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TMI Blog2022 (8) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... fly, the facts of the case are that the appellant is a Recreational Club. The return of income for the assessment year 2006-07 was originally filed on 29.11.2006 disclosing total income of Rs.25,35,019/-. The said return of income was processed u/s 143(1) of the Income Tax Act, 1961 ('the Act') on 06.10.2007 accepting the returned income. Subsequently, the Dy. Commissioner of Income Tax, Circle- 4, Pune ('the Assessing Officer') issued a notice u/s 148 dated 19.02.2013 after recording the following reasons :- 5. On receipt of the reasons recorded for issuing notice u/s 147, the assessee filed objections, which were disposed by the Assessing Officer, then proceeded with re-assessment proceedings. Subsequently, the Assessing Officer completed the reassessment vide order dated 29.03.2014 passed u/s 143(3) r.w.s. 147 of the Act at a total income of Rs.1,52,42,673/-. While doing so, the Assessing Officer made addition of Rs.1,41,895/- by disallowing 7.5% of the interest income as expenditure claimed by the appellant on the lines of the decision of the Hon'ble ITAT in assessee's own case. Similarly, the Assessing Officer made addition by disallowing the expenses of Rs.9,39,456/- claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e validity of the reassessment should be upheld. 10. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal no.1 relates to the validity of the reassessment proceedings. The admitted facts of the case are that the appellant club had filed the return of income claiming certain percentage of the interest received from bank. Receipts from venue charges from members' guest, dinner receipts from members' guest, receipts from cricket ground books from members' guest as expenditure, entrance fees from members was claimed to be exempt from tax. The claim of expenditure made by the appellant club is in tune with the decision of the Hon'ble ITAT in assessee's own case for the assessment year 1994-95 in ITA No.625/PUN/1998. The decision of the ld. CIT(A) for assessment year 2010-11 came to be accepted by both the assessee as well as the Department. This claim was accepted by the Assessing Officer by accepting returned income in the assessment u/s 143(1) of the Act. Now, the Assessing Officer seeking to reopen the assessment on the ground that based on the decision of the Hon'ble Supreme Court in the case of Bangalore Club vs. CIT, 350 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. In the present case, from the reasons recorded it would be clear that the premises on which the Assessing Officer formed an opinion that the income had escaped assessment is the decision of the Hon'ble Supreme Court in the case of Bangalore Club (supra), which is subsequent to the completion of the assessment u/s 143(1) of the Act. But the return of income filed by the assessee is in consonance with the law laid down by the Hon'ble Supreme Court in the case of Bangalore Club (supra). Therefore, it cannot be said that there is any tangible information which came into possession of the Assessing Officer enabling him to form an opinion that the income had escaped assessment. Thus very factual premises on which the reassessment proceedings were initiated is mistaken of acts. Therefore, in such circumstances, the reassessment proceedings cannot be said to be validly assumed as held in the recent judgement of the Hon'ble Bombay High Court in the case of Raimaladitya Textile Pvt. Ltd. in Writ Petition No.2199 of 2021 dated 22.03.2022 held mistake certainly not to be reason to believe that income escaped assessment. Further, in the absence of any tangible material, it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment and the assessment was completed by the Assessing Officer vide order dated 29.03.2014 passed u/s 143(3) of the Act at a total income of Rs.3,77,14,049/- by disallowing the claim of expenditure on account of venue charges from members' guest, dinner receipts from members' guest, receipts from cricket ground books from members' guest etc. by holding that the principle of mutuality does not apply in the case of receipts from non-members placing reliance on the decision of the Hon'ble Apex Court in the case of Bangalore Club (supra). Similarly, the Assessing Officer also brought to tax the entrance fee received from corporate members of Rs.2,35,03,900/- by holding that the corporate members do not have any voting rights and the rights of voting for regular/permanent members much different from non-voting members placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Calcutta Stock Exchange Association Ltd., 36 ITR 222 and Delhi Stock Exchange Association Ltd. vs. CIT, 41 ITR 415. 18. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the disallowances of expenditure @ 7.5% claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure at the rate of 7.5% of the interest income claimed. Admittedly, there is no specific expenditure incurred to earn the interest income. However, incurring of sum indirect expenditure cannot be ruled out. It is trite law that what can be taxed is only real income not hypothetical income, when the specific expenditure cannot be identified, it is appropriate to estimate certain amount of expenditure. In the present case, in earlier year, the Tribunal took a view that 7.5% of interest income should be allowed as deduction. This finding had attained the finality, accepted both the assessee as well as the Department. Even on the principle of consistency, the same should have been followed by the lower authorities. The decision of the Hon'ble ITAT in assessee's own case is also in consonance with the ratio of decision of the Hon'ble Allahabad High Court in the case of CIT vs. Kisan Sahkari Chini Mills Ltd., 274 ITR 119, wherein, the Hon'ble Allahabad High Court confirmed the findings of the Tribunal that where the assessee held some interest income other than the exempted income, it must incur some expenses for earning the interest income and the expenditure cannot be identified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Bangalore Club (supra) has no application to the instant case. Accordingly, the ground of appeal no.3 raised by the assessee stands allowed. 28. Ground of appeal no.4 not pressed at the time of hearing of the appeal and the same is dismissed as not pressed. 29. In the result, the appeal filed by the assessee in ITA No.894/PUN/2017 for the assessment year 2011-12 stands partly allowed. ITA No.1237/PUN/2017, A.Y. 2011-12 - By Revenue : 30. Now, we shall take up Revenue's appeal in ITA No.1237/PUN/2017 for the assessment year 2011-12. 31. Ground of appeal no.1 to 4 challenges the decision of the ld. CIT(A) allowing the certain percentage of expenditure against the receipts from the members' guest on account of venue charges from members' guest, dinner receipts from members' guest, receipts from cricket ground books from members' guest. Admittedly, this issue was squarely covered by the decision of the Hon'ble ITAT in assessee's own case in earlier years and the decision of the Hon'ble Supreme Court in the case of Bangalore club (supra) have no application, inasmuch as, the issue before the Hon'ble Supreme Court in the said case relates to the taxability of the interest earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember and the facilities and the services provided by the assessee-club, it is not enough for a person merely to pay the annual subscription. As a matter of fact a person cannot exercise the rights and privileges of a member merely by volunteering to pay the annual subscription. What a member has to acquire first is the right of membership of the club. A person has first to get elected as a life or ordinary member, as the case may be, in the manner provided in the articles of association. It is only after a person is elected that he is required to pay the subscription and entrance fee within fourteen days of notice of his election under article 31. The acquisition of right as an ordinary member is done by the payment of the entrance fee of Rs. 500 in the relevant assessment years. In lieu of this payment of the entrance fee, a member does not get any return in the form of any services or amenities. All that he gets is a right to avail of the amenities or facilities provided by the club on a payment of the annual subscription. This right can be exercised by him as long as the membership is not determined as provided by article 44. This receipt of Rs. 500 received by the club is a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 2242/PUN/2017, A.Ys. 2012-13, 2013-14 & 2014-15 - By Assessee : 38. Since the facts and issues involved in all the above captioned appeals are identical, therefore, our decision in ITA No.894/PUN/2017 for A.Y. 2011-12 shall apply mutatis mutandis to the remaining appeals of the assessee in ITA Nos.895, 1653 & 2242/PUN/2017 for A.Ys. 2012-13, 2013-14 & 2014-15. Accordingly, the appeals of the assessee in ITA Nos.895, 1653 & 2242/PUN/2017 for A.Ys. 2012-13, 2013-14 & 2014-15 are partly allowed. ITA Nos.1238, 1939 & 2221/PUN/2017, A.Ys. 2012-13, 2013-14 & 2014-15 - By Revenue : 39. Since the facts and issues involved in all the above captioned cross-appeals are identical, therefore, our decision in ITA No.1237/PUN/2017 for the assessment year 2011-12 shall apply mutatis mutandis to the remaining cross-appeals of the Revenue in ITA Nos.1238, 1939 & 2221/PUN/2017 for A.Ys. 2012-13, 201314 & 2014-15. Accordingly, the cross-appeals of the Revenue in ITA Nos.1238, 1939 & 2221/PUN/2017 for A.Ys. 2012-13, 201314 & 2014-15 are dismissed. 40. To sum up, all the above captioned appeals filed by the assessee are partly allowed and the cross-appeals filed by the Revenue are dismissed, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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