2023 (7) TMI 793 - AT - Income Tax

Principles of mutuality - Surplus income shown in the return of income by mistake - Taxation at maximum marginal rate - society v/s AOP - whether income of a Co- Operative Housing Society is assessable as Co-op Society u/s 80P or as AOP at maximum marginal rate? - principles of consistency - a mistake has been committed by the CA of the assessee wherein at the time of filing return of income the surplus income earned by the assessee which operates on the principle of mutuality has been incorrectly offered to tax in the return of income - HELD THAT - As in the past years as well as in the succeeding assessment years the income earned by the assessee has not been subject to tax since it is a society formed exclusively for the benefit of its members and the Department has accepted this position both in the preceding and succeeding assessment years. Accordingly in view of the well-established principles of consistency the surplus income earned by the assessee cannot be subject to tax since this income was offered to tax purely by way of mistake by the CA of the assessee at the time of filing of return of income. Matter is being restored to the file of Ld. CIT(Appeals) to analyse whether this position taken by the assessee that it s income has not been subject to tax in any of the earlier or succeeding assessment years by the Department is factually correct. It is a well-settled principle of law that if there is no change in facts relation to assessee s case then the position taken by the Department in the earlier and succeeding assessment years should not be disturbed unless certain new facts are before the Department which would necessitate it to change its earlier position. Appeal of the assessee is allowed for statistical purposes.

Issues involved:
The appeal against the order of the Commissioner of Income Tax, CIT(A)-3, Ahmedabad, regarding the assessment year 2018-19.

Grounds of Appeal:
1. Whether rectification under section 154 was permissible for the income assessment of a Co-Operative Housing Society.
2. Taxing the income of the appellant at the maximum marginal rate as an Association of Persons (AOP) instead of considering specific and identifiable shares of members.
3. Taxing member's share capital contribution as a revenue receipt.
4. Taxing member's contribution as a revenue receipt without considering the returnability of unconsumed contribution to the members.
5. Non-granting of deduction under section 80P(2)(c)(ii) amounting to Rs. 50,000 to the Co-op Society.

Condonation of Delay:
The appeal was time-barred by 560 days due to reasons beyond the control of the assessee, primarily caused by the Covid pandemic. The delay was condoned in the interest of justice.

Merits of the Case:
The assessee, a cooperative society, inadvertently filed the return of income as an AOP instead of a cooperative society. The income based on the principles of mutuality was taxed at the maximum marginal rate. The appeal before the Ld. CIT(Appeals) was dismissed as the income was offered in the return, and no adjustment was made by the CPC.

Arguments and Decision:
The counsel argued that the surplus income was mistakenly offered for taxation, as the society operates on the principle of mutuality. The matter was restored to the file of Ld. CIT(Appeals) to analyze the consistency of the position taken by the assessee regarding taxation in previous and subsequent years. The appeal was allowed for statistical purposes, emphasizing the importance of factual consistency in tax assessments.

Conclusion:
The delay in filing the appeal was condoned due to reasons beyond the assessee's control. The appeal was allowed for statistical purposes, highlighting the significance of factual consistency in tax assessments based on the principles of mutuality for cooperative societies.

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