IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA No.2340/DEL/2016 A.Y. : 2011-12 INDIA HABITAT CENTRE, COMMISSIONER OF INCOME LODI ROAD, VS. TAX (EXEMPTIONS), NEW DELHI - 110003 PRATYAKASH KAR BHAVAN, E- (PAN: AAATI0499M) 2, BLOCK, 26TH FLOOR, DR. SHYAMA PRASAD MUKHERJEEMARG, CIVIC CENTRE, JAWAHARLAL NEHRU MARG, NEW DELHI 110 002 (APPELLANT) (RESPONDENT) Assessee by : Sh. Suresh Ananthraman, CA Department by : Ms. Satpal Gulati, CIT(DR) Date of Hearing : 21-09-2016 Date of Order : 19-10-2016 ORDER PER H.S. SIDHU : JM This appeal by Assesse is directed against Order of Ld. Commissioner of Income Tax (Exemptions), New Delhi dated 15/16.03.2016 passed u/s. 263 of I.T. Act pertaining to assessment year 2011-12 on following grounds:- 1. order passed U/S 263 of Act is without jurisdiction. ITA NO. 2340/Del/2016 2. revisional order holding that order dated 24.3.2014 passed u/s 143(3) of Act is erroneous in as much as it is prejudicial to interest of Revenue, is perverse and opposed to evidences on record. 3. Assessing Officer in regular assessment having thoroughly examined applicability of principle of mutuality to appellant, revisional order holding same to be erroneous and not based on application of mind by Assessing Officer is entirely wrong. 4. finding of Commissioner of Income-tax that It is clear that in view of letter of Ministry of Urban Development, assesee does not have control over assets of Society , is perverse and is opposed to evidences on record. 5. finding of Commissioner that benefit of mutuality has been given by AO after due application of mind is not acceptable as AO has not even brought on record basic fact w.r.t. 2 ITA NO. 2340/Del/2016 allotment of land to assessee , is opposed to evidences on record. 6. It is contended that entire income of appellant is exempt on account of Principle of Mutuality. Your appellant craves leave to add, alter, amend or withdraw any of grounds of appeal at time of hearing. 2. facts in brief are that assessee filed its return of income as NIL on 30.9.2011. case of assesee was selected for scrutiny, notice u/s. 143(2)/142(1) were issued on 20.9.2012. In response to same Authorised Representatives of assessee appeared and filed details of record as required by AO from time to time. In assessment order dated 24.3.2014 passed u/s. 143(3) of I.T. Act, AO has stated that Assessee Society is registered u/s. 12A of Income Tax Act, 1961 vide order dated 13.1.1989 and has also reproduced aims and objects of assessee-society in his assessment order. AO in assessment order has mentioned that assessee has claimed exemption under charitable clause of Income Tax Act stating therein that activities of assessee society are within 3 ITA NO. 2340/Del/2016 purview of principle of mutuality. AO considered provisions of law alongwith evidences filed by assessee on this issue and has held that assessee is entitled to benefit under provision of principles of mutuality, this remains subject to due scrutiny of accounts from year to year. AO rejected claim of section 11 & 12 of I.T. Act and applied provisions of Income Tax Act and has held that assessee seems to be covered by principle of mutuality and is entitled for exemption only in respect of income accruing from members in terms of principles of mutuality. However, those receipts of income, which are attributable to outstanding or third parties, are not allowable to assessee, under same principle. He further observed that certain amounts, as reflected in income- expenditure account, have accrued to assessee from third parties being in nature of bank interest at amount of Rs. 72,78,575/- and therefore, this amount, not being covered under principle of mutuality, requires to be subjected to tax under normal provisions of I.T. Act. Thus, he completed assessment in this case u/s. 143(3) of I.T. Act on 24.3.2014 at income of Rs. 72,78,580/-. 3. After perusing assessment order dated 24.3.2014 particularly balance sheet filed by assessee, Ld. CIT(E) 4 ITA NO. 2340/Del/2016 noticed that fixed deposits have been classified under two heads one under head of IHC Building Complex and other Assets (Schedule-3) valued at Rs. 1,27,49,73,765/- and another, under head of Fixed Asets (Schedule-4) valued at Rs. 36,44,418/-. former assets do not belong to India Habitat Centre. These belong to various corporate members in proportion of their respective contribution towards cost of acquisition of land and cost of construction of building. These assets are shown in balance sheet of their respective owners who claim depreciation thereon in their respective books of accounts. Even surplus arising in Income & Expenditure Account of Centre is taken to IHC Building Complex and other assets head. Therefore, it is very clear that less than one percent of fixed assets are possessed by Centre and, mutuality if any is to be claimed by assessee in respect of income of Society, it should have been claimed only w.r.t. ratio of asset actually owned by it which is less than 1% of total assets. Further it was noticed by Ld. CIT(E) that as per land allotment letter of Ministry of Urban Development, in event of dissolution of Centre, land allotted to it and assets created thereon will be transferred to institution having similar aims and objects with prior approval of government and failing which, to Govt., on payment of 5 ITA NO. 2340/Del/2016 compensation determined by lesser in its absolute discretion. Thus, assessee does not have control of assets of society in case of its dissolution. Such society cannot be treated as Mutual society. 3.1 Ld. CIT(E) has observed that AO gave benefit of mutuality to assessee and charged only interest income instead of taxing whole excess of income over expenditure, which resulted mistake in assessment of income of Rs. 1,05,02,430/-. 3.2 Therefore, notice u/s. 263 was issued to assessee on 27.1.2015 requiring it to show cause as to why assessment order should be set aside to made afresh. In response to same, Assessee s AR attended proceedings and filed reply contesting proposed action u/s. 263 primarily on ground that assessment u/s. 143(3) is not liable to be cancelled u/s. 263 because same has been framed by AO after due application of mind and also that no prejudice has been caused to revenue. After considering reply filed by Assessee- Society, Ld. Commissioner of Income Tax(E) has passed impugned order u/s. 263 of I.T. Act dated 15/16.3.2016 by holding assessment order dated 24.3.2014 passed u/s. 143(3) 6 ITA NO. 2340/Del/2016 of Act is erroneous and prejudicial to interest of revenue by citing decision of Hon ble Karnataka High Court in case of Infosys Technologies Ltd. reported in 341 ITR 293 (Kar.). Thereafter, Ld. CIT(E) set aside assessment with directions to AO to examine issue in details in view of Memorandum of Association and Dissolution clause. 4. Against above order of Ld. CIT(E) dated 15/16.03.2016 passed u/s. 263 of I.T. Act, assessee appealed before Tribunal. 5. At time of hearing, Ld. Counsel of assessee has stated that issue in dispute is squarely covered by order dated 18.5.2016 of Tribunal for assessment year 2010-11 passed in assessee s own case and requested that issue is identical and similar, hence, Tribunal s order dated 18.5.2016 may be followed and appeal of Assessee may be allowed. 7. On contrary, Ld. CIT(DR) relied upon impugned order of Ld. Commissioner of Income Tax (Exemptions) dated 15/16.3.2016. He stated that impugned order has been passed as per law. He further stated that AO has passed assessment order without applying his mind and without making detailed enquiry. However, Ld. CIT(E) has rightly applied his 7 ITA NO. 2340/Del/2016 mind and passed order under section 263 of I.T. Act. In support of her contention, he filed copy of Order of Hon ble Supreme Court of India in case of Malabar Industries Co. Ltd. 243 ITR 83 (SC). He requested that impugned order of Ld. CIT(E) may be upheld and Appeal of Assessee may be dismissed accordingly. 8. We have heard both parties and perused records available with us, especially order passed by Revenue Authority alongwith documentary evidence and case law filed by assessee s counsel as well as provisions of law referred by Revenue Authority and Ld. Counsel of assessee. He stated that order passed by AO is not erroneous at all, because AO has considered applicability of principle of mutuality in his order. After careful consideration, we are of considered view that arguments advanced by Ld. Counsel of assessee is very much plausible and convincing, because claim of assessee regarding applicability of principle of mutuality in its return of income has been filed by assessee alongwith return of statement of account, meaning thereby assessee has claimed applicability of principle of mutuality in its return of income. AO during course of assessment proceedings has also directed assessee to explain 8 ITA NO. 2340/Del/2016 applicability of principle of mutuality which we have seen at assessment proceedings thereby issue of principle of mutuality has been discussed and detailed enquiry has been done at level of AO and assessee also filed its details before AO in assessment proceedings with regard to applicability of principle of mutuality . After perusing assessment order, we have seen that AO has rightly considered applicability of principle of mutuality in assessment order. 8.1 We also find force in Ld. Counsel of Assessee s submissions that exactly similar issue has been adjudicated and decided by ITAT, Delhi in assessee s own case for assessment years 2009-10 & 2010-11 passed in ITA No. 3017/Del/2014 & 2390/Del/2015, vide order dated 12.2.2015 & 18.5.2016 respectively has decided similar and identical issue relating to principle of mutuality in favour of assessee. In view of above, he stated that following precedent, as aforesaid, impugned order may be cancelled and Appeal filed by Assesee may be allowed. 8.2 Keeping in view of aforesaid, we are of view that AO has made detailed enquiries on issue of principle of 9 ITA NO. 2340/Del/2016 mutuality and passed order dated 24.3.2014 u/s. 143(3) of I.T. Act as per law. 8.3 We find that Hon ble Supreme Court in case of CIT vs. Green World Corporation 314 ITR 81 (SC) has held as under:- jurisdiction u/s. 263 can be exercised only when both following conditions are satisfied: i) order of AO should be erroneous; and ii) It should be prejudicial to Revenue interest. These conditions are conjunctive. order of assessment passed by AO should not be interfered with only because another view is possible. order would be erroneous only when AO makes no enquiries during course of assessment proceedings. This principle was noticed by Delhi High Court in Geevee Enterprises vs. Addl. CIT 99 ITR 375 (Del.). In arriving at this decision, Delhi High Court drew strength from principles laid down by Supreme Court in Rampyari Devi Sarogi vs. CIT 67 ITR 84 (SC) and Tara Devi Agarwal vs. CIT, 88 ITR 324 (SC). underlying principle which emerges from these judgments is that if assessment order is passed without making any enquiries, then such order would be erroneous. 8.4 We also find that AO has consciously taken view with regard to Principle of Mutuality . Hon ble Supreme Court in 10 ITA NO. 2340/Del/2016 case of Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC) held as under:- phrase prejudicial to interest of Revenue has to be read in conjunction with erroneous order passed by AO. Every loss of revenue as consequence of order of AO cannot be treated as prejudicial to interests of Revenue. For example, when Income Tax Officer, adopted one of courses permissible in law and it has resulted in loss of Revenue; or where two views are possible in law and Income Tax Officer has taken one view with which Commissioner does not agree, it cannot be treated as erroneous order prejudicial to interests of Revenue, unless view taken by Income Tax Officer is unsustainable in law. 8.5 We also find that case laws cited by Ld. CIT(DR) does not support case of Revenue. 8.6 In background of aforesaid discussions and respectfully following aforesaid precedents, we are of considered view that assessment order dated 24.3.2014 passed u/s.143(3) is not erroneous and prejudicial to interest of revenue at all and Ld. CIT(E) has passed impugned order dated 15/16.3.2016, is contrary to law and facts on record, which is not sustainable in eyes of law. Hence, we cancel impugned order dated 15/16.3.2016 passed by Ld. CIT(E) u/s. 263 of I.T. Act by accepting appeal filed by assessee and upheld assessment order dated 24.3.2014 passed by AO passed u/s. 143(3) of I.T. Act. Our view is supported by Ram Piari Devi 11 ITA NO. 2340/Del/2016 Sarogi vs. CIT 67 ITR 8 4 (SC) and Tara Devi Agarwal vs. CIT 88 ITR 323 (SC). 9. In result, Appeal filed by Assessee stands allowed. Order pronounced in Open Court on 19/10/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER Date 19/10/2016 SRBHATNAGAR Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 12 India Habitat Centre v. Commissioner of Income-tax (Exemptions), New Delhi