TaxTMI 
TaxTMI 
2015 (2) TMI 1023
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....(Appeals) in the appellate proceedings in respect to the assessment order U/S 143(3) of the Act, having held that the principle of mutuality is applicable to the appellant, the revisional order passed u/s 263 of the Act is without jurisdiction and is outside the mandates of the provisions of Section 263 of the Act. 5. The findings of Director of Income Tax (Exemptions) that the appellant "does not pass the test of mutuality due to this specific arrangement of ownership and dissolution club" will only amount to substitution of views/opinion of Commissioner. 6. It is contended that the sum of Rs. 1,06,10,312/- is squarely exempt on account of principle of Mutuality. Your appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing." 2. The facts relating to issue are that the assessee filed its return of income as NIL on 30.9.2009. The case of the assesee was selected for scrutiny, notice u/s. 143(2)/142(1) were issued. In response to the same Authorised Representative of the assessee appeared and filed the details of record as required by the AO from time to time. In the original assessment dated 13.12.2011 passed u/s. 143(3) of the....
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.... in respect of income of the trust and it can be claimed only in that ratio. 4.1 She further noticed that as per land allotment letter of Ministry of Urban Development, in the event of dissolution the land allotted and the assets created thereon will be transferred to an institution having the similar aims and objects with the prior approval of the government and failing that to Govt. on payment n compensation determined by lessor in its absolute discretion. She stated that the assessee does not have the control of the assets of society in the case of its dissolution. Such society cannot be treated as mutual society. 4.2 Lastly she held that AO gave the benefit of mutuality to the assessee and charged only interest income instead of taxing the whole excess of income over expenditure and this mistake resulted in under assessment of income of Rs. 1,06,10,312/-. 4.3 Ld. DIT(E) issued notice u/s. 263 of the I.T. Act to the assessee on 21.2.2014 requiring to show cause as to why the assessment order should not be set aside to be made afresh. In response to the same, Authorised Representative of the assessee appeared on 10.3.2014 and filed reply. Ld. DIT(E) after going through the fac....
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.... is not the income and is not includible in the total income under the 'principle of mutuality'. In support of his contention, the assessee has also mentioned some decisions of Hon'ble Supreme Court in the case of Chelmsford Club vs. CIT (243 ITR 89) [SC] and CIT vs. Bankipur Club Ltd. 226 ITR 97 (SC). He also draw our attention toward the Paper Book-1 Pages 80-85 i.e. the order sheet of the assessment proceedings and draw our attention specially the pages 83-85 and stated that the AO has asked the assessee's counsel about the applicability of 'principle of mutuality' and the assessee's counsel requested for more time to answer the query raised by the AO vide order sheet entry dated 20.10.2011 and the AO adjourned the matter for 1.11.2011 and on further various dates and lastly after considering the documentary evidence filed by the assessee, the AO has discussed the claim of 'mutuality' in the assessment proceedings vide it order sheet entry dated 8.12.2011 which is at pages 85 of the Paper Book- 1 and finally passed the order u/s. 143(3) on 13.12.2011 accepting the claim of 'principle of mutuality'. He argued that the AO has examined the issue of 'principle of mutuality', after c....
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....k-1, on the basis of the Audit Objection and without application of mind which is not permissible under the law. He stated that Ld. DIT(E) has wrongly invoked the provisions of section 263 of the I.T. Act. He stated that on this ground the impugned order is deserve to be cancelled. In support of his contention, he relied upon the reliance upon the decision in the case of Sirpur Paper Mills Ltd. vs. CWT, 77 ITR 6 (SC); Jeewan Lal (1929) Ltd. vs. Addl. CIT 108ITR 407 (Cal) and CIT vs. Sohana Woollen Mills, 207 CTR 178 (P&H). 6.3 Lastly, he argued that when there are two view possible and AO has taken one of the possible views, then the provisions of section 263 of the Act will not apply. He also draw our attention towards the various communications between the AO and the Audit Party and the Ld. DIT(E) with regard to applicability of 'principle of mutuality'. These are placed at pages 101 to 111 of the assessee's Paper Book-1. 6.4 The Audit Officer raised the objection on 2.5.2012 on the benefit of mutuality to the assessee and charging only interest income instead of taxing the whole income and in response to the audit objection, the AO vide his reply dated 18.12.2012 to the Sr. Au....
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.... documentary evidence filed by the assessee's counsel as well as the provisions of law referred by the Revenue Authority and the Ld. Counsel of the assessee. Ld. Counsel for the assessee has argued three issues to nullify the impugned order. He stated that the order passed by the AO is not erroneous at all, because the AO has considered the applicability of 'principle of mutuality' in his order dated 13.12.2011 passed under section 143(3) of the I.T. Act. We have also perused the Pages 39 to 43 of the Paper Book-1 especially the para 7 of the assessment order as well as the detailed submissions filed by the AO during the assessment proceedings with regard to applicability of 'principle of mutuality' which is placed at pages 86-97 and 98-100 of the Paper Book. Ld. Counsel of the assessee also submitted before us the noting of the AO written in the assessment proceedings which is placed at pages 81 to 85 of the Paper Book more particularly at pages 83 to 85 as well as the return filed by the assessee alongwith the statement of account which the assessee has enclosed at pages 1 to 26 of the Paper Book and more particularly pages 25 to 26 of the Paper Book. After thoroughly examined th....
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....interest income earned from the Bank on the ground that the 'principle of mutuality' will not apply to such income. Against this assessment order the assessee has filed the Appeal before the Ld. CIT(A), who vide impugned order dated 14.5.2012 deleted the addition of Rs. 44,40,871/- and cancelled the assessment order by respectfully following the order of the Hon'ble Jurisdictional High court in the case of CIT vs. Delhi Gymkhana Club 339 ITR 525 (Del) and has held that interest income will also get the protection of mutuality. As argued by the Ld. Counsel of the assessee in the aforesaid para regarding the doctrine of merger, we fully agree with the arguments advanced by him, because the assessment order has been cancelled by the Ld. CIT(A) vide his order dated 14.5.2012 by respectfully follow the order of the Hon'ble High Court in the case of CIT vs. Gymkhana (Supra) and the Ld. DIT(E) has issued the show cause notice u/s. 263 of the I.T. dated 21.2.2014 which is afterward. The doctrine of merger will apply and the impugned order dated 21.2.2014 is not sustainable in the eyes of law. Our view is supported by the CIT vs. Nirma Chemical Works (P) Ltd., 300 ITR 67 (Guj); Smt. Sujata ....