Case Law Details
Kailash Appartment Flat Owners Association Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, allowed the appeal filed by an apartment owners association against the order of the Addl./Joint Commissioner of Income Tax (Appeal), Panaji, relating to Assessment Year 2022-23.
The assessee had filed its return declaring income of Rs. 1,87,110 and claimed its status as an AOP/BOI. Since the income was below the taxable limit applicable to that status, no tax liability arose. While processing the return under Section 143(1) of the Income Tax Act on 16.03.2023, the Centralized Processing Centre (CPC) treated the assessee as a Co-operative Society instead of AOP/BOI and raised a tax demand of Rs. 97,690.
The assessee filed a rectification application under Section 154 against the intimation issued under Section 143(1), but the application was rejected on 12.05.2023. The first appellate authority also dismissed the appeal.
Before the Tribunal, the assessee submitted that it had consistently filed returns as an AOP/BOI in earlier years and the same had been accepted by the department. It argued that it was a non-profit apartment owners association and not a Co-operative Society. The Revenue contended that the assessee had failed to furnish registration certificates, bye-laws, memorandum of association, or other documentary proof showing that it was a non-profit association outside the scope of a Co-operative Society.
The Tribunal observed that under Section 143(1), only limited adjustments such as arithmetical errors, incorrect claims, and prima facie adjustments are permissible. It noted that the assessee had consistently disclosed its status as AOP/BOI and that the department had accepted this position in earlier years. The Tribunal held that the CPC was not justified in suo motu changing the assessee’s status from AOP/BOI to Co-operative Society while processing the return under Section 143(1).
According to the Tribunal, any change in the status of the assessee required detailed examination and could not be made through prima facie adjustments during processing of the return. Since the Revenue did not contend that the assessee had previously declared itself as a Co-operative Society, the adjustment was held to be beyond the scope of Section 143(1). The Tribunal quashed the adjustment and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is directed against the order dated 21.07.2025 passed by the Add./Joint Commissioner of Income Tax (Appeal), Panaji [hereinafter referred to as ‘Addl. CIT(A)’] for the Assessment Year (A.Y.) 2022-23 in the proceeding u/s. 154 of the Income Tax Act.
2. The brief facts of the case are that the assessee had filed its return of income for A.Y. 2022-23 declaring income of Rs. 1,87,110/-. The return was processed u/s. 143(1) of the Act by the CPC on 16.03.2023 raising demand of Rs. 97,690/-. The demand was raised for the reason that the assessee had claimed its status as AOP/BOI and the total income being below the taxable limit, there was no tax liability. The CPC, while processing the return, had treated the status of the assessee as Cooperative Society and accordingly raised the demand of Rs. 97,690/-. The assessee had filed a rectification application u/s. 154 of the Act vis-à-vis intimation u/s. 143(1) of the Act, which was rejected vide order dated 12.05.2023.
3. Aggrieved with the rectification order passed by the CPC, the assessee had filed an appeal before the first appellate authority, which was decided by the learned Addl. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
1. The CIT (Appeal has erred in law in treating status of the assessee as a co op society instead of AOP (Non Trading organization).
2. The CIT (Appeal) as erred in law in considering that the assessee has not filed the proof of registration of Non trading Association which is registered under Non-Trading Corporation Gujarat State, Ahmedabad. The said certificate has already ben submitted along with appeal memo to the learned CIT(Appeal).
3. The assessee has right to add amend alter any grounds of appeal before final hearing.
5. Shri Rajendra K Shah, the Ld. AR of the assessee submitted that the assessee has been filing the returns regularly under the status AOP/BOI which was duly accepted by the Department. Under the circumstances, the CPC was not correct in treating the status of the assessee as a Co. Op. society in the current year and raising the demand.
The Ld. AR submitted that the assessee is a non-profit owner’s association and not a Co. Op. Society and, therefore, the action of CPC in treating the assessee as Co. Op. Society was erroneous and contrary to law.
6. Per Contra, Smt. Ananya Kulshresth, the Ld. SR-DR, supported the order of Ld. Addl. CIT(A). She submitted that the assessee did not submit its registration certificate, governing bye-laws, memorandum of association or any other documentary proof to substantiate that it was a non-profit association falling outside the purview of a Co. Op. Society.
7. We have considered the rival submissions. As per provision of section 143(1) of the Act, the adjustments can be made only on account of arithmetical mistake, incorrect claim and the prima facie adjustments as stipulated therein. The assessee has been all along showing its status as AOP/BOI in the return of income. In view of this fact, the CPC was not correct in suo moto changing the status of the assessee from AOP/BOI to Co. Op. Society, particularly when the status of the assessee as AOP/BOI was accepted in other years. The adjustment as made by the CPC is thus found to be beyond the scope of provision of section 143(1) of the Act. The change in the status of assessee could have been subjected only after thorough examination of the issue, which was beyond the scope of adjustment u/s. 143(1) of the Act. It is not the case of the Revenue that the assessee had shown its status as Co. Op. Society in the earlier years but claimed its status as AOP/BOI in the current year. In view of this fact the adjustment as made by the CPC in the status of the assessee while processing the return of the assessee, is quashed. Accordingly, the grounds taken by the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 09/04/2026 at Ahmedabad.
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