The ACIT, Circle-8,, Ahmedabad v. M/s. Winners Business Link Pvt.Ltd.,, Ahmedabad

ITA 1860/AHD/2011 | 2008-2009
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 186020514 RSA 2011
Assessee PAN AAACV1747P
Bench Ahmedabad
Appeal Number ITA 1860/AHD/2011
Duration Of Justice 3 year(s) 9 month(s) 5 day(s)
Appellant The ACIT, Circle-8,, Ahmedabad
Respondent M/s. Winners Business Link Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-04-2015
Date Of Final Hearing 23-04-2015
Next Hearing Date 23-04-2015
Assessment Year 2008-2009
Appeal Filed On 25-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO . 1860 /AHD/201 1 A. Y. 200 8 - 0 9 ACIT AHMEDABAD . VS WINNERS BUSINESS LINK PVT. LTD. JEEVAN KAMAL COMPLEX N R. NAVRANGPURA POLICE STATION NAVRANGPURA AHMEDABAD. PAN: AAACV 1747P (APPELLANT) (RESPONDENT) REVENUE BY : S HRI P.L. KUREEL SR. D.R. ASSESSEE(S) BY : NONE / DATE OF HEARING : 2 3 / 0 4 /201 5 / DATE OF PRONOUNCEMENT: 30 / 0 4 /201 5 / O R D E R PER SHRI S.S. GODARA JUDICIAL MEMBER TH IS REVENUE S APPEAL FOR A.Y. 200 8 - 0 9 ARISE S FROM ORDER OF THE CIT (A) - XIV AHMEDABAD DATED 27.05 . 2011 PASSED I N CASE NO .CIT(A) - XIV/AC.CIR.8/97/2010 - 11 DELETING ADDITION OF RS. 1 40 97 580 / - MADE BY THE ASSESSING OFFICER AFTER REJECTING ITS ACCOUNTING POLICY IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT IN SHORT THE AC T . ITA NO. 186 0 /AHD/201 1 WINNERS BUSINESS LINK PVT. LTD. FOR A.Y. 2008 - 0 9 - 2 - 2. THE REVENUE SEEKS TO RESTORE THE IMPUGNED ADDITION BY REITERATING THE FINDINGS CONTAINED IN ASSESSMENT ORDER DATED 18.11.2010. NOBODY HAS C OME TO REPRESENT ASSESSEE. THE R EGISTRY HAS SENT AN RPAD. THE SAME HAS BEEN RECEIVED BACK UNSERVED. THE ASSES SEE IS PROCEEDED EX - PARTE ACCORDINGLY. 3. THE ASSESSEE - COMPANY PROVIDES DISCOUNT CARDS RANGING FOR A PERIOD OF 1 TO 30 YEARS TO ITS MEMBERS IN INSURANCE BUSINESS. IT CHARGES MEMBERSHIP FEES. THE ASSESSEE WAS FORMED IN THE YEAR 1979. IT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE SPLITS UP ITS MEMBERSHIP FEE RECEIPT S AS PER ACCOUNTING STANDARDS 9 AND 1. ITS RECEIPT S IN THE IMPUGNED ASSESSMENT YEAR READ RS.148 16 23 699/ - INCLUDING OTHER INCOME. IT FILED ITS RETURN ON 27.9.2008 DECLARING NIL INCO ME AFTER SETTING OFF BROUGHT FORWARD LOSSES OF THE PREVIOUS ASSESSMENT YEARS. THE ASSESSEE HAD SHOWN ITS INCOME TO BE RS.1 48 16 776/ - . THE SAME WAS PROCESSED. 4. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE REJECTED THE ASSESSEE S ACCOUNTING POLICY POSTPO NING ITS RECOGNITION OF ITS INCOME BY FOLLOWING CONSISTENT ACCOUNTING PRACTICE ADOPTED IN THE PAST AND OBSERVED THAT ONCE IT IS NOT LIABLE TO RETURN THE IMPUGNED MEMBERSHIP FEES IN ANY CIRCUMSTANCES THE ENTIRE SUM HAS TO BE TAXED IN THE YEAR OF RECEIPT I. E. THE IMPUGNED ASSESSMENT YEAR. HE ACTED ACCORDINGLY AND ASSESSED THE ENTIRE MEMBERSHIP RECEIPT AMOUNT. ITA NO. 186 0 /AHD/201 1 WINNERS BUSINESS LINK PVT. LTD. FOR A.Y. 2008 - 0 9 - 3 - 5 . THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) HAS DELETED THE IMPUGNED ADDITION BY OBSERVING AS UNDER: 3. 1 THE ASSESSING OFFICER HAS DISCUSSED THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT IN DETAIL IN THE ASSESSMENT ORDER FROM PAGE NO.2 TO 10. THE MAIN FINDING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS REPRODUCED AS UNDER: 'IN VIEW OF THE FACTS AND DISCUSSION THE ACCOUNTING POL ICY FOLLOWED BY ASSESSEE IS INCORRECT BECAUSE AS PER THE PRINCIPLE INCOME AND EXPENSES SHOULD BE SHOWN/CLAIMED IN THE SAME MANNER. IT IS A MATTER OF FACT THAT AFTER RECEIPTS OF MEMBERSHIP FEE THE ASSESSEE IS NOT REQUIRED TO RENDER ANY SERVICES TO THE MEMB ERS AND IT IS ALSO NOT LIABLE TO RETURN THE MEMBERSHIP FEE IN ANY CIRCUMSTANCE . THUS MEMBERSHIP FEE HAS ACCRUED TO THE ASSESSEE ON RECEIPT OF IT AND IS LIABLE TO BE TAXED IN THE YEAR OF RECEIPT. ALTERNATIVELY ALL THE EXPENSES CAN BE ALLOWED TO THE EXTENT OF 1.57% ONLY IN THE YEAR. THUS IT IS CLEARLY ESTABLISHED THAT SYSTEM OF ACCOUNTING FOLLOWED BY ASSESSEE IS SUCH THAT THE CORRECT PROFIT CANNOT BE DEFINED FROM IT. THEREFORE THE SYSTEM OF ACCOUNTING OF ASSESSEE IS HEREBY REJECTED AND ENTIRE MEMBERSHIP RECEIPT IS TAXED IN THIS YEAR ITSELF. THE TAXABLE INCOME OF THE ASSESSEE IS ACCORDINGLY WORKED OUT AS UNDER: NET PROFIT AS PER P&LA/C. RS. 1 48 16 77 6/ - ADD: COMMISSION RS. 8 97 87 964/ - INSURANCE RS. 3 54 86 403/ - TOTAL RS.L 4 00 91 143/ - LESS : MEMBERSHIP FEES RS. 4 02 12 432/ - COMMISSION(AS PER P & L A/C) RS. 7 09 64 355/ - TOTAL INCOME RS. 2 89 14 356 / - 3.2. THE AR OF THE APPELLANT HAS SUBMITTED HIS WRI TTEN SUBMISSION WHICH IS REPRODUCED AS UNDER: 'L)THE ASSESSMENT ORDER FOR THE BLOCK PERIOD 1989 - 90 TO 1998 - 99 AND UP TO 17 - 3 - 99 WAS PASSED BY THE AO ON 28/11/2001 WHERE IN THE METHOD OF ACCOUNTING ADOPTED WAS ACCEPTED BY THE AO AFTER APPLYING HIS MIND T O THE CONTENTIONS RAISED BY THE ASSESSEE. 2) THE APPEAL FILED AGAINST THIS ORDER HAS BEEN DECIDED BY THE CIT(A) ON 28 - 6 - 02. THIS ORDER HAS NOT BEEN - CHALLENGED BEFORE TRIBUNAL. THEREFORE THE SAID ORDER OF CIT(A) HAS BECOME FINAL. 3) CONSIDERING THE COMPLE XITIES OF THE ACCOUNTING SYSTEM'S OF THE ASSESSEE COMPANY ITS ACCOUNTS GOT AUDITED U/S. 142(2A) OF THE ACT. THE AUDITORS GAVE THEIR REPORT ON 16 - 7 - 01 ON THE BASIS OF WHICH ITA NO. 186 0 /AHD/201 1 WINNERS BUSINESS LINK PVT. LTD. FOR A.Y. 2008 - 0 9 - 4 - ADDITION HAS BEEN MADE BY THE AO. THE AUDITOR HAS ACCEPTED THE METHOD OF 'ACCOUNTIN G FOLLOWED BY THE ASSESSEE. 4) THE BLOCK ASSESSMENT HAS BEEN PASSED ON 28 - 11 - 01 AND APPEAL AGAINST THIS ORDER WAS DECIDED BY CIT(A) ON 28/06/2002 THEREBY THE ORDER OF THE AO MERGED WITH THE ORDER OF C1T(A). THE CIT PASSED THE ORDER U/S. 263 ON 3 - 2 - 03. BU T ON THE DAY THERE WAS - NO ORDER OF THE AO BECAUSE OF THE DOCTRINE OF MERGER. HENCE THE CIT HAD NO POWER TO INVOKE SECTION 263 AGAINST THE ORDER OF THE CIT(A). THE APPELLANT FOLLOWED SAME METHOD OF ACCOUNTING IN THE ASST. YEARS 1998 - 99 1999 - 2000 2000 - 01 & 2001 - 02 WHICH HAS BEEN FOLLOWED BY IT IN THE ASST. YEAR 2008 - 09 AND THEREFORE THE CIT(A) RIGHTLY UPHELD IT FOR ALL THESE YEARS. 6) IN PARAS 28 & 29 THE HON'BLE IT AT HAS RECORDED THE FACT THAT THE DEPARTMENTAL REPRESENTATIVE TRIED TO DISTINGUISH THE CASE OF UNIQUE MERCANTILE SERVICES (P) LTD. FROM THAT OF THE APPELLANT COMPANY. AFTER DISCUSSING THE ISSUE IN PARA 30 AND 31 THE HON. TRIBUNAL FOUND THE FACTS OF THE CASE OF UNIQUE MERCANTILE SERVICES (P) LTD. TO BE IDENTICAL WITH THOSE OF THE APPELLA NT AND CONSEQUENTLY THE HON. IT AT DID NOT ACCEPT THE DR'S SUBMISSIONS AND ALLOWED THE APPEALS OF THE APPELLANT FOR YEARS INVOLVED AND DISMISSED THE REVENUE'S APPEALS. WHILE DOING SO THE HON. TRIBUNAL REFERRED TO THE JURISDICTIONAL GUJARAT HIGH COURT'S D ECISION IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT IN 253 ITR 749 (GUJ) TO HOLD THAT ON SIMILAR FACTS THE EARLIER DECISION OF THE TRIBUNAL IS NECESSARILY TO BE FOLLOWED. THE HON. TRIBUNAL ACCORDINGLY DIRECTED THAT THE METHOD OF ACCOUNTING OF THE APPE LLANT IS TO BE ACCEPTED. 7) IT MAY BE MENTIONED THAT THE APPELLANT'S METHOD OF ACCOUNTING HAS BEEN UPHELD BY THE CIT(A) IN THE SUBSEQUENT YEARS AS WELL IN APPEAL NO. CIT(A) - I/CC.I(3)/49/05 - 06 DATED 24 - 3 - 06 FOR ASST YEAR 2003 - 04 AND OF CIT(A) - I'S ORDER DA TED 10 - 12 - 07 FOR A.Y. 2004 - 05. THE LATTER DECISIONS HAVING BEEN DECIDED AFTER THE JUDGMENT OF HON. IT AT REFERRED TO SUPRA ALSO MAKE A MENTION OF THE SAME. 8) COPY OF APPEAL ORDER FOR THE ASST. YEAR 2007 - 08 IS ATTACHED HEREWITH. FROM THE ABOVE FACTS I HEREBY REQUEST YOUR HONOR TO ACCEPT THE ACCOUNTING POLICY AND DELETE THE ADDITION OF RS. 1 40 97 580/ - . 3 . 3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE ID.AR OF THE APPELLANT. IN THIS CASE THE APPEL LANT IS RECOGNISING THE REVENUE RECEIVED ON INSURANCE PREMIUMS AFTER SPREADING IT OVER TO THE NUMBER OF YEARS FOR WHICH THE INSURANCE WAS AVAILABLE. THE EXPENSES LIKE COMMISSION ETC. ARE SPREAD OVER 30 YEARS THAT IS THE ASSUMED LIFE OF THE MEMBER. ITA NO. 186 0 /AHD/201 1 WINNERS BUSINESS LINK PVT. LTD. FOR A.Y. 2008 - 0 9 - 5 - THE DE PARTMENT FOR A.Y. 1997 - 1988 HAD REJECTED METHOD OF ACCOUNTING DURING THE COURSE OF SCRUTINY OF THE CASE. THEREAFTER THERE WAS A SEARCH AND SEIZURE OPERATION ON THE ASSESSEE AND IN THE BLOCK ASSESSMENT THE AO ACCEPTED THE METHOD OF POSTPONEMENT OF RECEIPT BY THE ASSESSEE. HOWEVER THE ASSESSMENT WAS SET ASIDE BY CIT CENTRA L - 1 U/S 263. THE ASSESSMENTS WERE ACCORDINGLY COMPLETED AFTER REJECTING THE POLICY ADOPTED BY THE APPELLANT. THE APPEAL FILED BY THE ASSESSEE WAS ALLOWED BY CIT(A) FOR THAT YEAR AND SUBSEQU ENT YEARS IN WHI CH THE DEPARTMENT HAS REJECTED THE ACCOUNTING POLICY OF THE APPELLANT. THE APPEAL FILED BY THE DEPARTMENT IN THE ITAT HAD ALSO BEEN DISMISSED AND THE POLICY OF THE APPELLANT HAS BEEN ACCEPTED BY THE TRIBUNAL ALSO. ACCORDINGLY THE ASSESSMENT S FROM ASSESSMENT YEARS FROM 1998 - 99 TO 2007 - 08 HAVE BEEN SET ASIDE AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN THE ITAT THE CASES UPTO ASSESSMENT YEAR 2002 - 03 HAVE BEEN DECIDED IN FAVOUR OF THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT SINC E THE APPEAL FOR ASSESSMENT YEAR 2007 - 08 AND EARLIER YEARS HAVE BEEN DECIDED IN FAVOUR OF THE APPELLANT ON THIS ISSUE FOLLOWING THE PRINCIPLES OF RES JUDICATA THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE APPELLANT THIS YEAR ALSO. I HAVE CAREFULLY PERUSED THE FACTS OF THE CASE THE ORDERS FOR EARLIER YEARS AND THE ORDER OF HONOURABLE ITAT FOR ASSESSMENT YEAR 2002 - 03. RESPECTFULLY FOLLOWING THE DECISION OF CIT(A) FOR ASSESSMENT YEAR 2007 - 08 AND THE ORDER OF THE HONOURABLE ITAT AHMEDABAD BENCH IN APPELLANT' S OWN CASE THE GROUNDS OF APPEAL NO.L AND 2 ARE ALLOWED IN SO FAR AS THE ADDITION OF RS. 1 40 97 5807 - IS CONCERNED. TO MAINTAIN THE CONSISTENCY; THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. THIS LEAVES THE REVENUE AGGRIEVED. 6 . WE HAVE HEARD THE REVENUE AND GONE THROUGH THE RELEVANT FINDINGS. IT IS EVIDENT THAT THE PRESENT IS NOT FIRST ROUND OF LITIGATION BETWEEN THE PARTIES ON THE ISSUE OF RECOGNITION OF INCOME QUA THE VERY MEMBERSHIP FEE RECEIPTS VALID FOR A TIME SPAN OF 1 TO 30 YEARS. THE CASE FILE REVEALS THAT THE DEPARTMENT HAD REFERRED THE ASSESSEE S ACCOUNTING PRACTICE FOR A SPECIAL AUDIT WHEREIN THE SAME WAS UPHELD. THE CIT(A) S ORDER READS THAT THE TRIBUNAL HAS ALREADY DELETED IDENTICAL ADDITIONS IN PRECEDING ASSESSMENT YEARS. THE REVENUE DOES ITA NO. 186 0 /AHD/201 1 WINNERS BUSINESS LINK PVT. LTD. FOR A.Y. 2008 - 0 9 - 6 - NOT POINT OUT ANY DISTINCTION ON FACTS AND LAW TO THE CONTRARY. IN THESE CIRCUMSTANCES WE UPHOLD THE CIT(A) FINDINGS DELETING THE IMPUGNED ADDITION OF RS.1 40 97 580/ - MADE BY THE ASSESSING OFFICER BY REJECTING ASSESSEE S ACCOUNTING POLICY POSTPONIN G RECOGNITION OF INCOME ARISING FROM MEMBERSHIP F EES. THE REVENUE S GROUNDS FAIL . 7 . THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY THE 30TH APRIL 201 5 AT AHMEDABAD. SD/ - SD/ - ( PRAMOD KUMAR ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III AHMEDABAD 5. / DR ITAT AHMEDABAD 6. / GUARD FILE . / BY ORDER / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD