SHARADCHANDRA NAGARI SAHAKARI PATSANSTHA MARYADIT,PUNE vs. ITO WARD -10(1), PUNE

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.

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.

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.

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.

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.

The Assessee Society hereby requests for allowing any other relief as available under the law.

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:

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.

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.

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:

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.

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.

The learned AO has erred in upholding and concluding that there is under reporting of income in Assessee's case.

The penalty order and proceedings suffer from limb issue and lack of proper satisfaction.

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.

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.

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.

The computation and quantum of penalty is incorrect since the JAO has passed order giving effect to the ITAT's appeal.

No penalty can be levied on the disputed and/or the covered/settled issues.

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 ITA No.1391/PUN/2024 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 ITA Nos.705 & 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 ITA No.1391/PUN/2024 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:

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/-.

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:

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.

In the result, the appeals filed by the assessee vide ITA Nos.43/PUN/2026 & 44/PUN/2026 are allowed for statistical purposes and ITA No.45/PUN/2026 is allowed.

The concerned Pr.CIT, Pune

DR, ITAT, ‘B’ Bench, Pune ग र्ड फ ईल / Guard file. 5. आदेशानुसार/ BY ORDER, ////