AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1228
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..../2009, for the assessment year 2003-04. Ground of appeal for the A.Y. 2003-04 "1. The learned Commissioner of Income tax (Appeals) [CIT(A)] erred in upholding the action of the Assessing Officer in making addition of a sum of Rs.27,75,000/- on account of entrance fee collected by the appellant which were capital receipts. 2(a) The learned CIT(A) erred in not following the ratio laid down by the Bombay High Court in the case of CIT V. Diners Business Services P. Ltd. [(2003) 263 ITR l(Bom)] on the grounds that the amount received by the appellant was not one time fee and that the amount received was a composite amount including the annual fee. (b) The appellant further submits that the CIT(A) erred in concluding that the amount received by the appellant was a composite amount contrary to the actual situation where the appellant receives from each member entrance fees and annual fees separately. 3. The appellant submits that while deciding the appeal against the appellant and holding that the sum of Rs.27,75,000/ - is taxable, the learned CIT(A) relied upon certain conclusion reached in the order which are contrary to facts as enumerated hereunder:- (a) The learned CIT(A) erred....
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....o started the business of running of a club called ACRES Club. It has enrolled members in the club for which one time membership entrance fee is charged. For the assessment year 2003-04, the assessee has filed its return of income on 28th November 2003, under section 139(1) of the Act, declaring losses of Rs. 23,38,967. Later on, revised return of income was also filed on 1st December 2003, under section 139(5), declaring total loss of Rs. 50,99,960. Such a return of income was subjected to scrutiny and notice under section 143(2) dated 7th April 2004 was issued and served. In pursuance thereof, assessment order under section 143(3) was completed vide order dated 10th March 2006 on a total loss of Rs. 50,99,597, which was allowed to be carried forward. The relevant date for filing of the return of income and completion of the assessment for the assessment year 2004-05 and 2005-06, are as under:- A.Y. 2004-05 A.Y. 2005-06 Date of filing of the return of income 01.11.2004 declaring total loss of Rs. (-) 4,16,25,646 The original return of income filed on 31.10.2005, which was revised on 05.12.2005 declaring total loss of Rs. 3,95,37,344 Date of order The assessment orde....
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....d that the exemption claimed is legally not correct. However, the membership fees received are generally for a period of 25 years. Hence, the 1/25th portion thereof is chargeable to tax in every year. Accordingly, I offer to tax, the income on account of membership fees of the Acres Club in the hands of Natvar Parikh & Co. Pvt. Ltd. for the different financial years as under: Financial Year Amount (Rs.) 2002-2003 1,11,000 2003-2004 18,29,839 2004-2005 31,51,246 2005-2006 46,89,838 1.4.2006 to 23.1.2007 61,.74,929 Total 1,59,56,852 The tax due for the current financial year, if any, after set off of the past losses will be paid in due course. It is requested that due immunity from penalty may please be granted for this voluntary disclosure on our part." 7. Accordingly, at the time of search, the assessee offered 1/25th portion of the membership fee as chargeable to tax in respective years. Later on, vide letter dated 30th March 2007, the assessee retracted the statement recorded under section 132(4) and withdrew his offer for taxation on the one time membership fee, on the ground that the assessee's claim was based on the decision of the Hon'ble Jurisdictional High C....
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....o addition can be made. The Assessing Officer has solely relied upon the statement recorded on oath under section 132(4), which cannot be said to be incriminating material because the assessee has first clarified that its claim was based on the decision of the Hon'ble Jurisdictional High Court and, in any case, such expenditure should be deferred for 25 years. No corroborative evidence was found during the course of search so as to suggest that the membership fee is actually a revenue receipt. The assessee has retracted this statement immediately after the search and seizure action, based on the legal advice that the decision of the Hon'ble Jurisdictional High Court is applicable and has a binding precedence. Once, there is no incriminating material, then even if the assessment is completed under section 153(A) r/w 143(3), no addition can be made. He also strongly relied upon the decision of the Hon'ble Rajasthan High Court in Jai Steels India, Jodhpur v/s ACIT, [2013] 259 CTR (Raj.) 281. On merits also, he placed detail submissions as to why such a receipt cannot be held to be revenue in nature. 11. On the other hand, the learned Departmental Representative submitted that during ....
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....te of search, then the same shall get abated. In the present case, for the years under appeal, the assessments were not pending and had attained finality, therefore, the assessments completed in the impugned assessment years will not get abated. Once that is so, the legal position as of now is that the additions over and above the assessed income cannot be made dehors the incriminating material found at the time of search while completing the assessment under section 153A. This, inter -alia, means that if there is no incriminating material, then the original assessment made can be reiterated and no further addition is called for. This has been held so by the Tribunal, Mumbai Special Bench, in All Cargo Global Logistics (supra) and also by the decision of the Hon'ble Rajasthan High Court in Jai Steel, Jodhpur (supra). In the later decision, the High Court has analysed the provisions of section 153A in detail. The relevant conclusion of the High Court are as under:- "The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or req....
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....earch and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act." Thus, the law as envisaged by the High Court is that, if no incriminating material has been found, then no addition can be made in the assessment completed under section 153A which has not been abated. 13. Now, in the present case, we have to see whether the statement recorded under section 132(4) or the Annexure-B which has been referred to by the learned Departmental Representative can be said to be incriminating material. On a perusal of the answer given to question no.14 of the statement on oath recorded at the time of search which has been reproduced above, the assessee has clearly stated that it has claimed the membership fee as capital receipt based on the decision of the Hon'ble Jurisdictional High Court and such a claim has also been accepted by the Assessing Officer in scrutiny proceedings. After having said that the assessee stated that membership is for 25 years, then 1/....