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Facts
The assessee, Warangal Club, failed to file its return of income for AY 2015-2016 despite having deposited a significant amount in its bank account. The assessment was reopened under Section 147, and a best judgment assessment was completed after multiple notices were issued and not complied with.
Held
The Tribunal condoned the delay in filing the appeal. It held that while the club's income might be exempt under the principle of mutuality, it was still required to file an application to the CIT(A) explaining reasons for not paying advance tax or filing returns. The Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for de novo consideration, directing the assessee to provide evidence for cash deposits and the principle of mutuality.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal as un-admitted for non-payment of advance tax and non-filing of return, despite the assessee claiming exemption under the principle of mutuality?
Sections Cited
147, 148, 142(1), 144, 249(4), 249(4)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
Date of Hearing : 07.05.2025 Date of Pronouncement : 07.05.2025 ORDER PER MANJUNATHA G. :
This appeal has been filed by the Assessee- against the order dated 28.10.2024 of the learned CIT(A)- National Faceless Appeal Centre [in short the “NFAC”] Delhi, relating to the assessment year 2015-2016.
At the outset, there is a delay of 27 days in filing the appeal before the Tribunal. The assessee has filed an 2 ITA.No.109/Hyd./2025 affidavit explaining the reasons for the delay in filing of the appeal before the Tribunal, contending, inter alia, that one of the employee of the appellant-club was committed suicide and at the same time, the Manager of the Club and some staff of accounts section were resigned from the services of the Club. The Learned Counsel for the Assessee accordingly submitted that, since the circumstances were beyond the control of the appellant-club, there is a delay of 27 days in filing the appeal before the Tribunal. He, therefore, pleaded that, in the interest of justice, the meagre delay of 27 days in filing the appeal before the Tribunal, be condoned.
We have heard the submissions of the Learned Counsel for the Assessee and carefully perused the affidavit filed by the appellant-club seeking for condonation of delay of 27 days in filing the appeal before the Tribunal. Since there is a ‘sufficient and reasonable cause’ for the appellant- club in not filing the appeal before the Tribunal within the prescribed time and we are satisfied with the reasons furnished by the appellant-club in not filing the appeal before the Tribunal within the prescribed time, we condone
3 ITA.No.109/Hyd./2025 the delay of 27 days in filing the appeal before the Tribunal and proceed for adjudication.
Brief facts of the case are that, the appellant viz., “Warangal Club” has not filed it's return of income for the assessment year 2015-2016. As per the information available with the Department, the appellant has deposited cash of Rs.62,31,060/- in the bank account. Therefore, the assessment has been reopened under section 147 of the Income Tax Act, 1961 [in short “the Act”] and after due procedure provided under section 148 of the Act, notice under section 148 of the Act dated 25.04.2023 was issued and served on the appellant. However, the appellant had failed to file return of income in response to the said notice. Subsequently, notices under section 142(1) of the Act dated 06.06.2023 and 20.07.2023 were issued requesting to file various details. Once again, the appellant failed to comply with the notice issued under section 142(1) of the Act. Therefore, the Assessing Officer on the basis of information available with the Department completed best judgement assessment in terms of section 147 r.w.s.144 of the Income
4 ITA.No.109/Hyd./2025 tax Act 1961, dated 29.02.2024 and determined the total income of the assessee at Rs.57,52,820/-.
Being aggrieved by the assessment order, the appellant preferred an appeal before the CIT(A) and challenged the addition made by the Assessing Officer. The learned CIT(A) dismissed the appeal filed by the appellant by invoking the provisions of section 249(4) of the Income tax Act, 1961 on the ground that, when assessee has not filed any return of income, an amount equal to the amount of advance tax payable shall be paid before filing the return of income. Since the appellant has not paid advance tax, the learned CIT(A) dismissed the appeal filed by the appellant as un-admitted.
Smt. S. Sandhya, Advocate-Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in not appreciating the fact that, the appellant being mutually aided club, it’s income is exempt from tax and not required to pay any advance tax. She further submitted that, the assessee did not file it's return of income due to various
5 ITA.No.109/Hyd./2025 reasons. However, the income of the appellant is duly exempt from tax and, therefore, the question of paying advance tax does not arise. The learned CIT(A) without considering the relevant facts, simply dismissed the appeal filed by the appellant. Therefore, she submitted that, the order of the learned CIT(A) should be set-aside and the matter may be remitted to the file of Assessing Officer.
Shri D. Praveen, learned Sr.AR on the other hand, supporting the order of the learned CIT(A) submitted that, as per the provisions of section 249(4)(b) of the Act, where no return has been filed by an assessee, the assessee shall pay an amount equal to the amount of advance tax which was payable by him/it. Further, in a case falling under clause-(b), an application shall be made by the appellant to the Commissioner-(Appeals) for any good and sufficient reason to be recorded in writing exempt him/it from the operation of the provision of that clause. Since the assessee has not filed return of income and also not paid any advance tax, the learned CIT(A) has rightly dismissed
6 ITA.No.109/Hyd./2025 the appeal of the appellant. Therefore, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The appellant is a “Club” and normally income of any Club is exempt because, it functions on the principles of mutuality. However, in order to claim the benefit of mutuality, the appellant is needs to file return of income indicating relevant facts. In the present case, the appellant neither filed it's return of income nor explained the principles of mutuality before the authorities. Further, an assessee needs to pay advance tax, in case it has taxable income in excess of maximum amount not chargeable to tax for the relevant assessment year. In the present case, going by the ‘status’ of the appellant, the appellant being a ‘Club’ generally it claims benefit of “Mutuality”. Therefore, the question of payment of advance tax does not arise. However, even in a case where the appellant does not required to pay advance tax, but, as per the provisions of section 249(4)(b) of the Act, the appellant needs to file an application before
7 ITA.No.109/Hyd./2025 the CIT(A) and explain the reasons for not paying the advance tax. Therefore, the CIT(A) can exempt any assessee from the operation of the provisions of that ‘clause’. Learned Counsel for the Assessee has explained reasons of not filing relevant application due to ignorance of the intricacies of Income Tax Act. Since, the appellant is a “Club” claiming benefit of mutuality and further, there is sufficient reason for the appellant for not filing relevant application in terms of section 249(4)(b) of the Act, in our considered view, the matter needs to be set-aside to the file of Assessing Officer to give one more opportunity to the appellant to explain its case. Thus, we set-aside the order of the learned CIT(A) and restore the matter back to the file of Assessing Officer for de novo consideration and adjudication of the matter. The appellant is also directed to file relevant evidences to prove the source of cash deposit and also principle of mutuality. Accordingly, the appeal of the appellant is allowed for statistical purposes.
8 ITA.No.109/Hyd./2025 9. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 07.05.2025.