TMI Blog2015 (2) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... that all received of money from members should go for the maintenance of super-structure, the surplus arising after meeting the administrative expenses has naturally be transferred to the account of the Institution Members, because it belongs to the Members. He further replied that it is the Institution Members who had contributed towards the cost of the assessee or any service or some time deficit will also be to the account of the members. This is a settled principle behind the mutuality concept and lastly Dy. DIT(E) Circle-1, New Delhi vide his reply dated 10.1.2014 to the Director of Income Tax (E), Delhi. The reply to the DIT(E) establish that the revenue authority itself supported the order of the AO dated 13.1.22011 passed u/s. 143(3) of the I.T. Act. In our considered opinion, when two views are possible and the AO has taken one of the possible view, then the provisions of section 263 of the I.T. Act will not apply. Therefore, in the present case the same facts and circumstances are applicable. We are of the view that ld. DIT(E) has passed the impugned order by taking his own view which is contrary to the various decision rendered by the Hon’ble Supreme Court of India in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. In the original assessment dated 13.12.2011 passed u/s. 143(3) of the I.T. Act, the AO has stated that the Assessee Society is registered under section 12A of the Income Tax Act, 1961 dated 13.1.2009 and she has also produced the aims and objects of the assessee-society in her assessment order dated 13.12.2011. After considering all evidences produced by the assessee as required by her, she completed the assessment u/s. 143(3) of the I.T. Act on 13.12.2011 by making the addition of ₹ 44,40,871/- i.e. income from other sources on account of bank interest by holding that this amount not being covered under the Principle of Mutuality , subject to the tax under the normal provisions of the I.T. Act. The ITAT has passed the said order by following the order of the Hon ble Jurisdictional High Court passed in the case of CIT vs. Delhi Gymkhana Club reported in 339 ITR 525 (Del). Hon ble Delhi High Court has held that interest income will get protection of Mutuality. 3. Aggrieved by the order dated 13.12.2011 passed by the Assessing Officer, the assessee filed an appeal before the Ld. First Appellate Authority who vide impugned order dated 14.5.2012 deleted the addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative of the assessee appeared on 10.3.2014 and filed reply. Ld. DIT(E) after going through the facts of the case and submissions of the assesses and found that as per letter of Ministry of Urban Development, the assessee does not have control over the assets of the society. The only defence the assessee has in his support is that the ownership of assets and dissolution clause is as per the Scheme of the Government vide which the Centre was created and was allotted land. Ld. DIT(E) observed that this defence does not help the assessee as the assessee does not pass the test of mutuality due to this typical arrangement of ownership and dissolution clause. He further observed that the Assessing Officer has not addressed this issue while passing the assessment order. Non-application of mind to the facts of the case makes the order erroneous and is prejudicial as income of ₹ 1,06,10,312/- has been held to be exempt on account of principle of mutuality without proper examination of facts and position of law. Finally she held that the order passed by the AO held to be is erroneous in as much as it is prejudicial to the interests of revenue and set aside the assessment order with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of principle of mutuality . He argued that the AO has examined the issue of principle of mutuality , after calling the details and written submissions from the assessee which is at pages 86-87 and 98 to 100 of the Paper Book-1. Therefore, the AO has considered the applicability of principle of mutuality in the order under section 143(3) of the I.T. Act and can be seen from the pages 39 para 7 to pages 43 of the Paper Book. Ld. Counsel of the assessee stated that the AO has thus made the detailed enquiries and stated that the assessment is not erroneous at all. In support of his arguments he cited the judgment of the Hon ble Jurisdictional High Court in the case of Geevee Enterprises vs. Addl. CIT 99 ITR 375 (Del) wherein the Hon ble Delhi High Court has also taken note of two well known judgments of Supreme Court in: - Ram Piari Devi Sarogi vs. CIT 67 ITR 84 (SC) - Tara Devi Agarwal vs. CIT 88 ITR 323 (SC) 6.1 Secondly, the Ld. Counsel of the assessee argued that the assessment order dated 13.12.2011 passed u/s. 143(3) of the I.T. Act and the AO has taxed interest earned from bank on the ground that the principle of mutuality will not apply to such income. This matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of taxing the whole income and in response to the audit objection, the AO vide his reply dated 18.12.2012 to the Sr. Audit Officer regarding the principle of mutuality and supported the assessment order dated 13.12.2011 by stating that all received of money from members should go for the maintenance of superstructure, the surplus arising after meeting the administrative expenses has naturally be transferred to the account of the Institution Members, because it belongs to the Members. He further replied that it is the Institution Members who had contributed towards the cost of the assessee or any service or some time deficit will also be to the account of the members. This is a settled principle behind the mutuality concept and lastly Dy. DIT(E) Circle-1, New Delhi vide his reply dated 10.1.2014 to the Director of Income Tax (E), Delhi. He has also stated that the receipt audit has not accepted the reply sent by this office regarding dropping of the audit objections, further action is required to be taken, although we do not agree with the objection raised by the revenue audit party, in view of legal as well as factual position of the case. Since the audit objection pertains t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as enclosed at pages 1 to 26 of the Paper Book and more particularly pages 25 to 26 of the Paper Book. After thoroughly examined the aforesaid documentary evidence produced by the assessee in the shape of Paper Book before us, we are of the considered view that the arguments advanced by the Ld. Counsel of the assessee is very much plausible and convincing, because the claim of the assessee regarding the applicability of principle of mutuality in its return of income has been filed by the assessee alongwith the return of statement of account, meaning thereby the assessee has claimed the applicability of principle of mutuality in its return of income. The AO during the course of assessment proceedings has also directed the assessee to explain the applicability of principle of mutuality which we can see at the assessment proceedings noting at page 81 to 85 of the Paper Book meaning thereby the issue of principle of mutuality has been discussed in detail by the AO with the assessee and the assessee has also filed its details before the AO in the assessment proceedings with regard to the applicability of principle of mutuality which we can say that at pages 86 to 97 and 98 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Grover vs. Dy. CIT, 74 TTJ 347 (Del) and Marico Industries Ltd. vs. ACIT, 115 TTJ 497 (Born). 8.3 The third argument advanced by the Ld. Counsel of the assessee is about the about the audit objection and he stated that the Ld. DIT(E) has issued the show cause notice to the assessee u/s. 263 of the I.T. Act on the basis of audit objection and without application of mind which is not sustainable in the eyes of law. We have heard the Ld. Counsel of the assessee and perused the documentary evidence produced before him on the issue of audit objection especially the pages 100-111 of the Paper Book which are the various communications which have been taken by the AO and the Audit Party and the Ld. DIT(E) with regard to the applicability of the principle of mutuality . We find that 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. Audit Officer regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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