PRAKASHNAGAR CREDIT CO-OPERATIVE SOCIETY LIMITED,BENGALURU vs. INCOME TAX OFFICER WARD 2(2)(1), BENGALURU

Brief facts of the case are that assessee is a Co-operative Society under the Karnataka Co-operative Societies Act, 1959, filed its return of income on 18.11.2020 declaring a total income of Rs.2,65,930/-. Subsequently, the case of the assessee was selected for scrutiny and notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. On perusal of the ITR it is noticed that assessee earned income from loans and other income amounting to Rs.4,10,74,597/- and Rs.99,84,360/- respectively. Assessee has claimed deduction under section 80P of the Act for Rs.27,58,252/- against the net profit of Rs 30,24,185/-. On perusal of the return of income, the learned Assessing Officer [in short “AO”] disallowed a sum of Rs.1,21,53,108/- under section 80P(2)(a) of the Act and proceeded to initiate penalty proceedings under section 274 r.w.s. 270A of the Act. Assessee carried the matter before the learned CIT(A). The learned CIT(A) vide order dated 10.05.2024 partly allowed the appeal of the assessee by disallowing a sum of Rs.3,75,205/- as against the addition made by the learned AO for Rs.1,21,53,108/-. The learned AO, after passing the Order Giving Effect, levied a penalty of Rs. 84,712/- under section 270A(8) r.w.s. 270A(9) of the Act.

On being aggrieved by the order of the penalty, the assessee carried the matter before the learned CIT(A). The learned CIT(A) upheld the penalty levied by the learned AO and therefore dismissed appeal of the assessee.

On being aggrieved by the order of the learned CIT(A), assessee is in appeal before us. The learned Authorized Representative [in short ‘AR’] submitted that learned AO initiated penalty proceedings for “misreporting of income”. The notice for penalty issued stated that penalty for “under reporting which is in consequence of misreporting thereof” without striking the limb or the reason under which the penalty is levied as listed in Section 270A(9) of the Act.

Per contra, the learned Departmental Representative [in short ‘DR’] submitted that the learned AO has initiated penalty proceedings by stating in the Assessment Order which is due to misreporting of income and hence the penalty order passed by the learned AO is valid. He therefore pleaded that the order of the learned CIT(A) be upheld.

We have heard the rival contentions and perused the material available on record including the case laws cited by the learned AR.

It is admitted fact that the assessee has disclosed interest receipts which is being extracted in the order of the learned AO. However, the learned AO disallowed an amount of Rs.1,21,83,108/- stating that interest on investment in deposits with banks does not qualify for deduction under section 80P of the Act. However, the learned CIT(A) granted relief to the assessee vide Order dated 10.05.2024 by disallowing a sum of Rs.3,75,205/- and granting relief on the balance amount of Rs 72,483/-, Rs 6,82,480/- and Rs 1,10,52,940 by stating that deduction is available u/s 80P(2)(d). The learned AO passed Order Giving Effect to the order of learned CIT(A) dated 10.05.2024 and thereafter proceeded to levy

Section 270A of the Act has 2 limbs for which penalty can be imposed. The first limb is for underreporting of income specifically referred to in sub

The decision relied on by the assessee in the case of Schneider Electric South East Asia (HQ) Pte Ltd Vs. ACIT (International Taxation) in Writ Petition No.5111/2022 dated 28.03.2022 is distinguishable on the fact that in that case specification of limb relates to grant / denial of immunity from the imposing of penalty and not arising out of the notice issued. Further, in the instant case, assessee’s application for grant of immunity filed under section 270AA of the Act was not supported by any documentary evidences before the Revenue authorities or even before us. In these circumstances, we find that the AO has rightly imposed penalty and we do not wish to interfere in the order of the learned CIT(A) on this issue. Thus, the grounds raised by the assessee are dismissed.

The assessee has raised similar grounds for the AY 2018-19 in ITA No.471/Bang/2026. Since facts are identical and grounds are similar the findings in ITA No.417/Bang/2026 in the above paragraphs shall apply mutatis mutandis to the grounds raised in appeal in ITA No.471/Bang/2026.

In the result, appeals filed by the assessee in ITA No.417/Bang/2026 and ITA No.471/Bang/2026 are dismissed.