GAGANVIHAR SAHAKARI GRUHRACHANA SANSTHA MARYADIT,PUNE vs. INCOME TAX OFFICER, WARD-5(5), PUNE, PUNE

This appeal preferred by the assessee emanates from the order of National Faceless Appeal Centre [NFAC], Delhi, dated 16.01.2023 for A.Y.2011-12 as per the following grounds of appeal:

On the facts and in the circumstances of the case and in law, the ld. AO erred in making an ad of Rs. 2,72,502/- being into income earned from non-co-operative banking institutions without realizing the fact that it was part of maintenance fund and your appellant was entitled to settle the deficit arising out of maintenance charges against such interest income.”

In this case, assessment was completed u/sec. 147 r.w.s. 143(3) of the Act dated 05/12/2018. That, against the assessment order, assessee preferred rectification petition u/sec. 154 which was disposed of on 24/09/2019 on technical ground that there was no mistake apparent from record in the assessment order. Therefore, the assessee‟s request for rectification of the disallowances/additions made in the assessment order was rejected. That, against this order u/sec. 154, the assessee preferred appeal before the ld. CIT(A) and the first appellate authority, as evident in his order, had summarily disposed of the appeal of the assessee dismissing the same stating that since the additions were made on debatable issues, it cannot be rectified u/sec. 154 and, hence, the Assessing Officer (AO) had rightly rejected the rectification petition preferred by the assessee u/sec. 154 2

The first grievance of the assessee in this appeal is with regard to the addition of Rs. 65,000/- as debited in the income and expenditure account on account of fencing of boundary wall. The assessee-society is an AOP and is a co-operative housing society. It is registered under Co-operative Society Act vide registration No. P.N.A.(1)HSG/(TC) 71014/2002-2003 dated 11/02/2003. The accounts of the society are audited under MCS Act. Audit report is on record. The AO examined the details filed by the assessee and he observed that an expenditure of Rs. 65,000/- had been debited in the income and expenditure account for fencing wall. The AO observed that since it is a capital expenditure, no deduction should be allowed. During the scrutiny proceedings, ld.AR provided no explanation on this and, hence, the same was added to the total income of the assessee-society.

At the time of hearing before us, ld.AR submitted that admittedly the assessee-society is not doing any business and it is merely a co-operative housing society, therefore, it is functioning on the principle of mutuality and there is no profit element embedded in any of the transaction carried out. The expenditure that has been debited for fencing wall of Rs. 65,000/- is for fencing the boundary wall which does not have a permanent enduring effect and it is definitely perishable and subject to natural wear and tear, therefore it cannot be 3

Ground No.2 as evident from para 6 of the assessment order, the AO contemplates that the assessee-society had earned interest income of Rs.2,72,502/- which cannot be allowed as deduction u/sec. 80P(2)(d) of the Act since the funds were invested in nationalized banks i.e. Bank of Maharashtra & Oriental Bank of Commerce and not in co-operative bank. The entire disallowance u/sec. 80P(2)(d) was made by the AO saying that this deduction is not allowable to the assessee. We have perused the return of income filed by the assessee for the relevant year and it is observed that the claim of deduction u/sec. 80P(2)(d) is not emanating from the return of income, meaning thereby, the assessee has never claimed any deduction u/sec. 80P(2)(d) of the Act. As earlier observed, the ld. CIT(A) has not dealt with on the merits of both the additions made by the AO and had simply said that since the issues were debatable, it was not a subject 4

In the result, appeal of the assessee is allowed.