Nosegay Kinder Garden, SRIGANGANAGAR V. ITO, SRIGANGANAGAR

MA 34/JODH/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2358 (ITAT-JODHPUR)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 18-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Keywords: Rectification of order
• Section: 12A

Judgement Text

IN TH E INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. MA NOS. 34 TO 38/JU/2014 A/O ITA NOS . 54 TO 58 /J U /201 2 (A.Y. 2003 - 04 TO 2006 - 07 & 2 008 - 0 9 ) M/S NOSEGAY KINDER GARDEN VS. THE INCOME - TAX OFFICER CHAK 7 E, CHHOTI WARD 2 SRIGANGANAGAR SRIGANGANAGAR PAN NO. AA AJ N 0 5 3 1 H MA NOS. 39 TO 43/JU/2014 A/O C.O. NOS . 9 TO 13 /J U /201 2 (A.Y. 2003 - 04 TO 2006 - 07 & 200 8 - 0 9 ) NOSEGAY PUBLIC SCHOOL VS. INCOME - TAX OFFICER CHAK 7 E, CHHOTI WARD 2 SRIGANGANAGAR SRIGANGANAGAR PAN NO. AA ATN 5781 D A SSESSEE BY : SHRI SURESH OJHA DEPARTMENT BY : SHRI JAI SINGH DATE OF HEARING : 2 6 /0 8 /201 4 DATE OF PRONOUNCEMENT: 08 /0 9 /201 4 PER HARI OM MARATHA, JM : TH ESE MISCELLANEOUS APPLICATION S ARIS ING OUT OF TRIBUNAL ORDER DATED 12.02.2013 HAVE BEEN FILED BY THE ASSESSEE. 2 2. IN THE PRESENT MISCELLANEOUS APPLICATIONS SUBMITTED BY THE ASSESSEE , THE GROUND OF RECTIFICATION OF MISTAKE IS IN RESPECT OF THE FACT THAT THE GROUND TAKEN BY THE ASSESSEE HAS NOT BE DISPOSED OFF. IT WAS SUBMITTED IN THE APPLICATION THAT THE GROUND TAKEN IN THE MEMO WAS NOT DISPOSED OF F . IT WAS ALSO SUBMITTED IN THE MISCEL LANEOUS APPLICATION THAT THE ARGUMENT OF AR TAKEN IN THE WRITTEN SUBMISSION AND IN PERSON WERE ALSO NOT CONSIDERED AND ADJUDICATED UPON . IT WAS ALSO MENTIONED IN THE APPLICATION THAT BEFORE THE LD. CIT(A) AS WELL AS BEFORE THE BENCH THE AR RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN RESPECT OF STATUS OF THE ASSESSEE. THE JUDGMENT S SO REFERRED WERE ALSO NOT ADJUDICATED AND CONSIDERED. THEREFORE, IT WAS PRAYED THAT THE MISTAKES POINTED OUT ARE THE MISTAKES COVERED U/S 254(2) OF IT ACT, AND, THEREFORE , REQUESTED TO RECTIFY THE MISTAKE APPARENT FROM THE RECORD IN THE APPELLATE ORDER OF THE TRIBUNAL. IN THE APPLICATION , THE GROUNDS WHICH REMAINED INDISPOSED OF WERE REPRODUCED. 3. DURING THE COURSE OF HEARING THE LD. A.R REITERATED THE CONTENTS OF THE A FORESAID MISC. APPLICATION AND SUBMITTED THAT SINCE THE MISTAKE IS APPARENT FROM THE RECORD, THE ORDER DATED 12.2.2013 MAY BE RECALLED AND RECTIFIED. DURING THE COURSE OF HEARING THE LD. A.R OF THE ASSESSEE RELIED UPON THE JUDGMENT REPORTED IN 249 ITR 32 3 (RAJ.) IN 3 CASE OF RAMESH CHAND ER MODI AND FURTHER ON THE ORDER OF THE BENCH IN CASE OF ASHOK UPPAL SRIGANGANAGAR VS. INCOME - TAX OFFICER WARD 1 IN MA NO. 92/JU/2007. THE ASSESSEE ALSO SUBMITTED WRITTEN SUBMISSION S WHEREIN ALSO HE RELIED UPON THE JU DGMENT OF RAJASTHAN HIGH COURT DELIVERED IN CASE OF SH. RAM ESH CHANDER MODI REPORTED IN 249 ITR PAGE 323 (RAJ) WHERE IN IT WAS HELD THAT IF THE GROUND WAS NOT DISPOSED OF IT SHALL BE A MISTAKE APPARENT FROM THE RECORD. REGARDING THE ARGUMENT OF GROUND NOT CONSIDERED , THE LD. A.R ALSO RELIED UPON THE JUDGMENT REPORTED IN 199 ITR 771 IN THE CASE OF CIT VS. KESHAV FRUIT MART WHEREIN IT WAS HELD THAT IF THE ARGUMENT OF GROUND IS NOT DISPOSED OF , IT SHALL BE A MISTAKE APPARENT FROM RECORD. IT WAS ALSO ARGUED THA T IF THE JUDGMENT OF SUPREME COURT WAS NOT CONSIDERED , IT IS ALSO A MISTAKE APPARENT FROM RECORD. 4. THE L D. D.R. , IN HIS RIVAL SUBMISSIONS, OPPOSED THE RECALLING OF THE ORDER AND STATED THAT THE MATTER SHOULD BE RESTORE D TO THE FILE OF A.O. 5. WE HAVE CONSIDER ED THE SUBMISSION S OF BOTH THE PARTIES AND F IND MERIT IN THE SUBMISSION S OF LD. A.R . IT APPEARS THAT IN THE PRESENT CASE, INADVERTENTLY, THE BENCH HAS N OT CONSIDERED THE ARGUMENT IN RESPECT OF STATUS OF THE ASSESSEE AND ALSO COULD NOT ADJUDICATE TH E JUDGMENT OF 4 HONBLE SUPREME COURT REFERRED AND RELIED UPON BY THE LD. AR OF THE ASSESSEE. THE APPEAL OF THE ASSESSEE WAS DECIDED BY THE BENCH VIDE ORDER DATED 12.2.2013 . THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO. WE HAVE CONSIDERED THE ARGUMENT AND ALSO PERUSED THE RECORD. THE MISTAKES SO POINTED OUT BY THE ASSESSEE IN THE APPLICATION ARE CORRECT. THOUGH, THE MATTER IN QUESTION WAS RESTORED TO THE FILE OF THE AO IN THE LIGHT OF THE FACT THAT THE REGISTRATION HAS BEEN GRANTED U/S 12A OF THE A CT BY THE BENCH WITH EFFECT FROM 9.11.1985 VIDE ORDER DATED 19.12.2012 BUT THE GROUND IN RESPECT OF THE STATUS WAS NOT DECIDED. THE ISSUE RAISED IN THE GROUND REGARDING STATUS OF THE ASSESSEE IS IMPORTANT AND EFFECTING THE TAXABILITY OF THE ASSESSEE. THE WRITTE N SUBMISSIONS WERE ALSO SUBMITTED BY THE ASSESSEE AT THE TIME OF APPEAL WHEREIN IT HAS BEEN MENTIONED THAT THE NOSE GAY MANAGEMENT COMMITTEE IS THE PARENT INSTITUTE AND NOSEGAY PUBLIC SCHOOL AND NOSEGAY KINDER GARDEN ARE THE BRANCHES THEREOF. THE ASSESSEE SUBMITTED COPY OF WRITTE N SUBMISSION, WHICH IS PLACED AT PAGE S 1 TO 8 OF THE PAPER BOOK. IN THE SUBMISSION S, THE ASSESSEE SPECIFICALLY ARGUED IN RESPECT OF STATUS OF THE ASSESSEE. THE QUESTION WAS AS TO WHETHER THE SEPARATE ASSESSMENT S SHOULD HAVE BEEN COM PLETED OR CONSOLIDATED ASSESSMENT SHOULD HAVE BEEN COMPLETED. THIS ISSUE WAS RAISED BEFORE THE CIT(A) AND THE CIT(A) DID NOT ACCEPT THE CONTENTION OF THE 5 ASSESSEE, THEREFORE, THE ASSESSEE HAS COME IN APPEAL IN RESPECT OF THE STATUS OF THE INSTITUTION BEF ORE T HIS B ENCH. THE A.O TOOK STATUS OF THE APPELLANT AS AOP. THE ASSESSEE CHALLENGED THAT THE STATUS TAKEN BY THE AO IS NOT CORRECT AND SHOULD HAVE CONSIDERED THE ASSESSEE AS CONTROL LED AND MANAGED BY THE PARENT INSTITUTE I.E. NOSE GAY PUBLIC SCHOOL MANAGEMENT COMMITTEE. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED SUBMISSION AND ALSO RELIED UPON TWO JUDGMENTS REPORTED IN 88 ITR 432 G. MURUGESAN & BROS. VS. CIT AND 35 ITR 594 G. VENKATASWAMY NAIDU & CO. VS. CIT . THE CIT (A) ALSO REFERRED TO THE JUDGMENTS IN THE APPELLATE ORDER AT PAGE NO. 5 OF THE ORDER. WHILE DECIDING THE ISSUE REGARDING THE STATUS IT HAS NOT ADJUDICATED IN RESPECT OF THE JUDGMENTS OF HONBLE SUPREME COURT IN RESPECT OF THE S TATUS OF THE AOP. BEFORE THE BENCH THE SAME ARGUMENTS WERE TAKEN AND AGAIN RELIED UPON THE SAME JUDGMENTS. WE REPRODUCE THE RELEVANT PORTION OF THE JUDGMENT REPORTED IN 88 ITR 432, WHICH IS AS UNDER : THE EXPRESSION ' ASSOCIATION OF PERSONS ' IS NOT A T ERM OF ART. THAT EXPRESSION HAS COME UP FOR CONSIDERATION BEFORE THIS COURT IN MORE THAN ONE CASE. IN COMMISSIONER OF INCOME - TAX V. INDIRA BALKRISHNA, THIS COURT, AFTER REFERRING TO THE VARIOUS JUDGMENTS, OBSERVED THUS : ' IT IS ENOUGH FOR OUR PURPOSE TO REFER TO THREE DECISIONS : IN RE B. N. ELIAS , COMMISSIONER OF INCOME - TAX V. LAXMIDAS DEVIDAS ; AND 6 IN RE DWARKANATH HARISHCHANDRA PITALE. IN IN RE B. N. ELIAS, DERBYSHIRE C.J. RIGHTLY POINTED OUT THAT THE WORD ' ASSOCIATE ' MEANS, ACCORDING TO THE OXFORD DICTIONARY, ' TO JOIN IN COMMON PURPOSE, OR TO JOIN IN AN ACTION '. THEREFORE, AN ASSOCIATION OF PERSONS MUST BE ONE IN WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION, AND AS THE WORDS OCCUR IN A SECTION WHICH IMPOSES A TAX ON INCOME, THE ASSOCIATION MUST BE ONE THE OBJECT OF WHICH IS TO PRODUCE INCOME, PROFITS OR GAINS. THIS WAS THE VIEW EXPRESSED BY BEAUMONT C.J. IN COMMISSIONER OF INCOME - TAX V. LAXMIDAS DEVIDAS, AT PAGE 589 AND ALSO IN IN RE DWARKANATH HARISHCHANDRA PITALE. IN IN RE B. N. ELIAS, COSTELLO J. PUT THE TEST IN MORE FORCEFUL LANGUAGE. HE SAID; ' IT MAY WELL BE THAT THE INTENTION OF THE LEGISLATURE WAS TO HIT COMBINATION OF INDIVIDUALS WHO WERE ENGAGED TOGETHER IN SOME JOINT ENTERPRISE BUT DID NOT IN LAW CONSTITUTE PARTNERS HIPS ...... WHEN WE FIND. . . . . THAT THERE IS A COMBINATION OF PERSONS FORMED FOR THE PROMOTION OF A JOINT ENTERPRISE. . . . . THEN I THINK NO DIFFICULTY ARISES WHATEVER IN THE WAY OF SAYING THAT ...... THESE PERSONS DID CONSTITUTE AN ASSOCIATION. WE TH INK THAT THE AFORESAID DECISIONS CORRECTLY LAY DOWN THE CRUCIAL TEST FOR DETERMINING WHAT IS AN ' ASSOCIATION OF PERSONS ' WITHIN THE MEANING OF SECTION 3 OF THE INCOME - TAX ACT, AND THEY HAVE BEEN ACCEPTED AND FOLLOWED IN A NUMBER OF LATER DECISIONS OF DIF FERENT HIGH COURTS TO ALL OF WHICH IT IS UNNECESSARY TO CALL ATTENTION. IT IS, HOWEVER, NECESSARY TO ADD SOME WORDS OF CAUTION HERE. THERE IS NO FORMULA OF UNIVERSAL APPLICATION AS, TO WHAT FACTS, HOW MANY OF THEM AND OF WHAT NATURE, ARE NECESSARY TO COME TO A CONCLUSION THAT THERE IS AN ASSOCIATION OF PERSONS 7 WITHIN THE MEANING OF SECTION 3; IT MUST DEPEND ON THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CASE AS TO WHETHER THE CONCLUSION CAN BE DRAWN OR NOT.' IN THE COURSE OF THAT JUDGMENT, THIS COURT ALSO OBSERVED : ' WITH REGARD TO THE SHARES, DIVIDENDS, AND INTEREST ON DEPOSITS THERE WAS NO FINDING OF ANY ACT OF JOINT MANAGEMENT. INDEED, THE MAIN ITEM CONSISTS OF THE DIVIDENDS AND IT IS DIFFICULT TO UNDERS TAND WHAT ACT OF MANAGEMENT THE WIDOWS PERFORMED IN RESPECT THEREOF WHICH PRODUCED OR HELPED TO PRODUCE INCOME.' FOR FORMING AN ' ASSOCIATION OF PERSONS ', THE MEMBERS OF THE ASSOCIATION MUST JOIN TOGETHER FOR THE PURPOSE OF PRODUCING AN INCOME. AN ' ASSO CIATION OF PERSONS ' CAN BE FORMED ONLY WHEN TWO OR MORE INDIVIDUALS VOLUNTARILY COMBINE TOGETHER FOR A CERTAIN PURPOSE. HENCE VOLITION ON THE PART OF THE MEMBERS OF THE ASSOCIATION IS AN ESSENTIAL INGREDIENT. IT IS TRUE THAT EVEN A MINOR CAN JOIN AN ' ASS OCIATION OF PERSONS ' IF HIS LAWFUL GUARDIAN GIVES HIS CONSENT. IN THE CASE OF RECEIVING DIVIDENDS FROM SHARES, WHERE THERE IS NO QUESTION OF ANY MANAGEMENT, IT IS DIFFICULT TO DRAW AN INFERENCE THAT TWO OR MORE SHAREHOLDERS FUNCTION AS AN ' ASSOCIATION OF PERSONS ' FROM THE MERE FACT THAT THEY JOINTLY OWN ONE OR MORE SHARES, AND JOINTLY RECEIVE THE DIVIDENDS DECLARED. THOSE CIRCUMSTANCES DO NOT BY THEMSELVES GO TO SHOW THAT THEY ACTED AS AN ' ASSOCIATION OF PERSONS '. 8 6. THOUGH, THERE IS NO DEFINITION OF AOP GIVEN IN THE INCOME - TAX ACT AND WHEREAS THE HONBLE SUPREME COURT IN THIS JUDGMENT HAS OBSERVED THAT THE ASSOCIATION OF PERSON CAN BE FORMED ONLY WHEN TWO OR MORE PERSONS VOLUNTARILY COMBINED TOGETHER FOR CERTAIN PURPOSES. HENCE, THE V OL I TION ON THE PA RT OF THE MEMBERS ON THE ASSOCIATION IS AN ESSENTIAL INGREDIENT. AS SUCH , THERE MUST BE CHARACTERISTICS OF AN ASSOCIATION OF PERSONS , WHICH CAN BE SUMMARIZED AS UNDER IN VIEW OF THE ABOVE MENTIONED JUDGMENTS: 1. THERE SHOULD BE TWO OR MORE PERSONS. 2. SUCH PERS ONS MUST JOIN TOGETHER. THERE SHOULD BE MEETING OF MIN D S UNLESS THERE IS VIOLATION THERE CAN BE NO ASSOCIATION. 3. THE ASSOCIATION OR VOLI TION MUST BE FOR THE PURPOSE OF PRODUCING AN INCOME, PROFIT OR GAIN. I F THE FACTS OF THE CASE OF THE ASSESSEE IS PUT ON THIS TEST THEN THE ORDER OF THE LEARNED AO DO ES NOT STAND ANYWHERE FOR THE REASON THAT NOSE GAY PUBLIC SCHOOL AND NOSEGAY KINDER GARDEN IS A PART OF THE ACTIVITIES OF NOSE GAY PUBLIC MANAGEMENT COMMITTEE, THIS FACT IS ALSO CONFIRM ED IN AN AFFIDAVIT SUBMI TTED BY THE ASSESSEE. FURTHERMORE, THERE IS NO GROUP OF THE PERSONS WHO COULD HOLD PROPERTY OF SCHOOL THEN THERE REMAIN S NO STATUS AVAILABLE IN THE INCOME - TAX ACT. IN THESE CIRCUMSTANCES , THE STATUS TAKEN BY THE ASSESSING AUTHORITY OF THE 9 APPELLANT AS AOP IS NOT CORRECT IF TESTED ON THE CHARACTERISTIC AS LAID DOWN BY THE HONBLE SUPREME COURT. THE JUDGMENT OF HONBLE SUPREME COURT IS HAVING THE CHARACTER OF BINDING NATURE AS PER ARTICLE 141 OF CONSTITUTION OF INDIA. THE D.R. IS ALSO NOT IN POSITION TO CONTR OVERT THE CASE LAW ON WHICH THE AR RELIED UPON. MERELY, BECAUSE PAN WAS OBTAINED UNDER SOME WRONG ADVICE OF TAX CONSULTANT CANNOT BE A GROUND FOR SUSTAINING THE STATUS OF THE APPELLANT AS AOP. WE THEREFORE IN VIEW OF RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID REFERRED CASE, ARE OF THE CONFIRMED VIEW THAT THE STATUS OF THE ASSESSEE CANNOT BE TAKEN AS AOP AND MODIFIED THE EARLIER ORDER TO THIS EXTENT PASSED BY THE ITAT. 7. AS FAR AS THE OTHER GROUNDS ARE CONCERNED THERE IS NO MISTAKE APPARENT FROM THE RECORD BECAUSE THESE GROUNDS ARE C OVERED BY THE TRIBUNAL ORDER. 8. IN THE RESULT, ALL THE MAS STAND ALLOWED. ORDER PRONOUNCED IN THE OP EN COURT ON 08 TH SEPTEMBER, 2104. SD/ - SD/ - [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 8 TH SEPTEMBER, 2014 10 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPO NDENT 3. THE CIT 4. THE CIT(A) BY ORDER 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR