S-8541, THATHIYAMPATTY PACCS LTD.,SALEM vs. ITO, EXEMPTIONS WARD,, SALEM

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ITA 1496/CHNY/2026Status: DisposedITAT Chennai25 May 2026AY 2021-224 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that since the assessment order, which formed the basis for the penalty, was set aside and restored for fresh adjudication, the consequential penalty cannot be sustained independently. The penalty issue requires fresh examination based on the outcome of the assessment.

What were the facts?

The assessee, an agricultural co-operative credit society, claimed deduction u/s.80P, which was disallowed, leading to additions under sections 68, 115BBE, and 69A. Consequently, penalty proceedings u/s.270A were initiated.

What were the issues?

Whether penalty proceedings u/s.270A can be sustained when the underlying assessment order has been set aside and restored for fresh adjudication. Whether the assessee was provided adequate opportunity by the lower appellate authority.

Which sections of the Income-tax Act were involved?

Section 80P,Section 68,Section 115BBE,Section 69A,Section 143(3),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI ABY T VARKEY & SHRI S. R. RAGHUNATHA

Hearing: 12.05.2026Pronounced: 25.05.2026

आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI श्री एबी टी वर्की, न्याययर्क सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1496/Chny/2026 ननिाारण वर्ा / Assessment Year: 2021-22 S-8541, Thathiyampatty Primary The Income Tax Officer, Agro Co-op. Credit Society Limited, vs. Exemption Ward Sikkanampatti, Kadayampatti Salem. Salem – 636 309. [PAN: AAEAS-6973-M] (प्रत्यथी/Respondent) (अपीलाथी/Appellant)

अपीलाथी की ओर से/Appellant by : Mr. T.Vasudevan, Advocate प्रत्यथी की ओर से/Respondent by : Ms. Gouthami Manivasagam, Addl.CIT सुनवाई की तारीख/Date of Hearing : 12.05.2026 घोर्णा की तारीख/Date of Pronouncement : 25.05.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM :

The present appeal is filed by the assessee against the order dated 16.01.2026 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the penalty order dated 22.06.2023 passed u/s.270A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2021-22.

:-2-: ITA. No:1496/Chny/2026. 2. The brief facts of the case emanating from the records are that the assessee is a primary agricultural co-operative credit society and has filed its return of income on 15.03.2022 for A.Y 2021-22, declaring total income of Rs.NIL. The case was selected for scrutiny assessment under CASS to verify as to whether the assessee is entitled to claim deduction u/s.80P of the Act, accordingly, statutory notices were issued to the assessee and by calling for details. In response, the assessee partly submitted the reply along with supporting documents for verification. On perusal of the documents submitted by the assessee and information available with the department, the assessment was completed by passing an assessment order u/s.143(3) of the Act dated 22.12.2022 by making an addition to the tune of Rs.9,99,28,505/- on account of disallowance of deduction claimed u/s.80P, Unexplained cash credit u/s.68 r.w.s 115BBE and Unexplained money u/s.69A r.w.s 115BBE of the Act. Consequent to the assessment, penalty proceedings u/s.270A of the Act was also initiated and statutory notices were issued. Since, the assessee did not respond to any of the notices and hence the AO passed an exparte penalty order u/s.270A of the Act dated 22.06.2023 by levying penalty of Rs.3,64,943/- for alleged under reporting of Income. Aggrieved by the penalty order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi on 13.07.2023.

3.

At the outset, we observed that ld.CIT(A) has provided three opportunities to the assessee to appear for hearings as detailed in paragraph 2 of the ld.CIT(A) order to support the appeal of the assessee. However, the assessee chose to be silent and did not respond to any of the notices and hence, the ld.CIT(A), NFAC dismissed the appeal filed by the assessee by confirming the order of the AO by passing a penalty order dated 16.01.2026. Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us.

4.

Before us, the ld.AR for the assessee submitted that the ld.CIT(A) was not justified in confirming levy of penalty without affording adequate opportunity

:-3-: ITA. No:1496/Chny/2026. to the assessee to represent in the appeal hearing and without ensuring the notice has reached the assessee. The ld.AR also brought to our attention that the ld.CIT(A) vide his order dated 07.04.2026 has remanded the assessment, denovo to the Assessing Officer, since the assessee had not participated completely in the assessment proceedings. Since, the penalty levied is based on the above said assessment order, the ld.AR prayed to set aside the order of the ld.CIT(A) and give one more opportunity before the Assessing Officer by directing the Assessing Officer to decide the matter afresh along with the assessment.

5.

Per contra, the ld.DR fairly agreed for remitting the issue back to the Assessing Officer.

6.

We have heard the rival submissions and perused the materials available on record. It is observed that the impugned penalty u/s.270A of the Act has been levied consequent to the assessment order passed u/s.143(3) of the Act dated 22.12.2022. It is further noticed from the submissions of the ld.AR that the ld.CIT(A), vide order dated 07.04.2026, has already set aside the assessment order and restored the matter to the file of the AO for denovo adjudication, primarily on the ground that the assessee had not effectively participated in the assessment proceedings.

7.

In our considered opinion, when the very foundation, namely the assessment order on the basis of which the penalty proceedings were initiated, has itself been restored for fresh consideration, the consequential penalty levied u/s.270A of the Act cannot be sustained independently at this stage. Since the quantum additions are yet to attain finality, the issue relating to levy of penalty would also require fresh examination depending upon the outcome of the assessment proceedings.

:-4-: ITA. No:1496/Chny/2026. 8. Accordingly, in the interest of justice, we set aside the orders of the lower authorities in respect of the penalty proceedings and remit the matter back to the file of the AO with a direction to reconsider and decide the penalty issue afresh in accordance with law, consequent to and in consonance with the outcome of the assessment proceedings, after affording reasonable opportunity of being heard to the assessee.

8.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 25th May, 2026 at Chennai.

Sd/- Sd/- (एबी टी वर्की ) (एस. आर. रघुनाथा) (ABY T VARKEY) (S. R. RAGHUNATHA) न्याययर्क सदस्य/Judicial Member लेखासदस्य/Accountant Member चेन्नई/Chennai, दिन ांक/Dated, the 25th May, 2026 Devadas आदेश की प्रतिलिपि अग्रेपिि/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. ववभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF DEVADAS Digitally signed by DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.05.27 09:52:16 +05'30'

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