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2016 (6) TMI 370 - AT - Income TaxRevision u/s 263 - as per CIT(E) AO gave the benefit of mutuality to the assessee and charged only interest income instead of taxing the whole excess of income over expenditure, which resulted the mistake in the assessment of income of ₹ 2,32,45,608/- - Held that - After thoroughly examined the aforesaid documentary evidences, produced by the assessee in the shape of Paper Book and the case law cited in assessee s own case for the assessment year 2009-10, 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 have seen at the assessment proceedings thereby the issue of principle of mutuality has been discussed and detailed enquiry has been done at the level of the AO and assessee also filed its details before the AO in the assessment proceedings with regard to the applicability of principle of mutuality . After perusing the assessment order dated 07.3.2013 passed u/s. 143(3) of the I.T. Act, we have seen that AO has rightly considered the applicability of principle of mutuality in the assessment order especially the para 7 of the assessment order. Revision order od CIT(A) cancelled - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the order passed under Section 263 of the Income Tax Act. 2. Erroneous and prejudicial nature of the order dated 07.3.2013 passed under Section 143(3). 3. Applicability of the principle of mutuality. 4. Control over the assets of the society. 5. Examination of the facts regarding the allotment of land. 6. Exemption of entire income based on the principle of mutuality. Detailed Analysis: 1. Jurisdiction of the Order Passed Under Section 263: The assessee contended that the order passed under Section 263 of the Income Tax Act was without jurisdiction. The Tribunal examined whether the Commissioner of Income Tax (Exemptions) [CIT(E)] had the authority to revise the assessment order dated 07.3.2013. It was observed that the CIT(E) issued a notice under Section 263, questioning the assessment order's validity and alleging it was erroneous and prejudicial to the revenue's interest. 2. Erroneous and Prejudicial Nature of the Order Dated 07.3.2013: The Tribunal analyzed if the assessment order dated 07.3.2013 was indeed erroneous and prejudicial to the revenue. The CIT(E) argued that the AO had not properly examined the principle of mutuality and thus the assessment was flawed. However, the Tribunal found that the AO had made detailed inquiries and considered the principle of mutuality in the assessment order, which was evident from the documents and submissions made by the assessee. 3. Applicability of the Principle of Mutuality: The core issue was whether the assessee was entitled to claim the principle of mutuality for its income. The AO had accepted the assessee's claim of mutuality for income from its members but taxed the interest income from third parties. The Tribunal noted that the AO had thoroughly examined this aspect and had applied the principle of mutuality correctly. The CIT(E)'s contention that the AO had not applied his mind was found to be incorrect. 4. Control Over the Assets of the Society: The CIT(E) observed that the assessee did not have control over its assets in the event of dissolution, as per the Ministry of Urban Development's letter. The Tribunal found this observation to be perverse and unsupported by evidence. It was noted that less than one percent of the fixed assets were possessed by the Centre, and mutuality should be claimed only concerning the assets actually owned by it. 5. Examination of the Facts Regarding the Allotment of Land: The CIT(E) argued that the AO had not brought on record the basic facts regarding the allotment of land to the assessee. The Tribunal found that the AO had indeed examined the relevant facts and had considered the principle of mutuality in his assessment. The Tribunal emphasized that the AO had made a detailed inquiry into the matter, which was evident from the assessment order and the documents on record. 6. Exemption of Entire Income Based on the Principle of Mutuality: The assessee contended that its entire income was exempt based on the principle of mutuality. The AO had granted exemption only for the income from members, while taxing the interest income from third parties. The Tribunal upheld the AO's view, noting that the principle of mutuality applied only to the income from members and not to the interest income from third parties. Conclusion: The Tribunal concluded that the assessment order dated 07.3.2013 was not erroneous or prejudicial to the revenue's interest. The AO had made detailed inquiries and applied the principle of mutuality correctly. The CIT(E)'s order under Section 263 was found to be contrary to law and facts on record. The Tribunal canceled the impugned order dated 27.3.2015 passed by the CIT(E) and upheld the assessment order dated 07.3.2013. The appeal filed by the assessee was allowed.
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