P PUJYA BHALCHANDRA MAHARAJ NAGARI SAHKARI PAT SANSTHA MARYADIT KHAREPATAN,SINDHUDURG vs. INCOME TAX OFFICER,WARD-1 KUDAL, KUDAL

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ITA 1758/PUN/2026Status: DisposedITAT Pune30 July 2026AY 2017-186 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the quantum addition, which formed the basis of the penalty, was set aside by a previous Tribunal order for denovo adjudication, the penalty cannot be sustained. The penalty order was consequently set aside.

What were the facts?

The assessee, a trust, failed to file its return of income and respond to notices. The Assessing Officer treated cash deposits made during demonetisation as unexplained income and levied penalty. The CIT(A) upheld the penalty.

What were the issues?

Whether penalty under Section 271AAC can survive when the underlying quantum addition has been set aside for fresh adjudication. The validity of penalty proceedings in light of the set-aside assessment order.

Which sections of the Income-tax Act were involved?

Section 271AAC(1),Section 69A,Section 115BBE,Section 144,Section 139(1),Section 142(1),Section 133(6),Section 80P,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA

For Appellant: Shri Pramod S. Shingte
For Respondent: Shri Sandeep Sathe
Hearing: 30.07.2026Pronounced: 30.07.2026

PER ASTHA CHANDRA, JUDICIAL MEMBER :

This appeal filed by the assessee is directed against the order dated 26.02.2026 of the Ld. National Faceless Appeal Centre/NFAC), Delhi passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of Penalty order dated 18.09.2021 passed u/s.271AAC(1) of the Act.

2.

Briefly stated, the facts of the case are that the assessee is a trust and did not file its return of income for Assessment Year 2017-18 within the time prescribed u/s. 139(1) of the Income-tax Act, 1961 ("the Act"). Since the assessee was required to furnish its return of income in the manner prescribed under Rule 12 of the Income-tax Rules, 1962, a notice under section 142(1) of the Act dated

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12.12.2017 was issued through the ITBA portal. However, the assessee neither furnished the return of income nor filed any reply in response to the said notice. Based on the Statement of Financial Transactions (SFT) available with the Department, it was noticed that the assessee had deposited cash aggregating to Rs. Rs.25,95,910/- in the bank account maintained with Sindhudurg District Central Co-operative Bank Ltd., Kharepatan, during the demonetisation period. Accordingly, the learned Assessing Officer ("Ld. AO") formed a reason to believe that income chargeable to tax had escaped assessment. The Ld. AO also issued a notice under section 133(6) of the Act to the bank and, on the basis of the information received, observed that the assessee had deposited cash of Rs. Rs.3,73,93,476/-, out of which Specified Bank Notes (SBNs) amounted to Rs. 23,72,000/-. In the absence of any explanation from the assessee regarding the nature and source of the cash deposits, the Ld. AO completed the Best Judgment assessment and treated the cash deposits of Rs.3,73,93,476/- as unexplained money u/s. 69A r.w.s. 115BBE of the Act. Since the assessee had also failed to comply with the notices issued under section 142(1) of the Act, ld. Assessing Officer initiated penalty proceedings u/s.271AAC(1). As there was continued non- compliance with the statutory notices, penalty of Rs.1,83,237/- was levied by the Assessing Officer.

3.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) ["Ld. CIT(A)"], contending

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that the cash deposits represented deposits received from the members of the society and that its income was exempt under section 80P of the Act. However, the assessee did not succeed, as the Ld. CIT(A) upheld the penalty levied by the Assessing Officer u/s. 271AAC of the Act, observing that the assessee could not seek re-adjudication of the quantum additions in penalty proceedings unless the assessment order itself had been set aside.

4.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before this Tribunal.

5.

At the time of hearing, the learned counsel for the assessee submitted that, vide order dated 05.03.2025 passed by the Tribunal in ITA No.2604/PUN/2024, the quantum addition had been set aside to the file of the Ld. CIT(A)/NFAC for denovo adjudication. It was therefore contended that the penalty levied u/s. 271AAC of the Act does not survive.

6.

The learned Departmental Representative, while placing reliance on the order of the Ld. CIT(A), fairly conceded that the issue relating to the quantum addition had indeed been restored to the file of the Ld. CIT(A) by virtue of the Tribunal's order dated 05.03.2025.

7.

We have heard the rival submissions and perused the material available on record. The assessee is a Credit Co-operative Society engaged in the business of accepting deposits from its members and providing credit facilities. The sole issue

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involved in the present appeal relates to the levy of penalty under section 271AAC of the Act amounting to Rs. 1,83,237/-, consequent to the addition of Rs.23,72,000/- made u/s. 69A of the Act.

8.

Before us, the learned counsel for the assessee drew our attention to the Tribunal's order in ITA No.2604/PUN/2024 dated 05.03.2025, wherein the quantum addition was restored to the file of the Ld. CIT(A) for denovo adjudication. We have perused the said order and find that the Tribunal restored the issue relating to the quantum addition with the following observations:

“6. Having given our thoughtful consideration to the submissions made by the Ld. Counsel for the assessee and the facts of the case, we are of the opinion that larger interest of justice has to be taken into consideration while adjudicating the matters. None should be deprived of an adjudication on merits unless the Court of law or the Tribunal/Appellate Authority finds that the litigant has deliberately and intentionally delayed filing of the appeal, that he is careless, negligent and his conduct is lacking in bonafides. Further, the assessee would not have gained anything in filing the appeal with delay. Therefore, the delay of about nine months occurred before the ld.CIT(A) is condoned in light of various decisions including that of decision of Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. MST Katiji and others 167 ITR 471. 7. Coming to merits of the issue, we observe that the assessment order in this case was completed exparte u/s.144 of the Act and the ld.CIT(A) dismissed in the appeal of the assessee in limine without condoning the delay. Considering the facts in entirety and the submissions made by the Ld. Counsel for the assessee in the interest of natural justice, we are of the opinion that one more opportunity needs to be given to the assessee for representing its case before the ld.CIT(A)/NFAC. In view thereof, without dwelling into merits of the issue, the issues on merits are being remitted to the file of ld.CIT(A)/NFAC for denovo adjudication. The assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause, failing which the ld.CIT(A)/NFAC shall be free to proceed in accordance with law. Assessee is directed to provide proper email-id to the department for receiving notices through ITBA portal. Finding of the ld.CIT(A)/NFAC is set aside and Grounds of appeal raised by the assessee are allowed for statistical purposes.”

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9.

Since the very foundation of the penalty in the extant appeal, which is upon the quantum addition made u/s.69A of the Act, has been set aside by the Tribunal for fresh adjudication, the penalty levied u/s. 271AAC of the Act cannot be sustained at this stage. We, therefore, set aside the orders of the lower authorities and direct the Assessing Officer to delete the penalty. However, the Revenue shall be at liberty to take appropriate action, if so warranted, depending upon the outcome of the fresh adjudication in the quantum proceedings.

10.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 30th July, 2026.

Sd/- Sd/- (R. K. PANDA) (ASTHA CHANDRA) VICE PRESIDENT JUDICIAL MEMBER

पुणे Pune; दिन ांक Dated : 30th July, 2026 Satish

Digitally signed by Satish Kumar Madishetty Satish Kumar Madishetty Date: 2026.07.30 18:40:36 +05'30'

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आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to:

1.

अपील र्थी / The Appellant; प्रत्यर्थी / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘B’ Bench, Pune ग र्ड फ ईल / Guard file. 5. आदेशानुसार/ BY ORDER,

// True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune

S.No. Details Date Initials Designation 1 Draft dictated on 30.07.2026 Sr. PS/PS 2 Draft placed before author 30.07.2026 Sr. PS/PS Draft proposed & placed before the 3 30.07.2026 JM/AM Second Member Draft discussed/approved by Second 4 30.07.2026 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 30.07.2026 Sr. PS/PS 6 Kept for pronouncement on 30.07.2026 Sr. PS/PS 7 Date of uploading of Order 30.07.2026 Sr. PS/PS 8 File sent to Bench Clerk 30.07.2026 Sr. PS/PS Date on which the file goes to the Office 9 Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order

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