TaxTMI 
TaxTMI 
2017 (10) TMI 1092
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.... following shortcomings/discrepancies in the assessment order: - "During the year, the assessee company has received one time membership entrance fees of Rs. 2,51,78,859/- from new members admitted to Acres Club, a division of the company. This amount was taken as capital receipts and hence, has been directly taken to Reserve & Surplus by the assessee in view of the Bombay High Court decision, in the case of CIT v. Diner Business Services Pvt. Ltd. 263 ITR 1, Bombay and not offered to tax. It is pertinent to mention here that in earlier assessment years i.e. A. Yrs. 2003-04, 2005-06, 2006- 07, 2007-08 and 2008-09 onetime membership entrance fees was treated as revenue receipts and the same was brought to tax, which was subsequently upheld by the Ld. CIT (A). There is no change in facts and circumstances in A.Y. 2009-10. However, the Assessing Officer has not applied his mind over the issue and passed the order without appreciating the facts of the case. Therefore, it appears that the order is erroneous and prejudicial to the interest of the revenue. Therefore, by not treating Rs. 2,51,78,859/- as a revenue receipt, the order is certainly erroneous one." . In view of thi....
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.... Merely because the AO not incorporated the facts in detail in his order it does not mean that there has been no application of mind by the AO. The CIT did not agree with the submissions of the assessee and ultimately took the view that the order passed by the AO is erroneous as well as prejudicial to the interest of Revenue. The CIT, therefore, set aside the assessment order to the file of the AO and directed the AO to decide the issue involved afresh after due verification. 3. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. We noted that for invoking jurisdiction under section 263 both the conditions that the order passed by the AO is erroneous as well as prejudicial to the interest of Revenue must be satisfied. If the AO had not made any enquiry to the issue and passed the assessment order it will tantamount that the order passed by the AO is erroneous. In this case we noted that the CIT invoked the jurisdiction under section 263 by issuing following show cause notice to the assessee: - "OFFICE OF THE COMMISSIONER OF INCOME TAX, CENTRAL - IV AAYAKAR BHAVAN, 6TH FLOOR, ROOM NO: 660/661/663, M....
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....ly dated 24.06.2011 at page 10 of the paper book. The relevant part of para 26 reads as under: - "26. The company has accounted dividend income of Rs. 4,47,12,933/- during the year in which is claimed as tax free income u/s 10(34) of the I.T. Act, 1961. Besides dividend income, company has also treated the One time non refundable entrance fees amounting to Rs. 2,51,78,859/- collected from the members of the 'The Acres Club' as capital receipt. These are not liable to be taxed as income in view of the Bombay High Court decision in case of Commissioner of Income Tax vs. Diners Business Services Pvt. Ltd. 263 ITR 1 (Bombay), Details of one time non refundable entrance fees are enclosed herewith and marked as 'Annexure VII'" On this basis the learned A.R. contended that it not a case where the AO has not made any enquiry but it is a case where the AO has made due enquiry and the assessee has submitted all the details explaining the nature of onetime non refundable entrance fees amounting to Rs. 2,51,78,859/-. The assessee has also pointed out that the said receipt is a capital receipt and non taxable in view of the decision of the Hon'ble Bombay High Court in the case of CI....
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.... the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the A.O. Every loss of revenue as a consequence of an order of A.O. cannot be treated as prejudicial to the interests of the Revenue. Where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law." 7. Now the question arises whether the view taken by the AO was one of the possible view? In view of the decision of the Hon'ble Supreme Court we noted that the AO in assessment years 2003-04 and 2004-05 has duly accepted that the above receipt by the assessee is a capital receipt and is not chargeable to tax while during A.Y. 2010-11 also the one time membership received was treated as capital receipt in view of the decision of the Hon'ble Jurisdictional High Court in the case of Diners Business Services Pvt. Ltd.(supra) as decided by the CIT(A) vide order dated 11.02.200....