TMI Blog2019 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee that it has been concurrently rejected by all the appellate forums. However, mere rejection of the claim of the assessee cannot be invited with the penalty. Further more on this issue of the excess contribution received the learned AO has recorded his satisfaction that assessee has furnished inaccurate particulars of income in the assessment order. However, at the time of levy of the penalty as per para number 1 at page number 2 of the penalty order he levied penalty for concealment of income. This fact itself renders the penalty on this issue not sustainable. - Decided in favour of assessee. Disallowance of claim u/s 35D - The assessee has claimed expenses of INR 454992/– under section 35D as preliminary expenses however the capital employed of the assessee is only INR 10200/– and the claim is required to be restricted only to the extent of 5% of the capital employed for amortization - HELD THAT:- The assessee explained as per letter dated 8/9/2003 before the AO that the total preliminary expenses are INR 568740/– out of which INR 113748/– being 1/5 of the total expenses were charged to the income and expenditure account for the year ended on 31st of March 2000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case and in law, the learned Commissioner of The assessee has raised the following grounds of appeal in ITA No. 320/Del/2011 for the Assessment Year 2002-03:- Income-tax (Appeals) (CIT(A) erred in upholding the order of the ld Assessing Officer (A) levying penalty on the appellant under Section 271(1)(c) of the Act , 1961 (the Act) amounting to ₹ 12,16,703/-. 4. A fact for AY 2001-02 shows that assessee is a company filed its return of income on 30.10.2001 at Rs. Nil. Two issues were involved in the assessment proceedings on which the additions have been made. a. The first addition is with respect to the gross receipt of the assessee. In the return of income, it was stated that the receipts of the assessee are covered by principles of mutuality and therefore, contribution receipts are not chargeable to tax u/s 4 of the Act. The ld AO rejected the explanation of the assessee and held that excess contribution received of ₹ 4444402/- is chargeable to tax, as it is not covered by principles of mutuality. The assessee also submitted the income of the assessee is further not chargeable to tax with its income is also diverted by overriding ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that assessee has filed incorrect particulars of his income. Accordingly, penalty of ₹ 1937351/- was levied u/s 271(1) (C) of the Act vide order dated 25.09.2008. The assessee challenged the same before the ld CIT (A) who confirmed the same. Therefore, the assessee is in appeal before us. 9. The ld AR on the issue of the taxability of rupees 4444002/ vehemently submitted as under:- a. That penalty of ₹ 4444002/- was initiated by the ld AO for furnishing of inaccurate particulars; however the penalty is levied for concealment of income. He submitted that such penalty could not be upheld. He relied on the decision of the Hon'ble Bombay High Court in CIT Vs. Samson Perinchery dated 05.01.2017. b. That assessee has made complete disclosure of the claim by way of a note in the computation of total income. In the balance sheet, the assessee has disclosed the above sum as liability. All the facts relating to the claim of the assessee were completely explained before the ld AO as well as in the return of income. The complete disclosure of the assessee was not only in the return of income but also continued throughout the assessment proceedings. c. Clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of mutuality does not apply on the facts of the case. However, regarding complete disclosure by assessee, it has completely disclosed the facts in the computation of income that the income of the assessee is covered by the principle of mutuality. At para number, III of page number 2 of the assessment order the assessee has specifically given three notes in the computation of total income. The note number 1 says that the company operates as a mutual concern on No profit basis. The note number 2 says that that excess of contribution received is being disclosed as a current liability as it would be either to be distributed to the individual contributors or to be used for further expenditure based on confirmations to that extent from the contributors. Note number 3 says that based on the judicial precedents, excess receipt of the company does not fall within the ambit of taxable income u/s 4 of the income tax act. Assessee relied upon two decisions of the honourable Supreme Court. During the course of assessment, proceedings also vide letter dated 8/9/2003 the assessee made the complete disclosure explaining that why the above amount assessee claims to be tainted with mutuali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of claim of the assessee u/s 35D of the income tax act. The fact itself shows that the assessee has claimed expenses of INR 454992/ under section 35D as preliminary expenses however the capital employed of the assessee is only INR 10200/ and the claim is required to be restricted only to the extent of 5% of the capital employed for amortization. Therefore the AO disallowed a sum of INR 454482/ AO initiated penalty for furnishing of inaccurate particulars of income. The assessee explained as per letter dated 8/9/2003 before the AO that the total preliminary expenses are INR 568740/ out of which INR 113748/ being 1/5 of the total expenses were charged to the income and expenditure account for the year ended on 31st of March 2000. Thereafter the balance amount of INR 454992/ has been charged to the income and expenditure account for the year ended 31st of March 2001 it was stated that as assessee has claimed that it is a mutual concern operating on a no profit basis the above preliminary expenses are merely form part of the expenses charged to the income and expenditure account incurred by the assessee in the ordinary course of business for carrying out the act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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