The Duru Mahal Cooperative Housing Society Limited, located at Marine Drive, had claimed a deduction of Rs 8,23,830 under Section 80P of the Income Tax Act for Assessment Year 2018-19. Section 80P provides co-operative societies with deductions on certain income, including interest earned from co-operative banks.

The society filed its income tax return on 29 September 2018. The Centralised Processing Centre (CPC) of the Income Tax Department, while processing the return under Section 143(1), denied the deduction entirely. The stated reason: the return was filed after the due date under Section 139(1) of the Act, triggering the bar under Section 80AC, which disallows deductions under certain provisions if the return is filed late.

The problem with this conclusion, as the society argued before the ITAT, was that the CPC had applied the wrong deadline.

Under the Income Tax Act, the due date for filing returns under Section 139(1) varies by the type of assessee. For entities whose accounts are required to be audited — which co-operative housing societies are — the applicable deadline for AY 2018-19 was 30 September 2018, not 31 August 2018. The CPC had applied the August deadline, which applies to assessees not required to get their accounts audited.

The society had filed on 29 September — one day before the correct deadline. Yet the CPC treated this as a late filing and denied the Rs 8.23 lakh deduction. The Commissioner of Income Tax (Appeals) upheld the CPC’s action, and the society approached the ITAT.

The Tribunal found no ambiguity in the facts. The assessee was a co-operative housing society with mandatory audit requirements. The correct deadline was 30 September. The return was filed on 29 September. It was, by any measure, an on-time filing.

The ITAT further noted that the deduction itself had not been challenged on merits — at no point did the department argue that the interest income was ineligible for deduction under Section 80P. The sole basis for denial was the alleged late filing, and once that premise collapsed, so did the entire disallowance.

The Tribunal set aside the CIT(A)’s order and directed the Assessing Officer and CPC to allow the Section 80P deduction and recompute the society’s income accordingly.

Parties: Duru Mahal Cooperative Housing Society Limited (Appellant) vs. Circle 19(3), Mumbai, Income Tax Department (Respondent)

Tribunal: Income Tax Appellate Tribunal, “H (SMC)” Bench, Mumbai

Coram: Smt. Beena Pillai (Judicial Member) and Shri Jagadish (Accountant Member)

Date of Hearing: 10 June 2026

Date of Pronouncement: 16 June 2026

ITA Number: ITA No. 1320/Mum/2026

Assessment Year: 2018-19

Key Aspects of the Order:

• The CPC and CIT(A) both incorrectly held that the due date for filing the return was 31 August 2018
• The correct due date for a co-operative housing society subject to audit under Section 139(1) for AY 2018-19 was 30 September 2018
• The society filed its return on 29 September 2018 — one day before the actual deadline
• Section 80AC bars deductions if a return is filed after the due date under Section 139(1); since the return was timely, this bar did not apply
• The department never challenged the eligibility of the deduction on substantive grounds — only the alleged delay
• The ITAT directed the CPC/AO to allow the Rs 8,23,830 deduction and recompute income

How the Society Was Saved by One Day: The society filed its return on 29 September 2018. Had it filed on 30 September or later, even the correct deadline would have been missed. The authorities had assumed a wrong deadline of 31 August, which would have made the September filing appear late by nearly a month. It was only on appeal before the ITAT that the correct legal position — an audit-mandatory entity gets until 30 September — was properly applied, vindicating the society’s timely compliance and restoring its full deduction.

Also Read: Cancellation Loss Allowed – But Only in the Right Year: Key ITAT Ruling for Mumbai Builders

The post Mumbai Co-op Housing Society Wins Rs 8.23 Lakh Tax Battle After Filing Return a Day Early appeared first on Square Feat India.

The case, Nirman Realtors and Developers Ltd. vs. Circle-2(3)(1) (ITA No. 3447/MUM/2025, Assessment Year 2012-13), was pronounced on January 22, 2026. It deals with two major issues that affect almost every Mumbai builder who has faced project delays, buyer cancellations, or department jurisdiction changes during the 2011–2015 period.

The Background: What Went Wrong with the Sea Vista Project?

Nirman Realtors was developing a premium residential project called Sea Vista in Mahalaxmi, one of Mumbai’s most sought-after locations near the racecourse and close to the Arabian Sea. Like most real estate companies at the time, the builder followed the Percentage Completion Method — recognising revenue and profit as construction progressed, even before handing over flats.

In the financial year 2010–11 (Assessment Year 2011–12), the company had received bookings/advances from three buyers:

• Ashwini Pathak
• Meenal Amit Israni
• Ruthai International

It recognised about 30% of the sale value as revenue in its books for that year.

However, the project faced significant delays due to issues under the Joint Development Agreement (JDA) with the land owner/partner, Effile Properties Pvt. Ltd. The buyers eventually cancelled their bookings, and the builder refunded their advances.

In the next financial year (2011–12, Assessment Year 2012–13), the company reversed the previously booked sales and claimed a loss/deduction of ₹1,84,86,824 (approx. ₹1.85 crore) under the head “Other Allowances”.

The Assessing Officer completely disallowed this claim, saying there was insufficient proof of genuine cancellations. The matter reached the Commissioner of Income-tax (Appeals) and finally the ITAT.

Big Relief No. 1: Old Scrutiny Assessments Are Safe After Jurisdiction Change

Many builders feared that assessments completed during the Income Tax Department’s cadre restructuring (around 2014–15) were invalid because the new Assessing Officer did not issue a fresh notice under Section 143(2).

In this case:

• The original scrutiny notice u/s 143(2) was validly issued on 22 September 2014 by the Deputy Commissioner of Income-tax, Circle-8(2), Mumbai (when he had jurisdiction).
• Later, due to cadre restructuring, the case moved to the Assistant Commissioner of Income-tax, Circle-10(3)(1), Mumbai.
• The new officer issued a fresh enquiry notice u/s 142(1) and completed the assessment — but did not issue another 143(2) notice.

The builder argued the entire assessment was void, relying on an earlier Bangalore ITAT decision (Golf View Homes Ltd.).

ITAT’s clear ruling: No fresh 143(2) notice is required after an administrative jurisdiction transfer (cadre restructuring), if the original notice was validly issued within time by an officer who had jurisdiction at that moment. The transferee officer can continue the proceedings from where they left off.

This part of the order is a major relief for builders with pending appeals from AY 2011-12 to 2015-16. It means thousands of old scrutiny assessments are not automatically bad in law just because of a department shuffle.

Big Relief No. 2 (With a Catch): Cancellation Loss Is Allowed — But Only in the Correct Year

The ITAT accepted the principle that if revenue was recognised earlier under the percentage completion method and the booking is later genuinely cancelled with refund of money, the builder can reverse that revenue and claim the corresponding loss in the year the cancellation actually happens.

However, the tribunal agreed with the CIT(A) that not the entire ₹1.85 crore was allowable in AY 2012-13.

From the project ledgers submitted:

• Reversal for Meenal Amit Israni (₹95,85,000) was booked on 31 March 2012 → eligible in AY 2012-13.
• Reversal for Ashwini Pathak (₹67,50,000) was booked on 10 May 2012 → technically falls in next year.
• Reversal for Ruthai International (₹93,00,000) was booked on 31 March 2014 → much later.

More importantly, the sales ledger for Sea Vista already showed net sales of ₹5,38,65,000 after deducting some cancellations. If the Profit & Loss Account already reflected net figures, allowing an extra deduction would result in double benefit (claiming the same loss twice).

ITAT’s direction: The matter is sent back to the Assessing Officer to verify:

• Whether the Profit & Loss Account showed gross sales (₹6,39,00,000) before any reversals, or already net of cancellations.
• The exact year each reversal was accounted for.
• Genuineness of cancellations (ledgers, refund proofs, arbitration orders if any).
• Allow the eligible portion only — ensuring no double deduction.

The ground was allowed for statistical purposes — meaning the builder can get relief after proper verification, but not the full amount automatically.

What This Means for Mumbai Builders and Homebuyers

For developers:

• Cancellation losses are real and allowable — but timing is critical. Book reversals in the exact financial year the cancellation and refund occur.
• Keep strong documentation: cancellation letters, refund bank statements, buyer communications, JDA-related orders.
• Old scrutiny cases from the cadre restructuring period are largely protected — a big relief for appeals still pending.

For homebuyers: This order does not directly affect you, but it shows how builders manage the financial hit when projects get delayed and bookings are cancelled. If your booking was cancelled and money refunded, the builder may be able to reduce taxable income only if they follow these strict timing and proof rules.

Bottom Line

The ITAT Mumbai order brings much-needed practical guidance for the real estate sector on two evergreen issues: validity of old assessments after department changes, and tax treatment of booking cancellations due to project delays. While the builder did not get full relief on the ₹1.85 crore claim, the ruling protects the assessment process and confirms that genuine reversals are deductible — provided they are correctly timed and documented.

Developers with similar disputes should immediately review their pending appeals and accounting entries in light of this decision.

Also Read: MahaRERA Rules Developer Cannot Forfeit Entire Booking Amount Upon Cancellation

The post Cancellation Loss Allowed – But Only in the Right Year: Key ITAT Ruling for Mumbai Builders appeared first on Square Feat India.