TMI Blog2016 (3) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. - Decided in favour of the assessee - ITA Nos. 279 & 280/2010, C/W ITA No. 173/2009 - - - Dated:- 26-2-2016 - MR. JAYANT PATEL AND MRS. S. SUJATHA, JJ. FOR THE APPELLANT : SMT.JINITA CHATTERJEE, ADV FOR MR.S PARTHASARATHI, ADV FOR THE RESPONDENT : SRIYUTHS: E I SANMATHI AND K V ARAVIND, ADVS COMMON JUDGMENT These appeals under Section 260-A of the Income-tax Act 1961, (hereinafter referred to as the Act for short) are by the assessee against the orders passed by the Tribunal, Bengaluru Bench. 2. The following substantial question of law arises for adjudication before this court: 1. Whether the finding of the Income-tax Appellate Tribunal holding that the provisions of Section 44AB of the income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant had failed to obtain the audit report under Section 44AB of the Act, for which proceedings under Section 271B of the Act were initiated by the assessing officer while concluding the assessments for the relevant assessment years. The appellant offered an explanation that the appellantclub was the mutual concern and was supplying the liquor and beverages only to its members and there was no business carried on by the appellant and accordingly, it was under the bonafide belief that the provisions of Section 44AB of the Act were not applicable to it. Consequently, the appellant did not obtain the audit report at the time of filing of the return of income. The assessing Officer rejected the explanation offered by the appellant and levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the club even though a distinct legal entity is only acting as an agent for its members in the matter of, supply of various preparations to them no sale would be involved (1) [1968] 2 S.C.R.421. (2) [1924] 1K.B.390. as the element of transfer would be completely absent. This position has been rightly accepted even in the previous decision of this Court. 7. This Court in the case of CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND vs. DEPUTY COMMISSIONER OF INCOME TAX reported in [(2009) 308 ITR 202], while considering the general law relating to mutual concerns, has held at paras 13 and 14 as under: 13. Under the general law relating to mutual concerns, the surplus accruing to a mutual concern cannot be regarded as income, profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts audited under section 44AB of the Act amounted to a reasonable cause for cancellation of penalty. 9. Indeed, these judgments referred to above, supports the contention of the assessee that Section 44AB of the Act is not applicable to the facts of the present case. 10. However, without entering into the issue of applicability of Section 44AB of the Act, if we examine as to whether the assessee had the bonafide belief which constituted reasonable cause to absolve him from the levy of penalty, it is clear from Section 273(B) of the Act that no penalty shall be leviable to a person or on assessee for any failure referred to under the provision of Section 271B of the Act, if, it is proved that there was reasonable cause for such f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of money lender, turnover would constitute the basis for invoking the said provision or gross receipts would constitute the basis for applying the said provision, the appeal is decided on the ground as to whether the assessee had a bona fide belief which constituted reasonable cause in the facts and circumstances of the case. Under the provisions of Section 273B of the Act, legislature has provided that notwithstanding anything contained in the provisions of Section 271B of the Act, no penalty shall be imposable on a person or an assessee for any failure referred to in the said provisions if it is proved that there was reasonable cause for the said failure. 8. Therefore, without entering into the larger issue as to whether there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under the bonafide belief that the provisions of Section 44AB of the Act were not applicable to a Club, while supplying beverages, liquor etc., to its members as it was not engaged in any business, but only a mutuality. The authorities and the Tribunal failed to appreciate the vital aspect of the explanation offered by the appellant in a right perspective and as such, in our considered opinion, the order passed by the Tribunal confirming the order of penalty is unsustainable. 15. For the foregoing reasons, we answer the substantial questions of law raised in these appeals in favour of the assessee and against the revenue. The impugned orders of the Tribunal and of lower authority imposing penalty are set aside. Appeals are allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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