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2015 (7) TMI 845 - ITAT MUMBAI

2015 (7) TMI 845 - ITAT MUMBAI - TMI - Assessment under section 144A - assessee challenged the orders passed by the AO under section 144 of the Act on the ground that due to personal reasons of the Consultant of the assessee necessary details could not be furnished which resulted in exparte assessment by rejecting retuned loss which is not in accordance with law - Scope of revision u/s 263 - Held that:- The direction given by the Commissioner has to be understood in the context/setting in which .....

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re considered by the Revisional Authority. Such being the case the AO has no jurisdiction to touch upon a fresh issue which does not emanate from the notice issued by the Commissioner under section 263 of the Act, while making assessment under section 143(3) r.w.s. 263 of the Act.

In the instant case the AO had not treated the entrance fees as revenue receipt despite the fact that the assessee, in the audit report annexed to the return of income, furnished the details with regard to .....

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isposed of the appeals on merits, by following the decision of the Hon'ble Bombay High Court in the case of Diners Business Services P. Ltd.[2003 (4) TMI 56 - BOMBAY High Court] , we need not have to go into the nature of the entrance fees at this stage since the same cannot be subject matter of consideration in the proceedings under section 143(3) r.w.s. 263 of the Act.

Addition of ₹ 1 lakh confirmed by the learned CIT(A) under section 14A r.w. Rule 8D in the order passed under .....

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o there is no specific mention about the addition made in the proceedings under section 144 of the Act. Therefore it cannot be inferred that the Commissioner has made the impugned addition afresh while disposing the appeal arising out of the order passed by the AO under section 144 of the Act. We, therefore, do not find any merit in the contention of the assessee. However, going by para 4.1 in the order passed by the CIT(A) it has to be assumed that the CIT(A) has considered this issue. We, ther .....

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assessment years 2005-06 and 2006-07. Facts necessary for disposal of the appeals are interconnected and, therefore, we proceed to dispose of these appeals by a combined order for the sake of convenience. 2. Assessee-company, in the name of M/s. Royal Western India Turf Club Ltd., carried on the activity of running a club providing hospitality services to its members and their guests apart from conducting horse races. In respect of the previous year relevant to A.Y. 2005-06 it declared loss of .....

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etermined the loss at Nil; in other words the total income of the assessee was determined at Nil. 4. It may be noticed that the assessee received a sum of ₹ 5,17,74,750/- and ₹ 2,02,97,000/- for the assessment years 2005-06 and 2006-07 respectively as entrance fees from the members. According to the assessee company the amount received from the Members as entrance fees is a capital receipt and, therefore, not liable to tax since it is a onetime payment made by the members. It was als .....

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or A.Y. 2006-07 assessment was made on 29.12.2008. 5. The learned CIT-7, Mumbai called for the records of the AO for both the years and noticed that the assessment is deficient on the following issues: - Assessment Year: 2005-06 i) The assessee has shown addition in fixed assets at ₹ 3,75,59,860/-. The total expenses as per income & expenditure account are ₹ 38,15,57,668/-. The AO did not make any independent enquiry into allowing of expenses and depreciation. By assessing the in .....

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s materials to the computation of total income. Therefore, the amount disallowed was deemed to be the income in respect of which particulars have been concealed. iii) Under the circumstances and above said reasons, the assessment order passed by the then DCIT-7(2), Mumbai dated 12.12.2007 is considered to be erroneous and prejudicial to the interest of Revenue. You are hereby given opportunity to state as to why the assessment be not set aside, enhanced or suitably modified. 6. For A.Y. 2006-07, .....

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/- c) Receipts and contractors Rs.15,96,543/- d) Cash deposit Rs.72,60,000/- e) Mutual Fund Investment Rs.1,45,00,000/- The assessee did not file any explanation in respect of the same. However, these amounts were not added/disallowed as unexplained investments, undisclosed receipts and the assessment order is also erroneous in so far as prejudicial to the interest of revenue on this account. (ii) Further, even though the assessee did not comply with the notices issued by the department, there h .....

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/c are ₹ 44,78,73,696/-. Out of these expenses only ₹ 1,29,15,512/- pertain to computation of Fringe Benefit Tax. However, the final assessed income is nil. Therefore, the expenses claimed have not been disallowed in the computation, except to the extent of returned loss. (iv) In the schedule 2 of the return, the assessee has set off long term capital loss against short term capital gains. No verification of these claims have been made and the set off has been wrongly allowed in viol .....

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in respect of which particulars have been concealed. 7. In response to the show cause notice the assessee s representative filed a written submission and also furnished certain details. After considering the details and submissions the learned Commissioner was of the opinion that the income was determined at Nil without bringing any facts on record and without making any outdoor enquiries in respect of the items proposed in the show cause notice and, therefore, the assessment orders were set asi .....

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assessment years 2005-06 and 2006-07, included the entrance fees received as income of the assessee and accordingly assessments were completed. Aggrieved by the orders passed by the AO the assessee preferred appeals before the learned CIT(A). 8. It deserves to be noticed that in respect of assessment years 2005-06 & 2006-07 assessee challenged the orders passed by the AO under section 144 of the Act on the ground that due to personal reasons of the Consultant of the assessee necessary detail .....

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assessment order was set aside by the Revisional Authority in exercise of the powers vested in him under section 263 of the Act. Though in the orders passed under section 144 of the Act there is no addition referable to entrance fees received from members, the learned CIT(A) made brief mention about it while disposing of the appeals. Therefore the assessee preferred appeals against the orders passed by the AO under section 144 contending, inter alia, that during the course of assessment proceedi .....

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with regard to the additions made under section 143(3) r.w.s. 263 of the Act in the proceedings arising out of the best judgement assessment. 9. At the time of hearing the learned counsel for the assessee prepared a chart to submit that in A.Y. 2005-06 the assessee preferred appeal (ITA 6453/Mum/2012) against the order passed by the AO under section 144 of the Act wherein in was contended that the addition of ₹ 1 lakh, sustained by the learned CIT(A) under section 14A r.w. Rule 8D, deserv .....

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the learned CIT(A) erred in treating the annual subscription fees as revenue receipt. The learned counsel submitted that the appeals filed against the orders under section 144 of the Act would become academic if the appeals arising out of the order passed under section 143(3) r.w.s. 263 or the appeals filed against the orders under section 263 are disposed of since in those cases the assessee challenged the jurisdiction of the AO while giving effect to the order passed by the CIT(A), i.e. to ma .....

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ties admitted that the appeals arising out of the orders passed under section 143 r.w.s 263 should be taken up first and we accordingly proceed to consider the matters. The case of the learned counsel for the assessee is that the jurisdiction of the Revisional Authority, in exercise of powers vested in him under section 263 of the Act, is limited to the issues that were mentioned in the show cause notice or on such other matters which were specifically dealt with by the learned Commissioner upon .....

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heard is for the simple reason that the assessee may be able to refute, prima facie, the plea of the Commissioner which might have been formed on examination of the record. When the Commissioner s powers are limited to the issues which were put to the assessee, the AO, under guise of framing fresh assessment, cannot enlarge the scope of revisionery proceedings. In other words, the AO, while making assessment under section 143(3) r.w.s. 263 of the Act, should exercise the powers in relation to t .....

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se notice issued by the Revisional Authority and the operative part of the order of the CIT to highlight that at no stage of the proceedings the CIT had touched upon the issue of taxability of the entrance fees and hence while passing the orders under section 143(3) r.w.s. 263 of the Act the AO was not justified in raking up the issue at this stage since he has no jurisdiction to touch upon the issue which was not subject matter of consideration by the Revisoinal Authority. 14. The learned D.R. .....

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ide the assessment the standard language employed, in the revisional orders, is to direct the AO to make de novo assessment; but one should not go by the language employed therein if it comes in conflict with the powers vested in the Commissioner while passing the order under section 263 of the Act, which were considered in detail by the Hon'ble Gujarat High Court (supra). The direction given by the Commissioner has to be understood in the context/setting in which such direction is given; in .....

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onal Authority. Such being the case the AO has no jurisdiction to touch upon a fresh issue which does not emanate from the notice issued by the Commissioner under section 263 of the Act, while making assessment under section 143(3) r.w.s. 263 of the Act. In the instant case the AO had not treated the entrance fees as revenue receipt despite the fact that the assessee, in the audit report annexed to the return of income, furnished the details with regard to the receipt of entrance fees from membe .....

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llowing the decision of the Hon'ble Bombay High Court in the case of Diners Business Services P. Ltd. 263 ITR 1, we need not have to go into the nature of the entrance fees at this stage since the same cannot be subject matter of consideration in the proceedings under section 143(3) r.w.s. 263 of the Act. We, therefore, accept the plea raised by the assessee in the cross objections in CO No. 64/Mum/2013 (A.Y. 2005-06) and in appeal No. 6334/Mum/2012 (A.Y. 2006-07). Consequently the appeals f .....

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Act no addition can be made by the CIT(A). In fact it was brought to the notice of the CIT(A) that the AO made addition under section 143(3) r.w.s. 263 referable to the entrance fees received from members by treating it as revenue receipt; in this context the learned CIT(A) made a comment by merely observing as under: Entrance fees from members is capital receipt. Hence no further comments are called for. Aggrieved, Revenue preferred appeal before the Tribunal. 17. Since we have already taken a .....

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Act and thus the issue does not arise out of the order passed by the AO and consequently the CIT(A) could not have considered this issue in his order dated 09.07.2012. With these observations the appeal filed by Revenue is dismissed as infructuous. 18. As regards the appeal filed by the assessee against the order passed under section 144 dated 12.12.2007 and the order dated 02.07.2008 in respect of A.Y. 2005-06 the only issue is with regard to the addition of ₹ 1 lakh confirmed by the lear .....

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