JSSMVP EMPLOYEES HOUSE BUILDING COOPERATIVE SOCIETY,MYSORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), MYSORE

The assessee is a house building cooperative society exclusively constituted for the benefit of employees M/s. JSS Mahavidya Peeta House Building Co-operative Society Ltd. The members of the society are the employees and the objects of the society were to develop house sites out of the contributions made by the members to whom ultimately the developed sites are allotted at a pre-fixed price. No benefit is conferred by the society to any outsider. Thus, there was total identity of the activities of the society with its members and the benefit derived therefrom was distributed only to the members. Accordingly, the society was a mutual concern whose income stood exempted under section 4 of the Income-tax Act. Hence, the society was not filing any return of income.

When the assessing authority issued notice u/s. 148 of the Act, under protest the assessee filed the return of income wherein the interest income derived on account of the temporary deposits made with the banks out of the contribution of the members until the investments were made in the land purchased for making layout and sites to be allotted to the members had been made and against the said interest, interest payments and other expenses were claimed, which had resulted in loss. The profit income was also declared to be set off against the said loss. There being no income, the loss was declared in the return filed in response to the notice under s.148 of the Act. The assessee had also claimed exemption under s.80P(2)(c ) of the Act.

The assessing authority thereafter proposed to bring to tax the interest received from the deposits and also the property income without considering the expenditure by holding that the expenditure would go to increase the capital outlay. The assessee vide submission dt.25.02.2016 has raised objections and explained the facts of the case and also furnished evidence to support its claim that it was a mutual society and its income stood exempted us.4 of the Act and also S.80P(2)( c) of the Act. The assessing authority without considering the explanation offered issued the order raising huge demand which includes the interest levied under sec.234A, 234B and 234C of the Act. The AO made the additions for the assessment years under appeal as per Table given below:

S. Particulars AY AY AY AY No. 2008-09 2009-10 2012-13 2013-14 1. Returned Income 32,71,683 32,74,021 15,47,087 12,38,084 2. Disallowances Bank interest received 32,88,421 41,03,378 27,27,833 21,97,575 Bank interest paid 66,17,788 74,12,329 12,05,946 9,93,931 Income from house property 57,684 34,930 25,200 34,440 3. Assessed income 66,92,210 82,76,616 55,06,066 44,64,030 5. Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(Appeals) did not go into the merits of the case and passed the order by stating that the assessee has not represented the case before him. The relevant extract of the CIT(A)’s order is as given below:-

The ld. DR supported the order of the CIT(Appeals).

We heard the rival submissions and perused the material on record. We notice that the appeals have been dismissed by the CIT(A) on the basis that the assessee has not represented before the CIT(A). We also notice that the assessee has filed a letter of adjournment dated 8.6.2022 which has not been taken cognizance of by the CIT(A). We also notice that the CIT(A) has not looked into the merits of the case on the basis of grounds of appeals filed by the assessee and has dismissed the appeals by a cryptic order as extracted in the earlier paragraph. We therefore, in the interest of justice, remit the issue back to the file of the CIT(A) for fresh consideration of the issue on merits. Needless to say that the assessee may be given a reasonable opportunity of being heard.

In the result, the appeals are allowed in favour of the assessee for statistical purposes.