2020 (8) TMI 810 - AT - Income Tax

Dismissal of appeal for non-prosecution by CIT-A - Addition being part of fees received from life members,Treating entrance fees received from the ordinary members as taxable receipt, Addition towards the entrance fees received from the corporate members, Considering redemption/switch-out of units of mutual fund as business income, Credit for self - assessment tax not granted, Non-granting of deductions under Chapter VI-A from Gross Total Income, Non granting set off of brought forward unabsorbed depreciation, Not quantifying the brought forward 'long term capital loss' and 'short term capital loss' to be carried forward to subsequent Assessment Years - HELD THAT - We find that it is incumbent upon the Ld. CIT(A) to pass an order on the merits of the case and not to dismiss the appeal for non-prosecution. Accordingly in the interest of justice we remit the issue raised in the appeal the file of the Ld. CIT(A). Ld. CIT(A) is directed to consider the issue afresh and pass an order on the merits of the case after giving an opportunity of being heard to the assessee in accordance with law. Therefore, in the said circumstances, we are of the view that the order of the CIT(A) is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on all the issues and restored the matter before the CIT(A) to decide the matter afresh by giving an opportunity of being heard to the assessee in accordance with law.

Issues Involved:
1. Addition of fees received from life members.
2. Treating entrance fees received from ordinary members as taxable receipt.
3. Addition towards the entrance fees received from corporate members.
4. Considering redemption/switch-out of units of mutual fund as business income.
5. Credit for self-assessment tax not granted.
6. Non-granting of deductions under Chapter VI-A from Gross Total Income.
7. Non-granting set off of brought forward unabsorbed depreciation.
8. Not quantifying the brought forward 'long term capital loss' and 'short term capital loss' to be carried forward to subsequent Assessment Years.

Detailed Analysis:

1. Addition of Fees Received from Life Members:
The assessee contested the addition of ?47,55,956/- as part of fees received from life members, arguing that it was not taxable based on precedents set by the Jurisdictional High Court and the Income-tax Appellate Tribunal in previous years. The CIT(A) confirmed the Assessing Officer's view, but the assessee maintained that the addition was "misconceived, erroneous, incorrect and bad-in-law."

2. Treating Entrance Fees from Ordinary Members as Taxable Receipt:
The assessee challenged the treatment of 80% of entrance fees from ordinary members as revenue receipts forming part of taxable income. The CIT(A) upheld the Assessing Officer's decision, but the assessee argued that the entire entrance fees should be considered a capital receipt, not liable to tax.

3. Addition Towards Entrance Fees from Corporate Members:
The CIT(A) confirmed the view that 80% of entrance fees from corporate members were part of taxable income. The assessee argued that only 1/10th of these fees should be taxed in the year received, with the balance taxed in subsequent years. Alternatively, if the entire 80% was taxable, the assessee sought consequential relief in subsequent years.

4. Considering Redemption/Switch-out of Units of Mutual Fund as Business Income:
The CIT(A) upheld the Assessing Officer's action of treating redemption/switch-out of mutual fund units as business income. The assessee argued that these transactions should be considered capital gains or losses, not business income.

5. Credit for Self-Assessment Tax Not Granted:
The assessee contended that the CIT(A) failed to address the issue of not granting credit for self-assessment tax amounting to ?11,84,695/-. The assessee argued that it was entitled to this credit and requested the Assessing Officer be directed to grant it.

6. Non-Granting of Deductions Under Chapter VI-A:
The CIT(A) did not decide on the issue of not granting deductions under Chapter VI-A, specifically ?45,000/- under section 80G of the Income-tax Act, 1961. The assessee argued for entitlement to this deduction and requested the Assessing Officer be directed to grant it.

7. Non-Granting Set Off of Brought Forward Unabsorbed Depreciation:
The CIT(A) did not address the issue of not granting a set-off for brought forward unabsorbed depreciation against the business income assessed for the year. The assessee argued for entitlement to this set-off and requested the Assessing Officer be directed to allow it.

8. Not Quantifying Brought Forward Long Term and Short Term Capital Loss to be Carried Forward:
The CIT(A) did not address the issue of not quantifying/notifying brought forward long term and short term capital losses to be carried forward to subsequent years. The assessee argued for entitlement to carry forward these losses and requested the Assessing Officer be directed to quantify them.

Tribunal's Decision:
The Tribunal found that the CIT(A) dismissed the appeal for non-prosecution without addressing the merits of the case. It cited precedents (CIT Vs. Premkumar Arjundas Luthra (HUF) and CIT Vs. S Chenniappa Mudaliar) to emphasize that the CIT(A) must pass an order on merits. The Tribunal remitted the issues back to the CIT(A) for fresh consideration, directing the CIT(A) to pass an order on the merits after giving the assessee an opportunity to be heard.

Appeal by Revenue:
The Tribunal dismissed the Revenue's appeal for the AY 2010-11, noting that the tax effect involved was less than ?50 lacs, as per the CBDT circulars No. 3/2018 and No. 17/2019, which set the monetary limits for filing appeals. The Tribunal allowed the Revenue to file a miscellaneous application if the issues fell within exceptions provided in the circulars.

Delay in Pronouncement:
The Tribunal explained the delay in pronouncement due to the nationwide lockdown imposed because of the COVID-19 pandemic, which disrupted judicial work. It cited a co-ordinate bench decision (DCIT V/s JSW Limited) to justify excluding the lockdown period from the 90-day limit for pronouncing orders.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, and the appeal filed by the Revenue was dismissed. The Tribunal directed the CIT(A) to reconsider the issues afresh and pass an order on the merits after giving the assessee an opportunity to be heard.

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