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TMI Blog2015 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (1) of the Income-tax Act, 1961. 1 3 The Appellant submits that the enhancement made by the Commissioner of Income-tax (Appeals) be struck down as illegal, invalid and in excess of jurisdiction and the Assessing Officer be directed to recompute the Appellant' s total income ignoring the same. Without prejudice to the foregoing: 2: 0 Re.: Treating the Appellant as a 'mutual concern': 2: 1 The Commissioner of Income-tax (Appeals) has erred in holding that the Appellant is a 'mutual concern' and hence its income for the year needs to be computed by applying the principles of mutuality. 2 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the principles of mutuality do not apply to it and /or have been erroneously applied to it. Further the assessee has always been treated by the tax department de hors the principles of mutuality since the last 60 years and that the stand taken by the Commissioner of Income-tax (Appeals) in this regards is incorrect, erroneous, misconceived and ought to be struck down. 2 3 The learned Commissioner of Income-tax (Appeals) failed to appreciate that the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a 'mutual concern': 2: 1 The Commissioner of Income-tax (Appeals) has erred in holding that the Appellant is a 'mutual concern' and hence its income for the year needs to be computed by applying the principles of mutuality. 2 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the principles of mutuality do not apply to it and .I or have been erroneously applied to it. Further the assessee has always been treated by the tax department de hors the principles of mutuality since the last 60 years and that the stand taken by the Commissioner of Income-tax (Appeals) in this regards is incorrect, erroneous, misconceived and ought to be struck down. 2: 3 The learned Commissioner of Income-tax (Appeals) failed to appreciate that the principle of mutuality could not be thrust upon the Appellant. 2 4 The Appellant submits that the Assessing Officer be directed to re-compute its total income treating it as a 'trading concern' in accordance with the normal provisions of the Income-tax Act, 1961. Without prejudice to tile foregoing: 3: 0 Re.: Treatment of interest of Rs. 1,69,07,816/- earne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law the Ld. CIT(A) has erred in deleting the addition of Rs. 2,95, 171/-. 5. The appellant prays that the order of the Ld. CIT(A) be set aside and the order of the A.O. be restored as the assessee did not comply with the opportunity given by the A.O. during the assessment proceeding and the assessment was completed u/s.144 The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary." ITA No.808/M/10(06-07): "1.On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 1,20,91,000/- made on account of entrance fee received from life members ignoring their detailed reasoning given by the Assessing Officer in his order. The appellant prays that the order of the ld. Commissioner of Income tax(Appeals) be set aside and the order of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary." ITA No.4274/M/12 (07-08) "1.Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the entire addition of Rs. 93,50,900/- made by the Assessing Officer on account of member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther observed that the assessee being a mutual concern was not entitled to set off its loss against income from non-mutual activities,that it was incurring losses from providing services to its members, that it was earning interest income/dividend on shares from banks and companies,that those entities were not members of the club. Accordingly,he issued a notice for enhancement of income of the assessee.He directed the assessee to explain as to why it should not be treated as mutual concern and that why its income/loss through mutual activity should not be excluded to compute its total income.In its replies,dated 11.8.2009 and 31.8.2009 ,the assessee argued that it was in business of club facility for the use of its members as well as for outsiders,that it could not be treated as mutual concern,that the Hon'ble Bombay High Court had also in the AY.s 1955-56 -1959-60 held it was engaged in the business of providing services to its members. Challenging the proposed action of enhancement of income,the assessee argued that the FAA had no power to enhance income to consider the item of income which had not been considered by AO while framing assessment.The assessee relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not considered any new item of income,that the enhancement was proposed about a source that had been considered by the AO, that the enhancement was proposed on the ground that the assessee is a mutual concern and that it was covered by the concept of mutuality, that income/loss of the assessee from mutual activity was to be ignored, that even if the assessee was providing facility to outsiders income earned from them was to be taxed as per provisions of the Act, that on dissolution of the club certain members were entitled to share the surplus, that on that basis it could not be held that it was a mutual concern, that members as a class were entitled to share the surplus of funds, that the power of sharing surplus on dissolution had to be seen as a Class and not by looking whether a particular member was entitled to share the surplus or not, he referred to the case of Bankipur Club Ltd. (226 ITR 97),that no deduction/allowance which the assessee was entitled to and had not been claimed was being thrust on it, that the assessee is a mutual club and that its income/loss out of mutual activities would not form part of taxable income, that receipt accrued to the assessee under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable to decision of Income-tax Authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the Department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision, and if the Tribunal giving the earlier decision has taken into consideration all material evidence. A Tribunal like the Appellate Tribunal, should be extremely slow to depart from a finding given by an earlier Tribunal. .... There is also a further limitation, namely, that the effect of revising a decision in a subsequent year should not lead to injustice and the court must always be anxious to avoid injustice to the assessee. For instance, if the court is satisfied that by depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere to be taken into consideration while deciding the question as to whether or not a particular fact is proved. Neither the principle of res judicata nor the rule of estoppel is applicable to the assessment proceedings,yet the rule of consistency does apply to such proceedings.Finally,it was held that the Tribunal cannot take a different view in the subsequent year when in the earlier year on the same facts,it had accepted the claim made by the assessee. In our opinion,rule of consistency requires that the view taken by the AO in the preceding years should not be disturbed,unless there is a substantial change in the factual and legal position.We have gone through the assessment orders passed by the AO for the earlier and subsequent assessment orders and have found that the activities carried out by the assessee were same and that the AO had assessed the income arising out of such activities as business income.On 05.04.2011the AO had passed a rectification order u/s154 of the Act for the AY.2003-04 and had specifically mentioned that principles of mutuality were inapplicable to the facts of the case(pg.237 of the PB).The coterminous powers of the FAA authorise him to assess the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n did not mean incidental or collateral examination of any matter by the AO in the process of assessment,that there must be something in the assessment order to show that the AO had applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the assessment order passed by the AO, there is nothing to show that he had applied his mind to the particular subject matter i.e. applicability of principle of mutuality.Therfore,the FAA was not justified in enhancing the income of the assessee by applying principles of mutuality for the year under appeal.Reversing his orders,we hold that the assessee was carrying out business activities and that the principles of mutuality are not applicable to such activities.The assessee is entitled to the carry forward/set off of losses as per the provisions of the Act. We find that the FAA had heavily relied upon the case of Bankipur Club Ltd. (supra).In our opinion facts of Bankipur Club are not identical to the facts of case under conisideration.In that matter the FAA had not enhanced the income of the = applying the principle of mut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand report from the AO.In our opinion,he should have called for a report from the AO in this regard. We are of the opinion that in the interest of justice,the matter should be restored back the file of the AO for fresh adjudication and verification of the documents produced by the assessee before the FAA.Grounds no.1-2 are decided in favour of the AO,in part. 5.Ground no.3 deals with allowance of loss on sale of fixed assets.During the assessment proceedings,the AO held that the assessee had sold depreciable assets at a loss of Rs. 92,437/-, that it did not provide any evidence about the sale.He made an addition of the said amount to the total income of the assessee. 5.1.During the appellate proceedings the assessee contended before the FAA that it had sold depreciable fixed assets at loss of Rs. 93,437/- during the year under appeal, that it had already added back the loss in the statement of computation of taxable income, that no further disallowance was called for. After considering the submission of the assessee, the FAA held that the contention made by the assessee was factually correct, that loss had been added back by the assessee while computing the taxable income.He dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered part of income shown in TDS certificates in the earlier years on accrual basis, that same could not be include in the taxable income of the assessee for the current year. Accordingly he deleted the addition of Rs. 2.95 lacs and upheld the balance addition of Rs. 7350/-. 6.2.Before us, the DR stated that no evidence was produced before AO with regard to payment of taxes in the earlier year.The AR supported the order of the FAA. 6.3.We have heard the rival submission and perused the material. As stated earlier the assessment was completed under section 144 of the Act and no details whatsoever was produced before the AO by the assessee during the assessment proceedings, that the FAA held that part of the TDS payment was shown in the earlier years.In our opinion it was the duty of the FAA to call for the remand report from AO before allowing the appeal.Therefore, in the interest of justice we are remitting back the matter to the file of AO to decide the issue again.The assessee is directed to produce relevant certificates before the AO.The AO would give credit for the taxes paid paid in the earlier years,as claimed by the assessee.Ground no.4 is allowed,in part. Now,we would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a taxable receipts as held by Bombay High Court. Accordingly the Assessing Officer was not 'justified in making an addition of Rs. 21,60,000/- and an addition of Rs. 98,40,000/- to the income of the Appellant. Further the Assessing Officer was not justified in making an addition of Rs. 5,76,000/- to the income of the Appellant on account of subscriptions transferred from the advance subscription account of ordinary members to the life members subscription account. This ground of the appeal of the Appellant is allowed." During the course of hearing before us,the DR left the issue to the discretion of the Bench.The AR supported the order of the FAA. 9.2.We have heard the rival submission and perused the material before us.We find that the matter has been conclusively decided by the Hon'ble Bombay High Court in assessee's own case, as stated by the FAA.Respectfully following the same,we uphold the order of the FAA and decide the effective ground of appeal against the AO. ITA/1560/M/12-AY.04-05 and ITA/4274/M/12-AY.07-08: 10.The only issue raised by the AO,for both the AY.s.,pertains to membership fee of Rs. 52.08 lakhs and Rs. 93.50 lakhs respectively.Following the ..... 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