THE CHANOUR CO-OPERATIVE AGGRICULTURE SERVICE SOCIETY LIMITED,KANGRA vs. THE INCOME TAX OFFICER, WARD - DHARAMSHALA, DHARAMSHALA

The assessee is a primary agricultural credit society and PDS distribution society. It is engaged in the business of PDS and providing credit facilities to its members. The assessee carried out trading of PDS and non-PDS items. The Ld. AO held an opinion that profit earned on sale of non-controlled items would not be eligible for deduction u/s 80P. Accordingly, on proportionate basis, Ld. AO worked out profit on sale of non-PDS items as Rs.2.67 Lacs. Against the same, the assessee would be eligible for deduction of Rs.0.50 Lacs u/s 80P(2)(c).

The assessee also earned misc. income of Rs.1.16 Lacs. The Ld. AO held that these incomes would not be covered u/s 80P and accordingly, the same was brought to tax. Finally, the income was determined at Rs.3.83 Lacs as against ‘nil’ income as filed by the assessee. It could be seen that the deduction of Rs.0.50 Lacs u/s 80P(2)(c), though allowed by Ld. AO, was not considered in the computation of income. Against assessed income of Rs.3.83 Lacs, tax payable came to be Rs.1.15 Lacs. Consequently, Ld. AO levied impugned penalty u/s 270A for Rs.57,715/- for under-reporting of income.

During appellate proceedings, the assessee, inter-alia, stated that the claims were bona-fide claims. The assessee made true and full disclosure of his income in the return of income and claimed eligible deduction u/s 80P(2). All the particulars of the income were duly disclosed in the return of income and the assessee acted in a bona-fide manner. However, Ld. CIT(A) confirmed the penalty against which the assessee is in further appeal before us.

From the facts, it clearly emerges that the assessee being cooperative society is eligible to claim deduction u/s 80P. The Ld. AO, on proportionate basis, segregated the trading profits for PDS and non-PDS items. However, the said computations are merely mathematical computations only. The assessee, as per extant law, has maintained requisite books of accounts as well as its particulars of income. All the particulars of the income have duly been disclosed in the return of income. The assessment of income is based on the opinion of Ld. AO that the assessee would not be eligible to claim deduction on trading of non-PDS items and income from other sources. Even the computation of income is erroneous. Therefore, the facts of the case do not indicate that there was any attempt to under report the income, in any manner. The assessee, in our opinion, has acted in a bona-fide manner. Therefore, it is not a fit case for levy of penalty. By deleting the same, we allow the appeal.

The appeal stand allowed. Order pronounced on 22-04-2025.