCOME - TAX AUTHORITIES.AN ASSESSMENT FOR A PARTICULAR YEAR IS FINAL AND CONCLUSIVE BETWEEN THE PARTIES ONLY IN RELATION TO THE ASSESSMENT FOR THAT YEAR AND THE DECISIONS GIVEN IN AN ASSESSMENT FOR AN EARLIER YEAR ARE NOT BINDING EITHER ON THE ASSESSEE OR THE DEPARTMENT IN A SUBSEQUENT YEAR. BUT THIS RULE IS SUBJECT TO LIMITATIONS, FOR THERE SHOULD BE FINALITY AND CERTAINTY IN ALL LITIGATIONS INCLUDING LITIGAT ION ARISING OUT OF THE INCOME - TAX ACT AND AN EARLIER DECISION ON THE SAME QUESTION CANNOT BE REOPENED IF THAT DECISION IS NOT ARBITRARY OR PERVERSE, IF IT HAD BEEN ARRIVED AT AFTER DUE INQUIRY, IF NO FRESH FACTS ARE PLACED BEFORE THE TRIBUNAL GIVING THE LA TER DECISION, AND IF THE TRIBUNAL GIVING THE EARLIER DECISION HAS TAKEN INTO CONSIDERATION ALL MATERIAL EVIDENCE. A TRIBUNAL LIKE THE APPELLATE TRIBUNAL, SHOULD BE EXTREMELY SLOW TO DEPART FROM A FINDING GIVEN BY AN EARLIER TRIBUNAL. . THERE IS ALSO A FUR THER LIMITATION, NAMELY, THAT THE EFFECT OF REVISING A DECISION IN A SUBSEQUENT YEAR SHOULD NOT LEAD TO INJUSTICE AND THE COURT MUST ALWAYS BE ANXIOUS TO AVOID INJUSTICE TO THE ASSESSEE. FOR INSTANCE, IF THE COURT IS SATISFIED THAT BY DEPRIVING THE ASSESSE E OF HIS RIGHTS UNDER THE LATER DECISION, IN AN EARLIER YEAR, THE ASSESSEE LOST AN IMPORTANT ADVANTAGE OR LOST SOME BENEFIT WHICH HE COULD HAVE GOT UNDER THE INCOME - TAX ACT, THEN THE COURT MAY TAKE THE VIEW THAT DEPARTING FROM THE EARLIER DECISION LEADS TO INJUSTICE OR DENIAL OF JUSTICE AND THE COURT MAY PREVENT AN INCOME - TAX AUTHORITY FROM DOING SOMETHING WHICH WOULD BE UNJUST AND INEQUITABLE. 517 & ORS. MALABAR HILL CLUB 7 IN THE MATTER OF ARONI COMMERCIALS LTD.(362 ITR403),THE HONBLE BOMBAY HIGH COURT HAS OBSERVED THAT THOUGH THE P RINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO TAX MATTERS AS EACH YEAR IS SEPARATE AND DISTINCT,NEVERTHELESS WHERE FACTS ARE IDENTICAL FROM YEAR TO YEAR,THERE HAS TO BE UNIFORMITY AND IN TREATMENT (EMPHA SI S SUPPLIED).SIMILARLY,IN THE CASE OF GOPAL PUROHIT( 336 ITR 287)THE HONBLE COURT REITERATED THE SAME PRINCIPLE AND HELD THAT THERE SHOULD BE UNIFORMITY IN TREATMENT AND WHEN FACTS AND CIRCUMSTANCES FOR DIFFERENT YEARS WERE IDENTICAL PARTICULARLY IN THE CASE OF THE SAME ASSESSEE. (EMPHASIS). HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF DHANSIRAM AGARWALLA(217ITR4)HAD ALSO DEALT THE SIMILAR ISSUE.IN THAT MATTER T HE ASSESSEE, FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, WAS ASSESSED IN THE STATUS OF AN INDIVIDUAL FOR THE AY.1973 - 74.ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3) OF THE ACT,ON MARCH 31 .03. 1976. IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD DEPOSITED RS.1,58,400 WITH THE BANK OF INDIA, NETAJI SUBHASH ROAD BRANCH, CALCUTTA, ON 05.04. 1972,THROUGH THE ASSESSEE'S SON, D, THAT THE ASSESSEE STAYED I N TINSUKIA, THAT ON 04.04.1972 THE ASSESSEE HAD NO SUFFICIENT OPENING CASH BALANCE AND HAD TO BORROW FROM OTHER FIRMS ON THAT DAY AND IN SUCH A CIRCUMSTANCE D COULD NOT HAVE REACHED CALCUTTA ON THE 5TH BEFORE NOON.THEREFORE, THE AMOUNT OF RS. 90,000 WAS TR EATED AS THE ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. THE ASSESSEE HAD EXPLAINED THAT D HAD TRAVELLED BY AIR BUT LATER STATED THAT D HAD TRAVELLED BY CAR AND THE AO DID NOT ACCEPT THIS AS TRUE.ON APPEAL, THE ASSESSEE CONTENDED THAT THE ASSESSMENT PROCEE DINGS HAD STARTED SOME YEARS AFTER THE EVENT AND HE DID NOT REMEMBER THE MODE OF TRANSPORT CORRECTLY.FOR THE AY. 1972 - 73,THE TRIBUNAL ACCEPTED THIS EXPLANATION BUT REJECTED IT FOR THE AY. 1973 - 74.WHEN THE MATTER TRAVELLED TO THE HONBLE HIGH COUT IT WAS HELD THAT THE TOTALITY OF THE CIRCUMSTANCES AND THEIR COMBINED EFFECT WERE TO BE TAKEN INTO CONSIDERATION WHILE DECIDING THE QUESTION AS TO WHETHER OR NOT A PARTICULAR FACT IS PROVED. NEITHER THE PRINCIPLE OF RES JUDICATA NOR THE RULE OF ESTOPPEL IS APPLICABLE TO THE ASS ESSMENT PROCEEDINGS, YET THE RULE OF CONSISTENCY DOES APPLY TO SUCH PROCEEDINGS.FINALLY,IT WAS HELD THAT THE TRIBUNAL CANNOT TAKE A DIFFERENT VIEW IN THE SUBSEQUENT YEAR WHEN IN THE EARLIER YEAR ON THE SAME FACTS, IT HAD ACCEPTED THE CLAIM MADE BY THE ASSESSEE. IN OUR OPINION, RULE OF CONSISTENCY REQUIRES THAT THE VIEW TAKEN BY THE AO IN THE PRECEDING YEARS SHOULD NOT BE DISTURBED, UNLESS THERE IS A SUBSTANTIAL CHANGE IN THE FACTUAL AND LEGAL POSITION. WE HAVE GONE THROUGH THE ASSESSMENT ORDERS PASSED BY THE AO FOR THE EARLIER AND SUBSEQUENT ASSESSMENT ORDERS AND HAVE FOUND THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE WERE SAME AND THAT THE AO HAD ASSESSED THE INCOME ARISING OUT OF SUCH ACTIVITIES AS BUSINESS INCOME. ON 05.04.2011THE AO HAD PASSED A RECTIFICATION ORDER U/S154 OF THE ACT FOR THE AY.2003 - 04 AND HAD SPECIFICALLY MENTIONED THAT PRINCIPLES OF MUTUALITY WERE INAPPLICABLE TO THE FACTS OF THE CASE(PG.237 OF THE PB) . THE COTERMINOUS POWERS OF THE FAA AUTHORISE HIM TO ASSESS THE INCOME OF AN AS SESSEE IN A DIFFERENT MANNER AS ASSESSED BY THE AO.BUT,THE RIGHT HAS ITS OWN LIMITATION ALSO.FROM THE ORDERS OF THE FAA IT IS NOT CLEAR AS TO WHY HE HAD DISTURBED THE FINDINGS GIVEN BY THE AO IN EARLIER YEARS.PASSAGE OF TIME IN ITSELF DOES NOT ALTER LEGAL POSITION.THE HONBLE HIGH COURT HAD DECIDED THE ISSUE OF NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE IN EARLIER YEARS AND THE DEPARTMENT HAD ACCEPTED THE JUDGMENT.THUS,THE QUESTION ABOUT THE NATURE OF ACTIVITIES HAD ATTAINED FINALITY.THE FAA HAS NOT E LABORATED AS TO WHAT WERE THE NEW FACTS AND CIRCUMSTANCES AS COMPARED TO THE FACTS MENTIONED BY THE HONBLE HIGH COURT WHICH JUSTIFIED THAT THE ASSESSEE WAS NOT C ARRYIN G OUT BUSINESS ACTIVITIES IN THE YEAR UNDER APPEAL.THE AO HAD EVEN IN THE BEST JUDGMENT ASSESSMENT HAS ALLOWED LOSS ON SALE OF DEPRECIABLE ASSETS.IT CLEARLY SHOWS THAT HE WAS CONVINCED ABOUT THE NATURE OF THE ACTIVITIES OF THE ASSESSEE . 517 & ORS. MALABAR HILL CLUB 8 BESIDES,THE PRINCIPLES OF CONSISTENCY WHAT HAS TO BE SEEN IS THE DECISION OF THE FAA WHEREIN HE HELD THAT W HILE COMPUTING THE TAXABLE INCOME FOR THE YEAR UNDER APPEAL INCOME OR LOSS ARISING OUT OF MUTUAL ACTIVITIES WAS TO BE IGNORED .AS A RESULT,THE ASSESSEE WAS DEPRIVED OF CLAIMING CARRY FORWARD OF LOSS.THE ENHANCEMENT IN THE INCOME OF THE ASSESSEE WAS MADE BY HIM BY FOLLOWING THE PRINCIPLE OF MUTUALITY.AS STATED EARLIER,THE AO HAD NOT DISCUSSED ANYTHING ABOUT MUTUALITY IN HIS ORDER.THE ASSESSEE HAD DEMONSTRATED THAT THE CONTRIBUTOR TO THE FUND THE ULTIMATE BENEFICIARIES OF THE FUND WERE DIFFERENT.BUT,THE FAA TR EATED THE MEMBERS OF THE CLUB AS A CLASS AND IGNORED THE BASIC FACTS THAT THE MEMBERS WERE OF DIFFERENT TYPES AND EVERY MEMBER WAS NOT ENTITLED TO THE BENEFITS IN CASE OF WINDING UP OF THE COMPANY.IN SHORT,IT CAN BE SAFELY BE SAID THAT THE CONTRIBUTORS AND BENEFICIARIES WERE NOT SAME AND THAT THE PRINCIPLES OF MUTUALITY WAS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. IN THE CASE OF RAI BAHADUR HARDUTROY MOTILAL CHAMARIA ( SUPRA),THE HONBLE APEX COURT HAD HELD THAT FAA FOR ENHANCING THE INCOM E DURING APPELLATE PROCEEDINGS, THE FAA SHOULD NOT TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE ASSESSEE OR THE ASSESSMENT ORDER OF THE AO , THAT THE POWER OF ENHANCEMENT WA S RESTRICTED TO THE SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT - MATTER OF CONSIDERATION BY THE AO FROM THE POINT OF VIEW OF TAXABILITY ,THAT CONSIDERATION D ID NOT MEAN INCIDENTAL OR COLLATERAL EXAMINATION OF ANY MATTER BY THE AO IN THE PROCESS OF ASSESSMENT ,THAT T HERE MUST BE SOMETHING IN THE ASSESSMENT ORDER TO SHOW THAT THE AO HAD APPLIED HIS MIND TO THE PARTICULAR SUBJECT - MATTER OR THE PARTICULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXABILITY OR TO ITS NON - TAXABILITY AND NOT TO ANY INCIDENTAL CONNECTION. IN THE ASSESSMENT ORDER PASSED BY THE AO, THERE IS NOTHING TO SHOW THAT HE HAD APPLIED HIS MIND TO THE PARTICULAR SUBJECT MATTER I.E. APPLICABILITY OF PRINCIPLE OF MUTUALITY . THERFORE,THE FAA WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE BY APPLYING PRINCIPLES OF MUTUALITY FOR THE YEAR UNDER APPEAL.REVERSING HIS OR DERS,WE HOLD THAT THE ASSESSEE WAS CARRYING OUT BUSINESS ACTIVITIES AND THAT THE PRINCIPLES OF MUTUALITY ARE NOT APPLICABLE TO SUCH ACTIVITIES.THE ASSESSEE IS ENTITLED TO THE CARRY FORWARD/SET OFF OF LOSSES AS PER THE PROVISIONS OF THE ACT. WE FIND THAT TH E FAA HAD HEAVILY RELIED UPON THE CASE OF BANKIPUR CLUB LTD. (SUPRA).IN OUR OPINION FACTS OF BANKIPUR CLUB ARE NOT IDENTICAL TO THE FACTS OF CASE UNDER CONISIDERATION.IN THAT MATTER THE FAA HAD NOT ENHANCED THE INCOME OF THE = APPLYING THE PRINCIPLE OF MUT UALITY. THE ISSUE BEFORE THE APEX COURT WAS AS TO WH ETHER THE ASSESSEE - MUTUAL CLUB, WAS ENTITLED TO EXEMPTION FOR THE RECEIPTS OR SURPLUS ARISING FROM THE SALES OF DRINKS,REFRESHMENTS, ETC., OR AMOUNTS RECEIVED BY WAY OF RENT FOR LETTING OUT THE BUILDINGS OR AMOUNTS RECEIVED BY WAY OF ADMISSION FEES, PERIODICAL SUBSCRIPTIONS AND RECEIPTS OF SIMILAR NATURE FROM ITS MEMBERS. THE HONBLE APEX COURT HAD HELD IN THAT CASE THAT W HETHER OR NOT THE PERSONS DEALING WITH EACH OTHER, WERE A 'MUTUAL CLUB' OR CARRYING ON A TRADING ACTIVITY OR AN ADVENTURE IN THE NATURE OF TRADE', WAS LARGELY A QUESTION OF FACT. IN THE CASE BEFORE US,WE HAVE THE BENEFIT OF HAVING JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT FOR TWO AY.S.AS A RESULT, E FFECTIVE GROUND (G ROUND S OF APPEAL NO. 1&2) RAISED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR. 3. GROUND NO.3 IS ABOUT INTEREST INCOME OF RS. 47,22,382/ - EARNED BY IT DURING THE YEAR. DURING THE COURSE OF HEARING,THE AR FAIRLY CONCEDED THAT ISSUE RAISED IN THE GROUND IS DECIDED AGAINST THE ASSESSEE AS PER THE DECISIONS OF HONBLE KARNATAKA HIGH COURT, DELIVERED IN THE CASE OF BANGLORE CLUB (350ITR509) .RESPECTFU LLY,FOLLOWING THE SAID JUDGMENT, WE DISMISS GROUND NO.3. ,RAISED BY THE ASSESSEE . 517 & ORS. MALABAR HILL CLUB 9 ITA /803 /MUM/2010 AY. 2005 - 06 : 4 . FIRST TWO GROUNDS OF APPEAL ,FILE D BY THE AO FOR THE YEAR UNDER APPEL DEAL WITH ALLOWANCE OF CARRY FORWARD OF SHORT TERM AND LONG TERM CAPITAL LOSSES TO THE SUBSEQUENT ASSESSMENT YEARS. WHILE PASSING THE ASSESSMENT ORDER THE AO HAD FOUND THAT THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL LOS S OF RS.2,00,84,224/ - AND SHORT TERM CAPITAL LOSS OF RS.30.10 LAKHS.AS THE DETAILS OF THE BOT H KIND OF LOSSES WERE NOT FILED,SO HE DISALLOWED THE CARRY FORWARD OF BOTH THE SUMS.DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE FILED ADDITIONAL EVIDENCES BEFORE THE FAA AND ALLOWED THE APPEAL OF THE ASSESSEE . 4 .1 BEFORE US,TH E DR STATED THAT THE AO HAD PASSED ORDER U/S.144 OF THE ACT,THAT NO DETAILS WERE FILED BY THE ASSESSEE BEFORE HIM ,THAT THE FAA DID NOT AFFORD ANY OPPORTUNITY TO THE AO TO VERIFY THE CORRECTNES S OF THE CLAIM MADE BY THE ASSESSEE .THE AR STATED THAT THE ASSESSEE HAD FILED ADDITIONAL EVIDENCES BEFORE THE FAA DURING THE APPELLATE PROCEEDINGS. 4 .2 WE FIND THAT THE ASSESSEE MADE A REQUEST TO THE FAA FOR ADMITTING FRESH EVIDENCE,THAT THE FAA HAD ADMITT ED THE SAME AND HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT CALLING FOR A REMAND REPORT FROM THE AO.IN OUR OPINION, HE SHOULD HAVE CALLED FOR A REPORT FROM THE AO IN THIS REGARD. WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE,THE MATTER S HOULD BE RESTORED BACK THE FILE OF THE AO FOR FRESH ADJUDICATION AND VERIFICATION OF THE DOCUMENTS PRODUCED BY THE ASSESSEE BEFORE THE FAA.GROUND S NO. 1 - 2 ARE DECIDED IN FAVOUR OF THE AO,IN PART. 5 . GROUND NO. 3 DEALS WITH ALLOWANCE OF LOSS ON SALE OF FIXED ASSETS . DURING THE ASSESSMENT PROCEEDINGS,THE AO HELD THAT THE ASSESSEE HAD SOLD DEPRECIABLE ASSETS AT A LOSS OF RS.92,437/ - , THAT IT DID NOT PROVIDE ANY EVIDENCE ABOUT THE SALE.HE MADE AN ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE . 5 .1 . DURING THE APPELLATE PROCEEDINGS THE ASSESSEE CONTENDED BEFORE THE FAA THAT IT HAD SOLD DEPRECIABLE FIXED ASSETS AT LOSS OF RS.93 , 437/ - DURING THE YEAR UNDER APPEAL, THAT IT HAD ALREADY ADDED BACK THE LOSS IN THE STATEMENT OF COMPUTATION OF TAXABLE INCOME , THAT NO FURTHER DISALLOWANCE WAS CALLED FOR. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE , THE FAA HELD THAT THE CONTENTION MADE BY THE ASSESSEE WAS FACTUALLY CORRECT, THAT LOSS HAD BEEN ADDED BACK BY THE ASSESSEE WHILE COMPUTING THE TAXABLE INCOME.H E DIRECTED THE AO TO RECTIFY THE MISTAKE. 5 .2 BEFORE US THE DR SUPPORTED THE ORDER OF THE AO. THE AR STATED THAT THE ASSESSEE HAD ALREADY MADE THE DISALLOWANCE IN ITS COMPUTATION OF INCOME, THAT THERE WAS NO JUSTIFICATION FOR FURTHER DISALLOWANCE.HE REFERRE D TO THE COMPUTATION OF INCOME FILED BY THE ASSESSEE BEFORE THE AO.ON A QUERY BY THE BENCH HE ADMITTED THAT THE FIGURES APPEARING IN THE COMPUTATION SHEET OF INCOME AND IN THE ASSESSMENT , AS WELL AS THE APPELLATE ORDER WAS NOT SAME. 5 .3 WE HAVE HEARD THE RI VAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FIGURE OF LOSS CLAIMED ON SALE OF DEPRECIABLE ASSET IS DIFFERENT FROM THE DISALLOWANCE MADE BY THE AO.IN OUR OPINION IT NEEDS FURTHER VERIFICATION.THEREFORE, IN THE INTEREST OF JUSTICE WE A RE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR VERIFYING THE EXACT FIGURE OF THE LOSS CLAIMED BY THE ASSESSEE AND TO ALLOW THE SAME IF IT HAS BEEN DISALLOWED BY THE ASSESSEE ITSELF WHILE COMPUTING THE INCOME FOR THE YEAR UNDER APPEAL.THE ASSESSEE IS DIRECTED TO PRODUCE THE EVIDENCE ABOUT THE SALE OF DEPRECIABLE ASSETS. GR OUND NO.3 IS ALLOWED, IN PART. 6 . LAST EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE ADDITION OF R S.2.95 LACS. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD CLAIMED TDS OF RS.7.68 LACS, THAT 517 & ORS. MALABAR HILL CLUB 10 TDS COVERED INCOME OF RS.39.25 LACS, THAT IT HAD DECLARED INCOME OF RS.36.25 LACS RELATING TO THE TDS CERTIFICATES. H E HELD THAT INCOME DECLARED BY THE ASSESSEE WAS SHORT BY RS.3 , 00,541/ - .AS THE ASSESSEE DID NOT RECONCILE THE DIFFERENCE, SO HE BROUGHT THE SAID AMOUNT TO TAX AND ADDED IT BACK TO THE TOTAL INCOME OF THE ASSESSEE . 6 .1 . BEFORE THE FAA THE ASSESSEE CONTENDED THAT IT HAD FILED DETAILS OF DEDUCTION OF TD S VIDE ITS LETTER DT.28.9.2007, THAT THE DIFFERENCE BETWEEN INC OME CREDITED TO THE P&L ACCOUNT AND THE INCOME SHOWN IN TDS CERTIFICATES WAS ON ACCOUNT OF TDS CERTIFICATES OF MAHARASHTRA STATE ROAD DEVELOPMENT CORP ORATIO N LTD. A ND UNION BANK OF INDIA, AND IT HAD EARNED INTEREST INCOME FROM T HE ABOVE MENTIONED TWO PARTI ES, THAT PART OF THE INCOME WAS OFFERED FOR TAX IN THE EARLIER YEARS, THAT INTEREST OF RS. 2.87 LACS FROM MSRDC AND INTEREST OF RS. 7 , 671 / - FROM UNION BANK OF INDIA WAS OFFERED FOR TAXATION IN THE PRECEDING YEAR, THAT INTEREST OF RS. 5 , 370 / - WAS NOT OFFERED FO R TAX. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE FAA H ELD THAT THE ASSESSEE HAD OFFERED PART OF INCOME SHOWN IN TDS CERTIFICATES IN THE EARLIER YEARS ON ACCRUAL BASIS, THAT SAME COULD NOT BE INCLUDE IN THE TAXABLE INCOME OF THE ASSESSEE FOR THE CURRENT YEAR. ACCORDINGLY HE DELETED THE ADDITION OF RS. 2.95 LACS AND UPHELD THE BALANCE ADDITION OF RS.7350/ - . 6.2. BEFORE US, THE DR STATED THAT NO EVIDENCE WAS PRODUCED BEFORE AO WITH REGARD TO PAYMENT OF TAXES IN THE EARLIER YEAR.THE AR SUPPORTED THE O RDER OF THE FAA. 6 .3 . WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL. AS STATED EARLIER THE ASSESSMENT WAS COMPLETED UNDER SECTION 144 OF THE ACT AND NO DETAILS WHATSOEVER WAS PRODUCED BEFORE THE AO BY THE ASSESSEE DURING THE ASSESSMENT PROCEED INGS, THAT THE FAA HELD THAT PART OF THE TDS PAYMENT WAS SHOWN IN THE EARLIER YEARS.IN OUR OPINION IT WAS THE DUTY OF THE FAA TO CALL FOR THE REMAND REPORT FROM AO BEFORE ALLOWING THE APPEAL.THEREFORE, IN THE INTEREST OF JUSTICE WE ARE REMITTING BACK THE M ATTER TO THE FILE OF AO TO DECIDE THE ISSUE AGAIN.THE ASSESSEE IS DIRECTED TO PRODUCE RELEVANT CERTIFICATES BEFORE THE AO.THE AO WOULD GIVE CREDIT FOR THE TAXES PAID PAID IN THE EARLIER YEARS , AS CLAIMED BY THE ASSESSEE .GROUND NO.4 IS ALLOWED, IN PART. NOW, WE WOULD ADJUDICATE THE APPEALS OF OTHER AY.S.,FILED BY THE ASSESSEE / THE AO. ITA.51 8 /MUM/2010(2006 - 07 ) : 7 . FOLLOWING OUR ORDER FOR THE AY.05 - 06 ,WE DECIDE GROUNDS NO.1 AND 2 IN FAVOUR OF THE ASSESSEE AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THE FACTS OF THAT YEAR - EXCEPT FOR THE AMOUNTS INVOLVED. 8 . GROUND NO.3 IS DECIDED AGAINST THE ASSESSEE,FOLLOWING OUR ORDER FOR EARLIER YEAR. ITA 808/M/ 10 - AY. 06 - 07 : 9. THE SOLITARY ISSUE FOR THE YEAR UNDER CONSIDERATION IS ABOUT TREATMENT TO BE GIVEN TO THE ENTRANCE FEE RECEIVED BY THE ASSESSEE FROM LIFE MEMBERS.DURING THE ASSESSMENT PROCEEDINGS,THE AO MADE AN ADDITION OF RS.1,20,81,000/ - TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF SUBSCRIPTION RECEIPTS(RS.5.76 LACS),LIFE MEMBERS ENTRANCE FEE DURING THE YE AR(RS.1.08 CRORES) AND ENTRANCE FEE RECEIVED IN ADVANCE (RS.6.90 LACS). 9.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA WHO FOLLOWING THE ORDER OF THE HON'BLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF THE ASSESSEE FOR THE AY.S.1963 - 64 AND 1964 - 65 ALLOWED THE APPEAL IN FOLLOWING MANNER: - 1.2 THE APPELLANT HAS FILED DETAIL SUBMISSIONS ON THIS ISSUE VIDE LETTER DATED 28.04.2009. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN PLACED ON RECORD. 517 & ORS. MALABAR HILL CLUB 11 1.3 THE ONLY DISPUTE IN APP EAL IS WHAT PORTION OF THE ENTRANCE FEE RECEIVED BY THE APPELLANT FROM PERSONS AT THE TIME OF ADMITTING THEM AS LIFE MEMBERS ARE TAXABLE RECEIPTS. THE ISSUE HAS BEEN SETTLED BY THE BOMBAY HIGH COURT IN ITS OWN CASE IN ASSESSMENT YEAR 1963 - 64 AND ASSESSM ENT YEAR 1964 - 65(136 ITR 569). BOMBAY HIGH COURT HELD THAT THE ENTRANCE FEE PAID BY THE LIFE MEMBERS EQUIVALENT TO THE AMOUNT COLLECTED FROM ORDINARY MEMBERS IS A CAPITAL RECEIPTS NOT LIABLE TO TAX AND THE BALANCE AMOUNT IS IN FACT COMPOUNDED PAYMENT, IN L IEU OF ANNUAL SUBSCRIPTIONS AND THEREFORE THESE ARE REVENUE RECEIPTS. THUS IT WILL BE SEEN THAT BOMBAY HIGH COURT HAS NOT LAID DOWN ANY RATIO FOR THE PURPOSE OF SPLITTING ENTRANCE FEE BETWEEN REVENUE AND CAPITAL RECEIPT. THEREFORE, THE ASSESSING OFFICER WA S WRONG IN SPLITTING THE FEE RECEIVED FROM LIFE MEMBERS INTO CAPITAL AND REVENUE RECEIPTS IN 20:80 RATIO. THAT PART OF THE ENTRANCE FEE COLLECTED FROM LIFE MEMBERS, WHICH COLLECTED FROM ORDINARY MEMBERS, IS TO BE TREATED AS CAPITAL RECEIPTS AND OVER AN D ABOVE THIS AMOUNT IS TO BE TREATED AS COMPOUNDED VALUE OF ANNUAL SUBSCRIPTIONS AND THEREFORE THIS PART IS A TAXABLE RECEIPTS AS HELD BY BOMBAY HIGH COURT. ACCORDINGLY THE ASSESSING OFFICER WAS NOT 'JUSTIFIED IN MAKING AN ADDITION OF RS. 21,60,000/ - AND AN ADDITION OF RS. 98,40,000/ - TO THE INCOME OF THE APPELLANT. FURTHER THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AN ADDITION OF RS. 5,76,000/ - TO THE INCOME OF THE APPELLANT ON ACCOUNT OF SUBSCRIPTIONS TRANSFERRED FROM THE ADVANCE SUBSCRIPTION A CCOUNT OF ORDINARY MEMBERS TO THE LIFE MEMBERS SUBSCRIPTION ACCOUNT. THIS GROUND OF THE APPEAL OF THE APPELLANT IS ALLOWED. DURING THE COURSE OF HEARING BEFORE US,THE DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.THE AR SUPPORTED THE ORDER OF THE FAA. 9.2. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE MATTER HAS BEEN CONCLUSIVELY DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE, AS STATED BY THE FAA . RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. ITA/1560/M/12 - AY. 04 - 05 AND ITA / 4274/M/12 - AY. 07 - 08 : 10. THE ONLY ISSUE RAISE D BY THE AO,FOR BOTH THE AY.S., PERTAINS TO MEMBERSHIP FEE OF RS.52.08 LAKHS AND RS.93.50 LAKHS RESPECTIV ELY .FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT FOR THE AY.S.1963 - 64 AND 1964 - 65,WE CONFIRM THE ORDER OF THE FAA.EFFECTIVE GROUND OF APPEAL IS DECIDED AGAINST THE AO,FOR BOTH THE AY.S. C.O.NO.52 & 152 /MUM/2013 - AY.S. 04 - 05 AND 07 - 08 : 1: 0 RE.: VALIDITY OF RE - ASSESSMENT PROCEEDINGS: 1: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN HOLDING THAT THE RE - ASSESSMENT PROCEEDINGS WERE IN ACCORDANCE WITH LAW. 1: 2 THE APPELLANT SUBMITS THAT THE RE - OPENING U/S. 148 WAS III EXCES S OF JURISDICTION AND OTHERWISE BAD IN LAW. 1: 3 THE APPELLANT SUBMITS THAT THE PROCEEDINGS U/S. 148 OF THE ACT WERE NOT IN ACCORDANCE WITH LAW AND THE PROVISIONS OF THE ACT AND CONSEQUENTLY THE ORDER PASSED BY THE ASSESSING OFFICER IS ALSO VO ID AND OF NO LEGAL EFFECT AND HENCE THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE STRUCK DOWN THE IMPUGNED ORDER. 2: 0 RE.: GENERAL: 2: 1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR OTHERWISE MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF CROSS OBJECTION AT OR BEFORE THE HEARING. DURING THE COURSE OF HEARING BEFORE US, THE AR STATED THAT IF THE APPEALS FILED BY THE AOS FOR THE ABOVE MENTIONED TWO AY.S.WERE TO BE DISALLOWED,THE A SSESSEE WOULD NOT BE INTERESTED IN PRESSING THE GROUND OF CO.S. AS A RESULT, G ROUNDS OF APPEAL FILED BY THE ASSESSEE , IN THE CO.S ARE 517 & ORS. MALABAR HILL CLUB 12 DISMISSED AS NOT PRESSED. AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR BOTH THE AY.S.STAND PARTLY ALLOWED.APPEAL FILED BY THE AO FOR THE AY.2005 - 0 6 IS PARTLY ALLOWED AND APPEALS FOR THE REMAINING THREE AY.S.STAND DISMISSED.CO.S.FILED BY THE ASSESSEE ARE DISMISSED. . . . . . 2005 - 06 . . . . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST ,2015. 26 TH , 2015 SD/ - SD/ - ( / PARTHASARATHY CHOUDHURY ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 26 .0 8 .2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE C ONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TR UE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.