Tribunal grants appeal, remands to Assessing Officer to re-examine exemption claim under mutuality principle.

The Tribunal allowed the appeal for statistical purposes, remanding the matter back to the Assessing Officer to re-examine the exemption claim of Rs. 93,20,286 under the principle of mutuality. The Tribunal emphasized that technicalities should not hinder substantial justice and directed the AO to consider relevant facts and precedents, providing the assessee with a proper opportunity of hearing before issuing a new order.

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Issues Involved:
1. Confirmation of addition of Rs. 93,20,286/- as business income.
2. Denial of deduction under the Mutuality Principle.

Summary:

Issue 1: Confirmation of Addition as Business Income
The assessee society challenged the addition of Rs. 93,20,286/- as business income by the Ld. CIT(A)/NFAC. The Ld. CIT(A) observed that the appellant society filled up details incorrectly in the 'Exemption schedule' of the Return of Income, leading to a discrepancy between Schedule BP and Schedule EI. The CPC, Bengaluru issued a letter to the appellant society, but the appellant failed to provide clarification within the allowed time. Consequently, the CPC disregarded the rectified data correction and did not rectify the order passed u/s 143(1).

The Ld. AR argued that no new claim was made in the rectification return, and the claim was wrongly filled in the original return. He cited various case laws and emphasized that the correct tax liability should be determined, even if the assessee made a mistake in the return. The Ld. AR also highlighted that the amount collected from members was spent for the intended purposes, and the principle of mutuality should apply.

Issue 2: Denial of Deduction under the Mutuality Principle
The Ld. CIT(A) dismissed the ground of appeal regarding the principle of mutuality, stating that it was a question of fact requiring examination of documents. The Ld. AR contended that the receipts by the co-operative society from its members are exempt based on the mutuality concept, as established in various judicial precedents, including the Hon'ble Supreme Court's decision in ITO vs. Venkatesh Premises Co-operative Society Ltd.

Tribunal's Decision:
The Tribunal noted that the Ld. CIT(A) failed to examine the merits of the assessee's plea regarding the exemption of Rs. 93,20,286/- under the principle of mutuality. The Tribunal emphasized that technicalities should not obstruct substantial justice and referred to Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by the authority of law.

The Tribunal set aside the impugned order of the Ld. CIT(A) and remanded the matter back to the AO to examine whether the claim of Rs. 93,20,286/- is exempt under the principle of mutuality. The AO was directed to consider the relevant facts and judicial precedents and provide the assessee with a proper opportunity of hearing before passing the order.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, and the matter was remanded back to the AO for a fresh examination of the exemption claim under the principle of mutuality.

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