City Institute Vs ITO (ITAT Bangalore)
Members’ Club Not Eligible u/s 12A but Mutuality Defence Restored for Fresh AO Check; Double Addition on Cash Deposits & Gross Receipts – ITAT Remands Club Case
Bangalore Tribunal dealt with the taxability of a members’ club claiming mutuality & the addition made for cash deposits during demonetisation.
Assessee, a club, did not file its return on the presumption that its income was exempt under the principle of mutuality. During assessment proceedings u/s 144, AO noticed cash deposits of ₹1,19,44,070 in various bank accounts including old currency of ₹12,67,500 when the recorded cash balance was only ₹69,164 on 09.11.2016. AO treated ₹11,98,500 as unexplained money u/s 69A & further added 10% of gross receipts (₹15,13,362) as income, holding that Assessee was not registered u/s 12A.
CIT(A) confirmed the additions holding that Assessee failed to prove exclusive dealings with members, did not demonstrate mutuality, & failed to file ROI despite having turnover requiring audit.
On further appeal, Tribunal noted that Assessee is a members’ club, & if it qualifies as a mutual concern, its income would not be taxable under section 4 itself. Tribunal observed that registration u/s 12A is neither necessary nor available for a club running bar/food facilities since such activities are not charitable. It found merit in the plea that the cash deposit of ₹11,98,500 was recorded in books & double addition arose because AO added both u/s 69A & again by estimating 10% of gross receipts.
