ASHISH CREDIT AND SUPPLY SAHAKARI MANDLI LTD.,AHMEDABAD vs. THE ITO, WARD-3(2)(1), AHMEDABAD

The grounds of appeal are as under:- “1.1 The order passed by U/s.250 passed on 10.10.2025 for A.Y. 2017- 18 by NFAC, [CIT(A)], Delhi (for short CIT(A)" upholding the penalty of Rs. 3,89,060/- levied u/s 270A by FAO for alleged misreporting of income in respect of deduction claimed u/s 80P(2)(a)(i) is wholly illegal, unlawful and against the principles of natural justice.

The assessee filed return of income for assessment year 2017-18 on 31-03-2018 declaring income at Rs. Nil. The case of the assessee was selected for scrutiny and subsequently the assessment order was passed u/s. 143(3) of the Act on 23-12-2019 thereby making addition of Rs. 6,58,664/- as disallowance deduction u/s. 80P and Rs. 7,47,490/- on account of cash deposit. Subsequently, the Assessing Officer issued show cause notice dated 23-12-2019 u/s. 270A of the Act in respect of penalty initiation for under-reporting of income as consequence of mis-reporting. The assessee did not file any reply and therefore the Assessing Officer imposed penalty of Rs. 3,89,016/- in respect of tax payable on mis-reporting of income relating to the addition of cash disallowance deduction u/s. 80P of the Act.

Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The ld. A.R. submitted that the assessee has claimed deduction u/s. 80P in respect of Ahmedabad District Co-operative Bank Ltd. and Bank of Baroda. The assessee is entitled for exemption u/s. 80P in respect of Ahmedabad District Co-operative Bank Ltd. to the extent of Rs. 4,68,227/-. Therefore, the component of interest earned by commercial bank i.e. Bank of Baroda is Rs. 1,90,137/- only. This cannot be termed as mis-reporting/underreporting as the assessee has under bonafide mistake. The ld. A.R. relied upon the decision of Hon’ble Supreme Court in case of CIT vs. Reliance Petro-Products Pvt. Ltd. (2010) 322 ITR 158 (SC).

The ld. D.R. relied upon the assessment order and the order of the CIT(A). The ld. D.R. also relied upon the penalty order.

Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the issue of deduction u/s. 80P(2)(a)(i) relating to interest earned from Co-operative Bank and Commercial Bank was in fact debatable issue and in fact in the present case, the assessee would have got the benefit of name u/s. 80P to the extent interest earned from Ahmedabad District Co- operative Bank Ltd.. This cannot be termed as mis-reporting of income or under-reporting of the total income. Therefore, the penalty levied u/s. 270A is not justifiable.

In the result, the appeal of the assessee is allowed.