ARADHANA CO OPERATIVE HOUSING SOCIETY LIMITED ,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX WARD 20(1)(1), MUMBAI

ITA 1285/MUM/2025

AI Insights

The case involves Aaradhana Co-operative Housing Society Ltd., which appealed against the orders passed by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2018-19. The primary contention was regarding the addition of Rs. 14,10,031 under the head 'Income from Business' and the disallowance of a deduction of Rs. 12,15,250 claimed under Section 80P. The CIT(A) had confirmed the addition under 'Income from Business' while deleting the addition under Section 80P. The ITAT allowed the appeal in part, admitting additional grounds and evidence, and restored the matter to the AO for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779831 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 25-02-2025
• Other Referred Cases: Jute Corporation of India Ltd v. CIT [1991] 187 ITR 688 (SC), National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 (SC), Ahmedabad Electricity Co. Ltd. v. CIT [1993] 66 Taxman 27 (Bombay), Sesa Goa Ltd vs. Additional CIT (2021) 430 ITR 114 (Bom), CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012] 349 ITR 336 (Bom), Sesa Goa Ltd. v. Joint CIT [2020] 423 ITR 426 (Bom), Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom) [FB]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN K. CHHATRAPATI
• Assessee Lawyers: KEVAL GANDHI
• Keywords: Additional evidence; Revised return; Earning of tax free income
• Section: 154

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. No. 1285/Mum/2025 Assessment Year: 2018-19 Aaradhana Co-operative Housing Society Ltd., Dr. Ambekar Road, Naigaum, Dadar (E), Mumbai. PAN – AAAA1759R Vs ITO, Ward 20(1)(1) Mumbai. (Appellant) (Respondent) Assessee by Shri Keval Gandhi Revenue by Shri Kiran K. Chhatrapati, Sr. DR Date of Hearing 01.09.2025 Date of Pronouncement 13.10.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.: The present appeal has been filed by the assessee challenging the impugned orders dt. 06.12.2024 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2018-19. 2. At the very outset, from the records we noticed that the assessee being a cooperative housing society Ltd filed its return of income which was processed u/s 143(1) of the Act and CPC has made the following adjustments: 1.3.1 An addition of Rs. 14,10,031 to the total income under the head \"Income from Business,\" citing an apparent mismatch Printed from counselvise.com 2 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. in incorne classification between \"Income from Business\" and \"Income from Other Sources.\" 1.3.2 Disallowance of a deduction of Rs. 12,15,250 claimed under Section 80P, on the ground that the return of income was allegedly filed beyond the prescribed due date under Section 139(1). 1.4 Aggrieved by the adjustments, the appellant filed an appeal before this office under Section 246A, raising three grounds of appeal as provided in Form 35. 3. Which were challenged by the assessee and the Ld. CIT(A) while disposing off the appeal deleting the addition u/s 80P of the Act and confirmed the addition of Rs. 14,10,031/- under income from business by holding as under: 3.1.2.1 Under the Income Tax Act, 1961, the concept of a rectification return does not exist. The rectification process under Section 154 is restricted to clerical or apparent errors and does not extend to substantive changes in income classification or deductions. In this case, the so-called rectified return was submitted to address fundamental misstatements regarding the nature of receipts, which is outside the scope of rectification permissible under the Act. 3.1.2.2 If the rectified return is considered a revised return, it fails to comply with the statutory timeline under Section 139(5), which requires a revised return to be filed before the end of the relevant assessment year. The appellant filed the purported revised return on July 20, 2019, well beyond the deadline of March 31, 2019. Consequently, the revised return is invalid in law. 3.1.2.3 An invalid revised return cannot give rise to a fresh claim or alteration in the treatment of income. The claim regarding the Doctrine of Mutuality, which was not properly disclosed in the original return, cannot now be entertained. The appellant's reliance on a procedurally defective return renders the claim inadmissible. Printed from counselvise.com 3 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. 3.1.2.4 The Doctrine of Mutuality requires strict satisfaction of three conditions: (i) Identity between contributors and beneficiaries. (ii) Absence of commercial intent. (iii) Exclusivity of mutual benefit. 3.1.2.5 In the present case, the records indicate that the appellant's receipts, including contributions and service charges, were credited to the profit and loss account and utilized for general purposes, some of which extended benefits beyond members. These circumstances negate the exclusivity required under mutuality principles. 3.1.3 Based on the above considerations, the addition of Rs. 14,10,031 under the head \"Income from Business\" by the CPC was validly made. The appellant's reliance on an invalid rectified return, coupled with the inability to substantiate the Doctrine of Mutuality, justifies the confirmation of the adjustment. 4. Although the assessee has challenged this addition but also raised additional ground and requested to lead additional evidence as well. 5. As far as the admission for raising additional ground is concern in this regard Ld. AR relied upon his detailed application the same is reproduced herein below: In relation to the above captioned subject, the appellant submits that it had filed ground of appeal with Form 36 against the intimation u/s 143(1) of the Income tax Act, 1961 for AY 2018- 19.In this connection, the Appellant is desirous of filing additional grounds in appeal for the above year. The additional grounds in appeal and submission relating thereto are enclosed herewith. Printed from counselvise.com 4 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. Aradhana Co-operative Housing Society Ltd. (hereinafter referred to as \"the Appellant\") is a Co- operative Housing Society registered under the Maharashtra Co-operative Societies Act, 1960. The Appellant is also subject to audit in accordance with the provisions of the said Act. The Return of Income for the year under consideration was filed on 28/09/2018, declaring a total income of Rs.19,29,380, and the due taxes were duly paid by the Appellant While filing the original return of income, the Appellant disclosed an amount of Rs.25,75,281 under the head \"Income considered under other heads\", comprising: 1) Contribution by members and service charges - Rs. 14,10,031 ii) Interest income-Re 1165.250 However, in the \"Income from Other Sources\" schedule, only the interest income of Rs.11,65,250 was disclosed. The Appellant inadvertently did not claim the balance amount of Rs.14,10,031 (being member contributions and service charges) as exempt income. This amount was, therefore, not specifically excluded from taxable income. It is submitted that such receipts are governed by the Doctrine of Mutuality and, by virtue of judicial and statutory recognition, are not taxable in the hands of a Co- operative Society, as they merely represent cost-sharing or reimbursement among its members. The Appellant, while filing the appeal before the Hon'ble ITAT, realised that the above error had occurred in the original return of income. The appellant company seeks to raise the additional ground on the above claim made in view of the decision of Hon'ble Supreme Court's decision in case of Jute corporation of India Ltd v. CIT[1991] 187 ITR 688 (SC), National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 (SC) and the decision of Jurisdictional Bombay High Court in case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 66 Taxman 27 (Bombay). At present, the issue before your honour is regarding the admissibility of additional ground under the Act. In this respect, your kind attention is drawn to the decision of Hon'ble Bombay High Court, Panaji Bench in the case of Sesa Goa Ltd vs. Additional CIT (2021) 430 ITR 114 (Bom) wherein it has Printed from counselvise.com 5 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. been held that the ITAT (Appeals) has undoubted power to consider a claim for deduction not raised in the return or revised return. The relevant para 10 of the judgement is quoted as below: \"10. According to us, the approach of the Commissioner of the Income-tax (Appeals) and the Income-tax Appellate Tribunal is contrary to the law laid down by this court in CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012] 349 ITR 336 (Bom), which decision has been followed in Sesa Goa Ltd. v. Joint CIT [2020] 423 ITR 426 (Bom), wherein it has been held thus (page 438 of 423 ITR): \"In CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012] 349 ITR 336 (Bom), one of the questions of law which came to be framed was whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal, in law, was right in holding that the claim of deduction not made in the original returns and not supported by revised return, was admissible. The Revenue had relied upon Goetze (supra) and urged that the Income-tax Appellate Tribunal had no power to allow the claim for deduction. However, the Division Bench, whilst proceeding on the assumption that the Assessing Officer in terms of law laid down in Goetze (supra) had no power, proceeded to hold that the appellate authority under the Income-tax Act had suf ficient powers to permit such a deduction. In taking this view, the Division Bench relied upon the Full Bench decision of this court in Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom) [FB] to hold that the appellate authorities under the Income-tax Act have very wide powers while considering an appeal which may be filed by the assessee. The appellate authorities may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of the assessee in accordance with law. The decision in Goetze (supra) upon which reliance is placed by the Income-tax Appellate Tribunal also makes it clear that the issue involved in the said case was limited to the power of the assessing authority and does not impinge on the powers of the Income-tax Appellate Tribunal under section 254 of the said Printed from counselvise.com 6 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. Act. This means that in Goetze (supra), the hon'ble apex court was not dealing with the extent of the powers of the appellate authorities but the observations were in relation to the powers of the assessing authority. This is the distinction drawn by the Division Bench in Pruthvi Brokers (supra) as well and this is the distinction which the Income-tax Appellate Tri bunal failed to note in the impugned order.\" 11. Accordingly, the substantial questions of law at (2) and (3) are required to be answered in favour of the assessee and against the Revenue.\" The facts of the appellant company case is exactly similar to the above judgement. Hence the appellant company hereby request your honor to kindly admit the additional ground raised and oblige 6. On the other hand, Ld. DR submitted that this ground cannot be raised at this stage and application filed by the assessee deserved to be dismissed. 7. After having heard the counsels for both the parties on the application for seeking permission to raise additional ground I found that this ground raised by the assessee is purely legal in question as the assessee wants to raise a claim for deduction not raised in the return of revised return and the Hon’ble Bombay High Court in the case of Sesa Goa Ltd Vs. ACIT (2021) 430 ITR 124 (Bom) has held that “ITAT has undoubted power to consider a claim for deduction not raised in the return or revised return and the facts of this case is identical with the cited case.” therefore while relied upon the decision in the case of NTPC V/s. CIT(1998) 229 ITR 383 (SC) and Sesa Goa Ltd Vs. ACIT (supra) I admit this ground to be heard on merits. Printed from counselvise.com 7 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. 8. Now with regard to leading additional evidence is concern, in this regard Ld. AR submitted that copy of audited financial statement for the year under consideration i.e 2018-19 could not be produced before the revenue authorities which has been now placed before the Tribunal at paper book page 120 to 140 and submitted that this document is very vital to decide the controversy in question. 9. After having heard the counsels for both the parties on the application for leading additional evidence by placing on record audited financial statement, I found that this document is necessary for adjudicating the controversy and would go to the roots of the case. Therefore considering the interest of justice I allow the assessee to place on record audited financial statement for the year under consideration and admit the same on record. 10. Since, I have allowed the application for raising the additional ground which was not raised before any of the authorities and for adjudicating the said additional ground and additional evidence now placed on record the necessary verifications are required, therefore I restore the matter back to the file of AO to decide the issue afresh on merits. After considering all the points raised by the assessee and also keeping in view of the documents relied upon by the assessee. Printed from counselvise.com 8 ITA No. 1285/Mum/2025 Andhra Co-op Housing Society Ltd, Mumbai. 11. Before parting, I make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law. 12. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 13/10/2025 Sd/- (SANDEEP GOSAIN) (JUDICIAL MEMBER) Mumbai: Dated: 13/10/2025 KRK, Sr. PS. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "