TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 332
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....ment of police personnel of household items such as groceries. The assessee procures household items from various suppliers and distributes to 9 unit canteens which serve the requirements of police personnel. The assessee is established to serve them without any profit motive and established on the principles of mutuality. The assessee filed its return of income for the Assessment Year 2022-23 on 22.12.2022 by declaring nil income. The Assessee's case was selected for scrutiny for the reason that 'it has shown substantially lower turnover in income tax return in comparison to turnover shown in GST returns filed and also has reported huge turnover exceeding statutory limit for tax audit as per section 44 AB of the Act and tax audit report has not been filed. 4. During the assessment proceedings, the assessee filed the details called for from time to time before the assessing officer and concluded the assessment u/s. 143(3) of the Act dated 20.03.2024 by accepting the return of income filed by the assessee under the concept of principles of mutuality. However, the assessing officer initiated separate penalty proceedings u/s. 271B of the Act for non-filing of tax audit report u/s. ....
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.... any business, but only a mutuality. 4. Further as per section 273B no penalty shall be imposable on a person or the assessee as case may be, for any failure referred to in the said provision if he proves that there was a reasonable cause for the said failure. 5. Section 273B covers section 271B also. 6. Appellant is of firm belief that its activities are covered under mutuality, tax audit u/s. 44AB is not warranted and hence a reasonable cause for the said failure was clearly demonstrated. 7. In State of West Bengal Vs Calcutta club Limited, Where the Supreme Court held that services provided by club to their members were not liable for service tax due to the mutuality principal. 8. Based on the above Supreme Court Judgement and amendment was carried out in the section of CGST Act 2017 based on the outcome of the above stated Supreme Court Judgement 39" meeting of the council has inserted section 7(1) (aa) which reads as follows. (1) For the purposes of this Act, the expression - "supply" includes (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, f....
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..../-. However, as the assessee failed to get his accounts audited, the AO levied penalty u/s. 271B of an amount of Rs. 1,50,000/- The plea of the assessee before the Hon'ble Tribunal is that, since, the assessee operates under mutuality concept, assessee is not carrying on any business. In this regard, a crucial fact is that assessee is getting its accounts audited for the purposes of GST and was submitting audit report and GSTR9C The term business is defined in Section 2(13) of the Act as under. "Business includes any trade commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". 2. While interpreting the word business the Hon'ble Supreme Court in the case of Barendra Prasad Ray vs. ITO [1981] 129 ITR 295(SC) holds the word business to be of wide import and that it means activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income. The expression business does not necessarily mean trade or manufacture only. 3. The Hon'ble Supreme Court in case of Raipur Manufacturing Company Ltd[1967] 19 STC1 holds that the term business do....
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....derived by a trade, professional or similar association from specific services performed for its members; The Kerala High Court in the case of CIT V Bus Operators Association (2013) 33 taxmann.com 586/(2012) 344 ITR 268 (Ker), following the decision of the supreme Court in the case of Chelmsford Club held that where the assessee, an association of bus operators, was engaged in purchase and distribution of tyres to automobile spares to its own members and profit, if any, arising in such transactions with its members, principle of mutuality is applied (Copy of the judgment enclosed). Obviously the "specific services performed by the Association to the members referred to in the above provision will not cover the regular services rendered by the Association to all the members i.e. sale of tyres, automobile spare parts etc., purchased for distribution among the members at moderate cost. A specific service obviously will mean a service which is not available to members generally but specifically extended to a particular member or members against specific charges received. The police canteen serves all members in general and no specific services are performed f....
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....ed the details called for from time to time before the assessing officer and concluded the assessment u/s. 143(3) of the Act dated 20.03.2024 by accepting the return of income filed by the assessee under the concept of principles of mutuality. However, the assessing officer initiated separate penalty proceedings u/s. 271B of the Act for non-filing of tax audit report u/s. 44AB of the Act. 13. Subsequently the Assessing Officer (AO) issued notice u/s. 274 r.w.s.271B of the Act for levy of penalty for failing to furnish the tax audit report as required u/s. 44AB of the Act. The AO found that the assessee had transacted a turnover to the tune of Rs. 32,33,16,631/- during the impugned assessment year but not filed the tax audit report u/s. 44AB of the Act along with the return of income filed. Hence, the AO levied penalty of Rs. 1,50,000/- u/s. 271B of the Act by passing an order dated 23.09.2024. On appeal, the ld.CIT(A) upheld the levy of said penalty order. 14. Before us, the ld. ld.AR contended that the ld.CIT(A) erred in confirming the penalty, considering that the assessee's activities, although reflected as turnover in the GST returns do not constitute 'business' under the....