M/S. ERODE MARKET COMMITTEE,CHENNAI vs. ACIT, ERODE

All the four appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals)-1, Coimbatore. Since common issue arises for consideration in all these four appeals, we heard these appeals together and disposing of the same by this common order.

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the application filed by the assessee for registration under Section 12A of the Income-tax Act, 1961 (in short 'the Act') is pending before the Commissioner and the same was not disposed of. Referring to the judgment of Apex Court in CIT v. Society for the Promotion of Education in Civil Appeal No.1478 of 2016, the Ld.counsel submitted that if the application of the assessee was not disposed of within six months, the registration under Section 12A of the Act is deemed to be granted from the date of application. The assessee is claiming exemption on the principle of mutuality since the application under Section 12A of the Act was not disposed of by the Commissioner. Since the application is pending before the Commissioner, according to the Ld. counsel, the matter may be remitted back to the file of the Assessing Officer to re-examine the matter in the light of the judgment of Apex Court in Society for the Promotion of Education (supra). The Ld.counsel further submitted that for the assessment year 2006-07, the Assessing Officer levied penalty under Section 271(1)(c) of the Act. This is also further confirmed by the CIT(Appeals) and the assessee is challenging the same before this Tribunal in I.T.A. No.1712/Mds/2012. The penalty was levied only on the ground that the assessee is claiming exemption on mutuality. According to the Ld. counsel, since the issue of registration is deemed to be granted by virtue of the judgment of Apex Court (supra), there cannot be levy of penalty, therefore, the issue of penalty also needs to be reconsidered.

On the contrary, Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the assessee claims that an application for registration under Section 12A of the Act was filed before the Commissioner and the same is pending. The status of application is not known. The principle of mutuality is not applicable to the assessee. The assessee being an authority to regulate the market, there is no question of adopting the principle of mutuality. There is no identity of beneficiaries and the people who are contributing to the funds of the assessee. Therefore, according to the Ld. D.R., the principle of mutuality is not applicable at all.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that the income is exempted on principle of mutuality. The assessee also claims that the application filed by the assessee for registration under Section 12A of the Act is still pending before the Commissioner. As rightly submitted by the Ld.counsel for the assessee, in view of judgment of Apex Court in Society for the Promotion of Education (supra), if the application is not disposed of by the Commissioner within a period six months, it would be taken that the assessee is registered under Section 12A of the Act from the date of application. However, no material is available on record to support the claim of the assessee that an application is filed before the Commissioner and the same is pending. Therefore, this Tribunal is of the considered opinion that the matter needs to be verified. Accordingly, the orders of the lower authority are set aside in all the appeals and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall verify whether the assessee has filed any application for registration under Section 12A of the Act and if such an application is filed, whether it is disposed of by the Commissioner. Thereafter, the Assessing Officer shall take into consideration the judgment of Apex Court in Society for the Promotion of Education (supra) and decide the issue on merit, in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, all the four appeals of the assessee are allowed for statistical purposes.