CPC Cannot Suo Motu Reclassify Apartment Owners Association as Co-operative Society while Processing ITR: ITAT Deletes ₹97,690 Demand [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench has held that the Centralized Processing Centre (CPC) cannot suo motu change the status of an assessee from an Association of Persons/Body of Individuals AOP to a Co-operative Society while processing the return underSection 143(1) of the Income Tax Act, 1961. The Tribunal consequently quashed the tax demand of ₹97,690.

The assessee Kailash Apartment Flat Owners Association had filed its return of income for the Assessment Year 2022-23 declaring an income of ₹1,87,110. The return was processed under Section 143(1) pursuant to which the CPC raised a demand of ₹97,690 after treating the assessee as a Co-operative Society instead of an AOP.

Aggrieved by the adjustment the assessee filed a rectification application under Section 154 contending that it was a non-profit apartment owners association and had consistently been assessed in the status of AOP in earlier years. However, the rectification plea was rejected by the CPC and the first appellate authority also upheld the adjustment.

The assessee argued that the CPC had exceeded its jurisdiction by altering the legal status of the assessee during return processing without any inquiry or examination. It was submitted that the association was registered as a non-trading association and had regularly filed returns under the status of AOP which had been accepted by the Department in preceding years.

The Revenue contended that the assessee had failed to furnish documentary evidence such as registration certificates governing bye-laws or memorandum of association to establish that it was not a Co-operative Society.

The Tribunal observed that adjustments permissible under Section 143(1) are confined to arithmetical errors, incorrect claims apparent from the return and prima facie adjustments specifically contemplated under the provision.

The Bench comprising Sanjay Garg (Judicial Member) and Narendra Prasad Sinha (Accountant Member) noted that the assessee had consistently disclosed its status as AOP and there was no allegation by the Department that a different status had been claimed in earlier years.

The Tribunal held that changing the status of the assessee required detailed examination and could not be undertaken as part of automated processing under Section 143(1).

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