RWA GC Emerald Heights, Ghaziabad V. DCIT, Circle- 2, Ghaziabad

ITA 6858/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5449 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: ALOK GUPTA ADV SH AKSHIT GOEL
• Keywords: Opportunity of being heard; Maximum Marginal Rate
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO.-6858/DEL/2017 ( ASSESSMENT YEAR: 2013-14) RWA GC EMERALD HEIGHTS T-1, RAMPRASTHA GREENS POCKET, SGC EMERADED HEIGHTS, SECTOR-7, VAISHALI, GHAZIABAD AABAR3229E VS DCIT CIRCLE 2, GHAZIABAD ASSESSEE BY SH. ALOK GUPTA, ADV. SH. AKSHIT GOEL, ADV. REVENUE BY MS. ASHIMA NEB, SR. DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE, ASSAILING THE CORRECTNESS OF THE ORDER DATED 01.08.2017 PERTAININ G TO 2013-14 AY ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY LD. CIT(A) IS BAD IN LAW. 2. THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE ORD ER PASSED BY THE ASSESSING OFFICER AND THEREBY CONFIRMING THE ADDITION OF RS. 4,14,328/- MADE BY AO U/S 143(3) OF THE INCOME TAX ACT, 1961. 3. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDI TION MADE BY LD. AO ON ACCOUNT OF INTEREST INCOME AND MISCELLANEOUS INCOME AMOUNTING TO RS. 3,82,242/- AND RS. 34,086/- RESPECTIVELY WITHOUT CO NSIDERING THE LAW AND FACTS OF THE CASE. 4. THE LD. CIT(A) ERRED IN INTERPRETING THE PROVISI ONS OF SEC. 167B AND CONFIRMING CHARGING OF TAX AT MAXIMUM MARGINAL RATE INSTEAD OF SLAB TAX RATE APPLICABLE ON ASSOCIATION OF PERSON (AOP) AS PER THE RELEVANT FINANCE ACT WITHOUT APPRECIATING THE FACT THAT THE APPELLAN T IS A SOCIETY REGISTERED UNDER THE SOCIETY REGISTRATION ACT, 1860. 5. THAT THE APPELLANT SEEKS LEAVE TO ADD, AMEND, AL TER ABANDON OR SUBSTITUTE ANY OF THE GROUND DURING THE HEARING OF APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A RESIDENTIAL SOCIETY AND STATES THAT IT COLLECTS FUNDS FROM ITS MEMBERS AND PAYS FOR COMMON EXPENDITURE FROM SUCH FUNDS. THE ASSESSEE RESIDENT IAL SOCIETY FILED ITS RETURN OF INCOME DURING THE YEAR UNDER CONSIDERATION AT NIL A ND CLAIMED A REFUND OF RS. 6630/- TOWARDS TDS AS DEDUCTED AT SOURCE. THE RETUR N OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY UNDER CASS. THE AO REQUIRED THE ASSESSEE TO JUSTIFY ITS CLAIM FOR DEDUCTION U/S 57 OF THE ACT. THE ASSESSE E STATED THAT IT IS A RESIDENTIAL SOCIETY REGISTERED UNDER SOCIETIES REGISTRATION ACT , 1860. IT WAS STATED THAT DATE OF HEARING 18.04.2018 DATE OF PRONOUNCEMENT 26.04.2018 ITA NO. 685 8 /DEL/2017 2 FUNDS ARE COLLECTED FROM MEMBERS AND THE COMMON EXP ENDITURE IS PAID FROM THAT AND DEDUCTION U/S 57 WAS CLAIMED INADVERTENTLY. TH E AO BROUGHT TO TAX THE INTEREST RECEIVED FROM FIXED DEPOSITS AS WELL AS TH E SAVING ACCOUNT AND THE MISCELLANEOUS INCOME RECEIVED BY THE SOCIETY. 3. THE ASSESSEE CHALLENGED THE SAID ACTION BEFORE T HE CIT(APPEALS) ATTENTION WAS INVITED TO SEC. 167B OF THE I.T. ACT, 1961 AND RELIANCE WAS PLACED UPON THE ORDER OF THE ITAT IN THE CASE OF KMR EDUCA TIONAL SOCIETY VS. ACIT 55 TAXMAN 218 OF HYDERABAD TRIBUNAL. THE SUBMISSIONS WERE CONSIDERED AND REJECTED VIDE PARA 6.4 AND 6.4.1 BY THE CIT(A) HOLD ING AS UNDER: 6.4 GROUND NO. 7 : THE APPELLANT HAS REQUESTED TH AT AS PROVISIONS OF SECTION 167B APPELLANT BEING A COOPERATIVE SOCIETY REGISTERED UNDER SOCIETIES REGISTRATIN ACT INSPITE OF HAVING IN DETE RMINED SHARE SHOULD NOT CHARGED AT MAXIMUM MARGINAL RATE BUT SHOULD BE TAXE D AT THE NORMAL RATE OF TAXATION. THE APPELLANT PLACED RELIANCE OF KMR EDUCATIONAL SOCIETY VS. ACIT 55 TAXMAN 218 OF HYDERABAD TRIBUNAL IN THIS REGARD. EXAMINATION OF FACTS REVEALS THAT THE APPELLANT SOC IETY IS REGISTERED UNDER SOCIETYS REGISTRATION ACT OF UTTAR PRADESH HAVING REGISTRATION FROM 20.07.2011 TO 19.07.2016. THE SOCIETY HAS THE POWE R TO GENERATE FUNDS FROM DIFFERENT SOURCES INCUDING THE CONTRIBUTION, D ONATION FROM MEMBERS RAISING LOAN ETC. THE SHARE OF EACH MEMBER OF THE ASSOCIATION IS NOT KNOWN AS PER THE DETAIL FILED BY THE APPELLANT. THE DECISION RELIED UPON BY THE APPELLANT IS NOT FROM JURISDICTIONAL TRIBUNA L. AS PER SECTION 167B: 167B (1) WHERE THE INDIVIDUAL SHARES OF THE MEMBERS OF AN AS SOCIATION OF PERSONS OR BODY OF INDIVIDUALS (OTHER THAN A COM PANY OR A COOPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA) IN THE WHOLE OR ANY PART OF THE INCO ME OF SUCH ASSOCIATION OR BODY ARE INDETERMINATE OR UNKNOWN, TAX SHALL BE CHA RGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT THE MAXIMUM MA RGINAL RATE: PROVIDED THAT, WHERE THE TOTAL INCOME OF ANY MEMBER OF SUCH ASSOCI ATION OR BODY IS CHARGEABLE TO TAX AT A RATE WHICH IS HIG HER THAN THE MAXIMUM MARGINAL RATE, TAX SHALL BE CHARGED ON THE TOTAL IN COME OF THE ASSOCIATION OR BODY AT SUCH HIGHER RATE. (2) WHERE, IN THE CASE OF AN ASSOCIATION OF PERSON S OR BODY OF INDIVIDUALS AS AFORESAID (NOT BEING A CASE FALLING UNDER SUB-SE CTIN (1)), - (I) THE TOTAL INCOME OF ANY MEMBER THEREOF FOR THE PREVIOUS YEAR (EXCLUDING HIS SHARE FROM SUCH ASSOCIATION OR BODY) EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX IN TH E CASE OF THAT MEMBER UNDER THE FINANCE ACT OF THE RELEVANT YEAR, TAX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT T HE MAXIMUM MARGINAL RATE; (II) ANY MEMBER OR MEMBERS THEREOF IS OR ARE CHARGE ABLE TO TAX AT A RATE OR RATES WHICH IS OR ARE HIGHER THAN THE MAXIMUM MA RGINAL RATE, TAX SHALL BE CHARGED ON THAT PORTION OR PORTIONS OF THE TOTAL INCOME OF THE ASSOCIATION OR BODY WHICH IS OR ARE RELATABLE TO TH E SHARE OR SHARES OF SUCH MEMBER OR MEMBERS AT SUCH HIGHER RATE OR RATES , AS THE CASE MAY BE, AND THE BALANCE OF THE TOTAL INCOME OF THE ASSO CIATION OR BODY SHALL BE TAXED AT THE MAXIMUM MARGINAL RATE. EXPLANATION FOR THE PURPOSES OF THIS SECTION, THE INDIVIDUAL SH ARES OF THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IN THE WHOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIATION OR BODY SHALL BE DEEMED TO BE INDETERMINATE OR UNKNOWN IF SUCH SHARE S (IN RELATION TO THE ITA NO. 685 8 /DEL/2017 3 WHOLE OR ANY PART OF SUCH INCOME) ARE INDETERMINATE OR UNKNOWN ON THE DATE OF FORMATION OF SUCH ASSOCIATION OR BODY OR AT ANY TIME THEREAFTER. 6.4.1 CAREFUL READING OF SECTION 167B SUGGESTS THAT APPEL LANT IS A BODY OF INDIVIDUAL AND SHARE OF EACH MEMBER IS NOT KNOWN TH US THE INCOME HAS TO BE TAXED AT MAXIMUM MARGINAL RATE. IN VIEW OF ABOVE PROVISI ON OF LAW IT IS EVIDENT THAT APPELLANT IS TO BE CHARGED AT MAXIMUM MARGINAL RATE ONLY AND ACCORDINGLY THIS ADDITIONAL GROUND ADMITTED IS NOT MAINTAINABLE HENC E DISMISSED. 4. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE THE CIT(A). 5. THE LD. AR APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT A NON- SPEAKING ORDER HAS BEEN PASSED BY THE CIT(APPEALS). IT WAS HIS SUBMISSION THAT THE ASSESSEE IS AN AOP AND IS A RESIDENTIAL SOCIETY REGISTERED UNDER THE SOCIETIES ACT ARE REGISTERED AS AN AOP AND THE ASSE SSEE HAS ACCEPTED THE SAID STATUS, HOWEVER, THE ORDER PASSED BY THE AO, WHICH WAS CHALLENGED BEFORE THE CIT(A) IS CONTRARY TO SEC. 167B OF THE ACT AND THE CIT(A) HAVING HELD THAT THE ASSESSEE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT OF UTTAR PRADESH IN PARA 6.4.1 HAS MISAPPLIED THE SECTION. 6. THE LD. SR. DR MS. NEB SUBMITTED THAT SHE WOULD HAVE NO OBJECTION IF THE ASSESSEE AGREES TO BE SUBMITTED BE ADDRESSED AS PER THE APPROPRIATE THE FINANCIAL RULES AS APPLICABLE AND LAYS SUPPORTING E VIDENCES AND .. 7. THE LD. AR IN RESPONSE SUBMITTED THAT IN FACT TH AT IS HIS LIMITED PRAYER. 8. I HAVE HEARD THE SUBMISSION AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. I FIND THAT THE IMPUGNED ORDER IN THE PECULIAR FACT S AND CIRCUMSTANCES OF THE PRESENT CASE CANNOT BE UPHELD. THE LD. CIT(APPEALS ) IN THE FACE OF THE FINDING RECORDED THAT THE ASSESSEE SOCIETY IS REGISTERED UN DER THE SOCIETIES REGISTRATION ACT OF UTTAR PRADESH CONSIDERING THE PROVISIONS OF THE ACT AND THE DECISION CITED OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO APP LY THE APPROPRIATE SLAB RATE WHICH POSITION IS ACCEPTED BY THE SR. DR ALSO. ACC ORDINGLY, THE IMPUGNED ORDER IS SET ASIDE WITH A DIRECTION TO THE CIT(APPEALS) T O PASS AN APPROPRIATE ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REA SONABLE OPPORTUNITY OF BEING HEARD. ITA NO. 685 8 /DEL/2017 4 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2018 SD/- (DIVA SINGH) JUDICIAL MEMBER DATED: 26.04.2018 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI