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As it is an admitted fact that 'No man can make a profit out of himself' which is the touchstone of mutuality concept. Reliance is placed on the decision of CIT vs West Godavari District Rice Millers Association (150 ITR 395) The A.P. High Court held that it is well settled that the surplus accruing to a mutual association is no income or profit at all for purpose of income tax, the test of mutuality being complete identity between the contributors and participants.

The assessee society was working on the concept of mutuality with an object of not for profit. Flats cannot be constructed separately by each member of the society therefore the flats were constructed by the society on the Principle of Mutuality. The Society appointed a Contractor to construct flats according to the approved map on the basis of per square feet rate with material and labour. Copy of agreement between society and contractor is enclosed and marked as Annexure-C. The Contractor started construction on the said land.

Thus the A.O. has wrongly stated that funds of unaccounted money of group housing society have been invested. Society did not have any business activity merely working on mutuality concept then how unaccounted money had been generated by the assessee society. The Ld. AO failed to prove the generation of unaccounted money in his order. The Ld. AO also failed to assess the income in the hands of original owner of the flats and the Ld. CIT (A) has confirmed the same without assigning cogent reason.