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Facts
The assessee, a cooperative housing society, filed its return of income. The Assessing Officer (AO) noted that the society rented out space for an advertisement hoarding, treating the income as house property. The AO reclassified this income as 'income from other sources' and disallowed the deduction claimed under section 24(b). Additionally, a statutory due amount of Rs. 61,01,040/- was disallowed under section 43B.
Held
The Tribunal observed that the assessee could not make compliance before the CIT(A) due to the illness of their earlier counsel, which was considered a bonafide reason. The Tribunal restored the appeal to the CIT(A) for a fresh decision on merit, allowing the assessee an opportunity to present their case.
Key Issues
Whether the rental income from advertisement hoarding is to be treated as house property or income from other sources, and whether statutory dues are disallowable under section 43B.
Sections Cited
143(3), 43B, 139(1), 80P, 22, 56, 24(b), 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
O R D E R
Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the assessment order dated 23.11.2018 passed u/s 143(3) of the Income Tax Act, 1961 for the assessment year 2016-17. The assessee has raised the following grounds before us:
1. Disallowance u/s 43B- 61,01,040/- i) The Id. CIT(A) erred in confirming the disallowance of statutory liabilities without appreciating that the same had been paid before the due date of filing of Return u/s 139(1) and further erred in holding that the Appellant, a co-op housing society (CHS), is doing business activity, therefore, as Sec 438 is not applicable on the face it being eligible for the benefit u/s 80P, the disallowance of Rs.61.01.040/- is uncalled for and the same may be deleted ii) Without prejudice to above, the Id CIT(A) erred in holding that the concept of mutuality does not apply to the Appellant where there is close nexus of all its funds flow are utilized exclusively for the benefit of its member s, hence the disallowance made may be deleted as consistency needs to be respected. 2. Taxability u/s. 22 or u/s. 56- Rental or hire charges Rs.8,73,634/- P a g e | IRLA Co-op HSG Society Ltd. VS. ITO, Ward 25(2)(5)
The Id. CIT(A) erred in confirming the rental and/or hire charges receipts be taxable u/s 56 instead of Sec 22 as correctly declared by the Appellant, therefore, on the failure of equity, taxing of Rs.8.73,634/- u/s 56 is not justified and the Appellant's declarations may be accepted 3. Levy of Penal Interests The Appellant, on merits, denies its liability to penal interest. 4. The Appellant craves leave to add, amend or alter all or any of the above Ground of Appeal
.”
2. Fact in brief is that assessee is a cooperative housing society and return of income declaring total income of Rs.9,19,650/- was filed on 22.10.2016. The case was selected for limited scrutiny and notice u/s 143(2) of the Act was issued on 29.07.2017. During the course of assessment the assessing officer on perusal of the submission of the assessee noticed that assessee has given space on rent and the rental income has been treated as house property income and claimed deduction u/s 24(b) of the Act. However, on perusal of the rental agreement the assessing officer found that Mr. Sufiyan Khan from whom assessee has shown rental income was the proprietor of M/s Ad- Line and carrying on business of advertisement and he had approached the assessee’s society for putting up ‘Glass Facad Board’ on the entrance of the building known as ‘Prime Mall’ which was a part of the assessee society. After considering contents of the agreement the assessing officer was of the view that the premises rented out by the assessee to the aforesaid tenant was used to put up advertisement hoarding. Therefore, income of the assessee society for giving space of rent is to be assessed as income from other sources and no income from house property. Since, the income for providing space on rent was assessed as income from other sources, therefore, the deduction u/s 24(b) of the Act amounting to Rs.1,59,467/- claimed was disallowed.
3. Further on verification of form no. 26AS the assessing officer noticed that assessee has received rental income of Rs.10,75,000/- however, it had shown such income to the amount of Rs.7,37,808/- P a g e | IRLA Co-op HSG Society Ltd. VS. ITO, Ward 25(2)(5) only, therefore, the balance amount of Rs.3,37,292/- was added to the income from other sources of the assessee society.
During the course of assessment the AO has also noticed that as per the audit report an amount of Rs.61,01,040/- was included in the current liability as statutory dues payable by the assessee in the balance sheet as on 31.03.2016. The assessee explained that provision of Sec. 43B was not attracted on account of concept of mutuality, however, the assessing officer had not agreed with submission of the assessee and disallowed the amount of Rs.61,01,040/- u/s 43B of the Act.
The assessee has filed appeal before the ld. CIT(A). However, the assessee has not made any compliance to the notices of hearing issued by the ld. CIT(A), therefore, the ld. CIT(A) has dismissed the appeal of the assessee and additions made in the assessment order were sustained.
During the course of appellate proceedings before us the ld. Counsel submitted that necessary compliance could not be made before the ld. CIT(A) since the earlier counsel of the assessee has not made compliance to the notices issued by the ld. CIT(A). In this regard the new tax counsel of the assessee Shri Pramod Kumar Parida has filed letter dated 13.05.2024 stating that due to serious illness (Alzheimer disease), the earlier counsel of the assessee Shri K.V.G. Aithal could not respond in time because of illness. Therefore, the ld. Counsel submitted that more opportunity be provided to the assessee for making submission before the ld. CIT(A) for deciding the case of the assessee on merit.
On the other hand, the ld. D.R supported the order of the lower authorities.