Cit v. Pradeep Agencies Joint Venture

BADAR DURREZ AHMED, J V.K. JAIN, J JANUARY 11, 2012 kb

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on 11.01.2012 + ITA No. 215/2011 CIT … Appellate versus PRADEEP AGENCIES JOINT VENTURE … Respondents AND + ITA No. 221/2011 CIT … Appellate versus PRADEEP AGENCIES JOINT VENTURE … Respondents Advocates who appeared in this case: For the Appellant : Ms Rashmi Chopra For the Respondent : Mr Rakesh Gupta, Ms Rani Kiyala & Mr Kunal Nagpal CORAM: HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE V.K.JAIN BADAR DURREZ AHMED (ORAL) 1. These appeals are taken up together as they arise of the common order passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the said Tribunal') dated 31.03.2010 in ITA Nos. 3322 & 3323/Del/2009 pertaining to the assessment years 2003-04 and 2004-05. Both these appeals are concerned with penalty proceedings under Section 271(1)(c) of the Income Tax Act 1961 (hereinafter referred to as 'the said Act'). 2. The assessee is an association of the persons comprising of five members namely Laxmi Traders, Bijay Paper Trading Co., Pradeep Agencies, Biswanath Industries Limited and Bishwanath Traders & Investment Limited. As indicated in the impugned order the said association of persons was constituted for carrying on the business of procuring orders on behalf of M/s Reliance Industries Limited (RIL) for supply of Purified Terephthalic Acid to M/s Indo Rama Synthetics India Limited. In respect of the assessment years in question, the assessee i.e., the association of persons (A.O.P) had filed a return of income at nil and refund had also been claimed on the tax deducted at source. During the course of assessment proceeding, the assessee was required to explain as to why the incomes of `. 2,37,55,912/- and `. 2,78,38,386/- in respect of the assessment year 2003-04 and 2004-05, respectively, should not be charged to tax in the hands of the A.O.P. by applying the provisions of Section 167(B)(2) of the said Act. 3. The A.O.P. had distributed the profit amongst its members as per their respective shares which were defined in the Joint Venture Agreement dated 30.03.2002 and all of them have shown their respective shares as income under the provisions of Section 67(A) of the said Act. According to the assessee, it is for this reason that section 167(B)(2) of the said Act was not applicable. This contention of the assessee was not accepted by the Assessing Officer and the share of each of the members of the Joint Venture Agreement having exceeded the maximum amount not chargeable to tax, the maximum marginal rate was applied to the A.O.P in terms of Section 167(B)(2) and the entire income was assessed in the hands of the A.O.P. This order was passed by the Assessing Officer and was confirmed by the Commissioner of Income Tax (Appeal) in the appeal filed by the assessee. 4. It may be pointed out that the assessee had referred to the CBDT circular No. 75/19/191/62-ITJ dated 24.08.1966 and it was contended that Sections 86 and 167 (B) of the said Act had no applicability in the facts of the present case. It was submitted that the said sections would come into play when the income was first assessed in the hands of the A.O.P. and not in those cases where the assessment was first done in the hands of the individual persons. It was also contended that inasmuch as the members of the A.O.P. were assessed prior to the assessment in the hands of the A.O.P. the said provision would not be applicable and that in terms of the circular the A.O.P. could not be taxed for the very same income which had been disclosed by the members in their individual returns. The Commissioner of Income Tax (Appeals) did not agree with the submissions made by the assessee. 5. In respect of assessment year 2003-04, the assessee had filed an appeal being ITA 17/Del/2007 before the said Tribunal. While considering the said appeal, the Tribunal felt that it was a case which was fit to be heard by a Special Bench consisting three or more members of the Tribunal. The refer