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Facts
The assessee society's appeals concerning assessment years 2020-21 and 2022-23 were dismissed in limine by the CIT(A) due to a delay in filing. The assessee argued that the delay was due to the assessment order being sent to an ex-employee's email address and requested condonation, citing substantial justice principles and Supreme Court judgments. The appeals also involved challenges to penalties levied under section 270A and disallowances of deductions under section 80P.
Held
The Tribunal, citing Supreme Court decisions emphasizing substantial justice over technicalities, held that the CIT(A) erred in dismissing the appeals solely on the ground of delay without considering the merits. The Tribunal restored the appeals to the CIT(A) with a direction to condone the delay and decide the matters on merit. For penalty appeals, the Tribunal observed that penalty under section 270A cannot be levied on amounts subsequently allowed as deduction by the Tribunal, and set aside the penalty on the allowed deduction amounts, also directing cancellation of penalty on a debatable issue.
Key Issues
Whether the CIT(A) was justified in dismissing the appeals due to delay without adjudicating on merits, and whether penalties under section 270A were leviable on amounts subsequently allowed as deduction under section 80P or on debatable issues.
Sections Cited
270A, 80P, 143(2), 142(1), 144, 144B, 80P(2)(a)(i), 80P(2)(d)
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
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER 44 & 45/PUN/2026 Assessment years : 2022-23, 2022-23 & 2020-21 Sharadchandra Nagari Sahakari ITO, Ward 10(1), Pune Patsanstha Maryadit Vs. At Post – Rajuri, Taluka – Junnar, Dist. Pune – 412411 PAN: AAABS1016L (Appellant) (Respondent) Assessee by : Shri Abhay Avachat Department by : Shri Gaurav K Singh, JCIT Date of hearing : 25-03-2026 Date of pronouncement : 26-03-2026 O R D E R PER BENCH:
08.12.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2022-23 confirming the penalty levied by the Assessing Officer u/s 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). filed by the assessee is directed against the order dated 20.11.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2022-23 confirming the addition of Rs.1,25,13,425/- made by the Assessing Officer as ‘Income from other sources’. filed by the assessee is directed against the order dated 18.12.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2020-21 confirming the penalty levied by the Assessing Officer u/s 270A of the Act. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assessee is a body of individuals and had filed its return of income for the year under consideration declaring total income of Rs.6,09,420/-. The case was selected for scrutiny under CASS. Accordingly, statutory notice u/s 143(2) of the Act was issued and served on the assessee. Thereafter, notice u/s 142(1) of the Act along with a questionnaire was issued and served on the assessee. However, there was no response from the side of the assessee for which the Assessing Officer completed the assessment u/s 144 r.w.s. 144B of the Act and made addition of Rs.1,25,13,425/- by rejecting the claim of deduction u/s 80P of the Act.
Since there was a delay in filing of the appeal before the Ld. CIT(A) / NFAC by 299 days, the Ld. CIT(A) / NFAC did not condone the delay on the ground that the assessee failed to give sufficient reason for not filing the appeal within the prescribed time frame. He, therefore, dismissed the appeal in limine.
Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds:
Each ground is taken without prejudice to each other On the facts and in the circumstances of the case and in law and 1. The learned AO has erred in not considering and in not allowing deduction claimed by Assessee Society under section 80P(2) of Rs.1,25,13,425 in respect of interest earned on FDs with coop banks and the learned CIT (A) erred in disallowing and confirming the same.
2. The learned AO has erred in disallowing deduction claimed by Assessee Society u/s 80P is respect of interest earned from coop banks despite compliance with relevant provisions of the Act and the learned CIT(A) erred in confirming the same.
3. Interest earned from FDs with coop banks is deductible u/s 80P(2)(a)(i) as well as u/s 80P(2)(d) of the Act and the said issue is covered in favour of assessee by virtue of ITAT judgments in other years.
4. The learned CIT Appeals erred in dismissing Assessee's appeal by rejecting delay condonation request and without going into merits of the case. The appellate proceedings, thus, suffer from principles of natural justice and needs to be set aside.
5. The Assessee Society prays before your honour to afford it and allow an opportunity of being heard in interest of natural justice and of hearing on merits of the case as well, before the lower authorities.
6. The Assessee Society hereby requests for allowing any other relief as available under the law.
7. The Assessee Society craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal.
The Ld. Counsel for the assessee at the outset submitted that the assessment order was sent to the e-mail ID of an employee who had left the service by that time and did not inform the assessee for which the assessee could not file the appeal before the Ld. CIT(A) / NFAC within the stipulated time. Relying on various decisions of the Co-ordinate Bench of the Tribunal submitted that the issue is fully covered in favour of the assessee and therefore the Ld. CIT(A) / NFAC should not have dismissed the appeal on account of delay and should have decided the appeal on merit. He accordingly submitted that he has no objection if the matter is restored to the file of the Ld. CIT(A) / NFAC with a direction to condone the delay in filing of the appeal and decide the issue on merit.
The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that due to late filing of the appeal by 299 days, the Ld. CIT(A) / NFAC did not admit the appeal holding that the assessee failed to give sufficient reason for the delay in filing of the appeal. It is the submission of the Ld. Counsel for the assessee that the delay in filing of the appeal was not intentional but due to mailing of the assessment order to the e-mail ID of one of the employees who had left the service and did not inform the assessee for which there was delay in filing of the appeal.
We find the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. reported in 167 ITR 471 (SC) has held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay after hearing the parties.
We find recently the Hon’ble Supreme Court in the case of Inder Singh Vs. The State of Madhya Pradesh reported in 2025 LiveLaw (SC) 339 has held as under: “14. There can be no quarrel on the settled principle of law that delay cannot be condoned without sufficient cause, but a major aspect which has to be kept in mind is that, if in a particular case, the merits have to be examined, it should not be scuttled merely on the basis of limitation.”
In the light of the above decisions of Hon’ble Supreme Court cited (supra) and considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(A) / NFAC with a direction to condone the delay in filing of the appeal and decide the issue on merit and as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to make its submissions, if any, on the appointed date without seeking any adjournment under any pretext failing which the Ld. CIT(A) / NFAC is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised
by the assessee are accordingly allowed for statistical purposes.
11. After hearing both the sides, we find the Assessing Officer levied penalty of Rs.21,96,653/- being the penalty @ 50% of tax on the under-reported income of Rs.1,25,13,425/-. Since the assessee filed the appeal with a delay of 126 days before the Ld. CIT(A) / NFAC, he did not admit the appeal on account of delay holding that the assessee failed to give sufficient reason for the delay in filing of the appeal. In the preceding paragraphs while adjudicating the quantum appeal we have restored the issue to the file of the Ld. CIT(A) / NFAC with a direction to condone the delay in filing of the appeal and decide the issue on merit. Following similar reasonings we restore the issue of levy of penalty u/s 270A of the Act also to the file of the Ld. CIT(A) / NFAC with a direction to condone the delay in filing of the appeal and decide the issue on merit. The grounds raised by the assessee are accordingly allowed for statistical purposes.
12. After hearing both the sides, we find the Assessing Officer in the order passed u/s 143(3) of the Act disallowed the claim of deduction u/s 80P of the Act amounting to Rs.1,33,50,608/- and thereafter initiated penalty proceedings u/s 270A of the Act. In absence of any response from the side of the assessee, the Assessing Officer levied penalty of Rs.22,82,973/- u/s 270A of the Act.
In appeal, the Ld. CIT(A) / NFAC sustained the penalty levied by the Assessing Officer by observing as under: 14. Aggrieved with such order of the Ld. CIT(A) / NFAC in confirming the levy of penalty, the assessee is in appeal before the Tribunal by raising the following grounds:
Each ground is taken without prejudice to each other. On the facts and in the circumstances of the case and in law and 1. The learned AO erred in levying penalty of Rs.22,82,973/- u/s 270A and the learned CIT(A) erred in confirming the same.
2. Without considering merits of the case, requisite provisions and judicial pronouncements, the learned AO erred in levying penalty of Rs.22,82,973/- u/s 270A and the learned CIT (A) erred in confirming the same.
3. The learned AO has erred in upholding and concluding that there is under reporting of income in Assessee's case.
4. The penalty order and proceedings suffer from limb issue and lack of proper satisfaction.
5. The learned CIT Appeals erred in dismissing Assessee's appeal for non- submission and without going into merits of the case The appellate proceedings, thus, suffer from principles of natural justice and needs to be set aside.
6. The Assessee Society prays before your honour to afford and allow it an opportunity of being heard on merits of the case before the lower authorities.
7. The penalty levied by the AO on issue of disallowance of deduction claimed by assessee u/s 80P(2) in respect of interest earned on FDs with Coop banks is not sustainable and valid. Further the NFAC has also erred in sustaining the said levy of penalty since appeal of assessee was decided in its favour by the Pune tribunal judgments by allowing deduction u/s 80P. Thus, no penalty can be levied / sustained on the issues which are ultimately decided in favour of assessee since there can be no underreporting of income.
8. The computation and quantum of penalty is incorrect since the JAO has passed order giving effect to the ITAT's appeal.
9. No penalty can be levied on the disputed and/or the covered/settled issues.
10. The Assessee Society craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal.
The Ld. Counsel for the assessee at the outset filed a copy of the order of the Tribunal in assessee’s own case and submitted that the quantum appeal travelled upto the Tribunal and the Tribunal vide order dated 24.03.2025 for assessment year 2020-21 has allowed the deduction u/s 80P of the Act to the extent of Rs.1,32,41,080/- and confirmed the disallowance of Rs.1,09,529/- being the deposit with MSEDCL.
So far as the disallowance of interest of Rs.1,09,529/- u/s 80P(2)(d) of the Act is concerned, he submitted that the Pune Bench of the Tribunal in the case of Bhagyalaxmi Nagri Sahakari Patsanstha Meryadit vs. ITO vide & 706/PUN/2021, order dated 14.03.2022 for assessment years 2017-18 and 2018-19 has allowed the claim of deduction u/s 80P of the Act. He accordingly submitted that the penalty levied by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC is liable to be deleted.
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.1,33,50,608/- by rejecting the claim of deduction u/s 80P of the Act. We find the Ld. CIT(A) / NFAC confirmed the addition and dismissed the appeal filed by the assessee in the quantum proceedings. The Assessing Officer thereafter initiated penalty proceedings u/s 270A of the Act and levied penalty of Rs.22,82,973/- being 50% of tax on the under-reported income of Rs.1,33,50,608/- which has been upheld by the Ld. CIT(A) / NFAC. We find when the assessee challenged the order of the Ld. CIT(A) / NFAC confirming the disallowance u/s 80P(2), the Tribunal vide order dated 24.03.2025 allowed the deduction u/s 80P of the Act to the extent of Rs.1,32,41,080/- and confirmed the disallowance of Rs.1,09,529/- by observing as under: “7. We have heard rival contentions and perused the records placed before us. We observe that the assessee which is a co-operative society has declared income of Rs.3,92,570/- after claiming deduction u/s 80P at Rs.1,33,50,608/-. We also observe that during the year the assessee society has earned interest income of Rs.18,96,95,893/- and has made interest payments of Rs.13,78,57,308/-. Further, the net total income of Rs.1,37,43,180/- has been assessed after considering the interest income earned from surplus funds deposited with cooperative banks at Rs.4,15,27,813/-. We observe that since the cooperative banks are basically cooperative societies, therefore, the interest earned from cooperative banks are clearly eligible for deduction u/s 80P(2)(d) of the Act and this view has been consistently followed by the Co-ordinate Bench of Tribunal in plethora of decisions including that of Samarth Nagari Shakari Path Sanstha Maryadit (supra) and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in order dated 27.05.2022. Therefore, in view of the above, the interest income from cooperative banks at Rs.4,15,27,813/- is eligible for deduction u/s 80P(2)(d) of the Act. However, deposit with MSEDCL at Rs.1,09,529/-, Ld. Counsel for the assessee failed to furnish any judicial precedent, therefore, disallowance to the extent of Rs.1,09,529/- is hereby confirmed. In view of the above, against the total disallowance u/s 80P of the Act at Rs.1,33,50,608/-, we allow the deduction u/s 80P of the Act to the extent of Rs.1,32,41,080/- and confirm the disallowance of Rs.1,09,529/-. Effecting grounds of appeal raised by the assessee are partly allowed.”
19. Therefore penalty u/s 270A is not leviable on the amount of Rs.1,32,41,080/- and is liable to be deleted. We, therefore, delete the penalty leviable on the amount of Rs.1,32,41,080/-.
20. Now coming to the disallowance of Rs.1,09,529/- being the interest on deposit with MSEDCL, we find the Co-ordinate Bench of the Tribunal in the case of Bhagyalaxmi Nagri Sahakari Patsanstha Meryadit vs. ITO (supra) has allowed the claim of deduction u/s 80P(2) of the Act on account of interest income on security deposit with MSEDCL by observing as under: “6. The other point raised in this appeal is against the denial of deduction u/s.80P(2) on the interest income of Rs.20,000/- on security deposit which was parked with MSEDCL for carrying on the business of collection of MSEDCL bills. Tribunal in Banganga Nagri Sah. Patsanstha Ltd. (supra) as a business activity, whose income is eligible for deduction u/s.80P(2), the instant interest income of Rs.20,000/- on security deposit with MSEDCL for carrying on the business of bill collection, which is a part and parcel of the overall activity of such business, cannot be accorded a different character. I, therefore, order to grant deduction on interest on security deposit with MSEDCL amounting to Rs.20,000/-.”
21. Thus, the issue, although has been decided against the assessee for want of furnishing the details, however, is a debatable issue. It has been held in various decisions that penalty cannot be levied on account of addition which is a debatable issue. We accordingly set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to cancel the penalty levied by the Assessing Officer u/s 270A of the Act for assessment year 2020-21 on the amount of Rs.1,09,529/-. The grounds raised by the assessee are accordingly allowed.