THE TATTA NIWASHI CO OPERATIVE HOUSING SOCIETY LTD ,MUMBAI V. ITO WARD 27(3)(1), MUMBAI

ITA 756/MUM/2025

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The case involves The Tatta Niwashi Co-operative Housing Society Ltd., which appealed against the order of the CIT(A) that upheld an addition of Rs. 12,70,490 to the society's income, treating members' contributions and property tax recovered as taxable income. The society argued that these contributions were exempt under the principle of mutuality, a claim initially not reflected in the correct schedule of the tax return due to an inadvertent error. The Tribunal considered precedents and the principles of natural justice, ultimately deciding to remit the matter back to the AO for a detailed examination and proper application of the law regarding the claimed exemptions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472000 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2019-2020
• Other Referred Cases: Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC), CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom), Goodwill Management Pvt. Ltd. Vs. DCIT in ITA 670/Bang/2020
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: ASHOK SHARMA
• Keywords: Business income; Revised return; Ignorance of law; Principle of natural justice; Earning of tax free income
• Section: 154; 143(1)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “H (SMC)” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI OMKARESHWAR CHIDARA (ACCOUNTANT MEMBER) I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co- operative Housing Society Ltd. The Tatta Niwashi Co- operative Housing society, Road No.3, Pestom Sagar, Chembur 400089 PAN: AACAT3718P Vs Income Tax Officer Ward 27(3)(1), Mumbai 3rd and 4th Floor, 6th tower, Railway Station Building, Vashi, Navi Mumbai 400703 (Appellant) (Respondent) Appellant by Shri. Ashok Sharma Respondent by Shri. Pravin Salunkhe, Sr. DR Date of Hearing 25.03.2025 Date of Pronouncement 04.04.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal arises out of order dated 06/12/2024, passed by Ld.CIT(A)-2, Noida for Assessment Year 2019-20 on following grounds of appeal. “1. THE ORDER IS BAD IN LAW 1.1 In the facts and the circumstances of the case, and in law, the appellate order framed by the ADDL/JCIT(A)-2 Noida is bad in law, as the same is framed in breach of the statutory provisions and the scheme and as otherwise also is not in accordance with the law. 1.2 Without prejudice to the generality of the above, the appellate order so passed is bad in law, and void as the same is cryptic and perverse. 2 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. 2. NATURAL JUSTICE 2.1 It is submitted that, in the facts and the circumstances of the case, and in law, the appellate order so framed be held as bad, as: (i) The same is framed in breach of the principles of natural justice; and (ii) The same is passed without appreciating to the facts and the submissions brought on record by the Appellant. WITHOUT PREJUDICE TO THE ABOVE 3. ADDITION OF Rs. 12,68,193/- ON ACCOUNT OF MEMBERS' CONTRIBUTIONS. 3.1 In the facts and the circumstances of the case and in law, the action of the ADDL/JCIT(A)-2 in confirming the addition (adjustment) of Rs. 12,70,490/-being members contributions of Rs 12,68,193/- and other receipts from members to the total income of the Appellant, made by the Assistant Director of Income Tax, Centralized Processing Centre ('the A.O.') in the intimation so issued u/s. 143(1) of the Act is wrong and improper. 3.2 While doing so, the ADDL/JCIT(A)-2 failed to appreciate that - (i) the appellant is a co-operative housing society, which has been enjoying in the matter of receipt by way of members' contribution from tax in all earlier and subsequent years on the principal of mutuality. (ii) In this year, there was merely an inadvertent mistake while incorporating the amount of exempt income while filing the relevant column of the return of income (iii) No such adjustment was called for u/s. 143(1) of the Act; 3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. LIBERTY 4. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.” Brief facts of the case are as under: 2. Assessee is a Co-operative Housing Society and filed its return of income declaring total income at Rs. 5,493/-. The return was proceed by the CPC u/s. 143(1)(a) of the act Rs.12,68,493/- was disallowed, as there was variation in the deduction claimed by the assessee. 3 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. Aggrieved by the order u/s. 143(1)(a) assessee preferred appeal before the Ld.CIT(A). 3. The Ld.CIT(A) decided the issue by observing as under “4.1 Ground No. 1: Addition of members' contribution and property tax recovered 4.1.1 The appellant contends that the CPC erred in making an addition of Rs. 1249,876/-on account of members' contributions and Rs. 18,317/- on account of property tax recovered, and taxing the same as business income. The appellant argues that being a co-operative housing society, these amounts cannot be taxed under the principle of mutuality 4.1.2 After careful consideration of the facts and circumstances of the case, I am of the view that this ground of appeal deserves to be rejected for the following reasons: a) The appellant has not made this claim in Schedule El (Exempt Income) of the Income Tax Return. In the Schedule El, the appellant has only made a claim of Rs. 100/- for dividend received. b) Any claim beyond the claim made in the return is not lawful and cannot be allowed at this stage. The appellant had the opportunity to file a revised return or seek rectification under section 154 of the Act. However, the appellant failed to avail these alternate remedies and did not file a revised return. c) It is a well-established principle that if a claim is not made in the ITR, it cannot be allowed at this stage. This view is supported by various judicial pronouncements. 4.1.3 In support of this conclusion, I rely on the following case laws. a) Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC): The Hon'ble Supreme Court held that the assessing officer has no power to entertain a claim for deduction otherwise than by filing a revised return. b) CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336 (Bom): The Hon'ble Bombay High Court held that a claim which is not made in the return of income cannot be allowed by any authority including the Appellate Authority. 4.1.4 Therefore, the addition made by the CPC on account of members' contributions and property tax recovered is upheld, and this ground of appeal is rejected.” 4 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. Aggrieved by the order of the Ld. CIT(A) assessee is in appeal before this Tribunal. 4. The Ld. AR submitted that, sum of Rs. 112,70,593/- was received by the assessee as member’s contribution and is reflected in the SCHEDULE BP of the return of income. It is submitted that, the said receipt is exempt based on the principal of mutuality. 4.1. Further, it was submitted that under SCHEDULE EI of the return of income assessee has claimed Rs.100/- received as dividend to be exemption. He also submitted that, the said income received as dividend is also reflected under SCHEDULE BP at page 26 of the paper book. 4.2. The Ld. AR submitted that, the only reason while the disallowance was made by the CPC is because the assessee furnished the details of exempt income in SCHEDULE BP being the members contribution, however, it failed to report same in SCHEDULE EI which is the SCHEDULE prescribed in the return for reporting exempt income. 4.3. It was submitted that, the said error accrued inadvertently while filing the return of income and assessee cannot be denied exemptions of the member’s contribution. He placed reliance on falling decisions in support of the submission. i. Hon’ble Supreme Court in case Goetz (India) (supra) reported in 284 ITR 323 ii. Decision of Hon’ble Bombay High Court in case of CIT Vs. Pruthvi Brokers & Shareholder pvt. Ltd. reported in 349 ITR 336 iii. decision of co-ordinate bench to this Tribunal in case of Goodwill Management Pvt. Ltd. Vs. DCIT in ITA 670/Bang/2020 for assessment year 2018-19 vide order dated 15/04/2021. 5 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. 4.4. On the contrary Ld. DR relied on orders passed by authorities below. We have perused the submissions advanced by both sides in light of records place before us. 5. It is noted that, assessee ordered dividend income of Rs. 100/- in both SCHEDULE BP as well as SCHEDULE EI however, in respect of the member’s contribution which is exempt based on the principal of mutuality was failed to be recorded in SCHEDULE EI. The CPC thus did not grant exemption in respect of the square. 5.1. Identical issue was considered by Hon’ble Bangalore Tribunal in case of Goodwill Management Pvt Ltd. (supra) by observing as under: “6. I heard the rival contentions and perused the record. I noticed that the assessee has mentioned that the dividend income of Rs. 13.37 lakhs is exempt in \"Schedule BP\" relating to computation of business income. However, the details of exempt income were mentioned in the schedule El of the return of income. In view of the same, the CPC has not granted exemption to the assessee. The question that arises is whether the inadvertent error committed by the assessee while filling up the return of income filed through electronic mode would be fatal and would disentitle the assessee from exemption, which is otherwise allowable as per the provisions of the Act. An identical issue was examined by the Mumbai bench of Tribunal in the case of Suman Chandra G. Mehta (supra). Following observations made by the Tribunal in the above said case are relevant here: 4.When this matter was agitated before the Ld. CIT(A), the CITIA) was of the opinion that it was a incorrect claim on account of the assessee, failing to reflect the correct details in the return of income, as per computerized processing programme, the A.O. has rightly made adjustments for this incorrect claim for deduction and held that there is no mistake in the processing of return and further concluded that no appeal lies against such processing where adjustments have been correctly made during processing as per Sec. 143(1)(a)(ii) of the Act. ……………… 7 The present case is a perfect example of such ignorance. The assessee has shown interest income earned as well as interest 6 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. paid under the head \"income from other sources\". Not realizing the negative figure is not accepted by the server and therefore the interest paid shown as Rs.2,33,535/- was rejected by the server while processing the return. 8. No doubt the CBDT has the powers to frame the rules but, at the same time, it cannot benefit from the ignorance of the taxpayers using the latest technology. We do not find any reason why such error should not be rectified by the AA.O. This is not ignorance of law but ignorance of the usage of the latest technology. 9 Therefore in the interest of justice and fair play to the taxpayer, we restore this issue back to the files of A.O. The A.O. is directed to examine the claim of the assessee of interest paid at Rs.2,33,535/- and if satisfied with the claim, the A.O. is directed to deduct the same from the positive interest figure of Rs.3,38,345/-meaning thereby that only Rs.1,04,810/- should be added to the taxable income. 10. Before parting, a similar issue came up for hearing before the Tribunal in the case of Srikant Real Estate Pvt. Ltd. 140 ITD 155 wherein one of us (AM) is the author of the decision where also the Tribunal has taken a similar view and directed the A.O. to rectify the error. Drawing support from the findings given in the aforesaid case, this appeal is also restored back to the files of the A.O. with the above direction. 7. The facts in the present case are identical. The assessee, out of ignorance or inadvertence has omitted to mention the details of exempt income in the relevant \"Schedule El\". So, the ignorance of the assessee or inadvertent mistake committed by the assessee should not come in his way in claiming exemption, which is otherwise allowable under the Act. It is also not a case that the assessee did not respond to the notice issued by CPC. The assessee has duly responded to the same, but it is the submission of revenue that the assessee should have filed a revised return of income. There is no dispute with regard to the fact that the assessee is entitled for exemption of dividend income. The object of assessment is to determine correct total income of the assessee. Accordingly, I am of the view that the right of the assessee could not be denied merely on accounting of technical errors. Hence there is a mistake apparent from record in not granting exemption claimed by the assessee. Accordingly, I am of the view that the said mistake deserves to be rectified.” 7 I.T.A. No.756/Mum/2025 Assessment Year: 2019-20 The Tatta Niwashi Co-operative Housing Society Ltd. 5.2. Based on the above observation, we remit this issue to Ld. AO to considered the claim of assessee and the grant exemption in accordance with law. Needless to say that proper opportunity being heard must be granted to the assesse. 6. Accordingly, grounds raised by the assessee stands allowed for statistical purposes. In the result appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 04/04/2025 Sd/- Sd/- (OMKARESHWAR CHIDARA) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 04/04/2025 Divya R. Nandgaonkar, Stenographer 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 "