2021 (5) TMI 376 - AT - Income Tax

Condonation of delay - Penalty u/s 271(1)(c) - assessee's claim for deduction under Sec. 80P(2)(d) of the interest income received denied - HELD THAT - On a perusal of the records, we find that the assessee society had candidly admitted that the delay in filing of the appeal had arisen because of their bonafide belief that as the quantum assessment was challenged before the CIT(A), thus, the penalty order passed by the A.O u/s 271(1)(c) would therein get merged and no separate appeal was required to be filed. Fact that the assessee had filed its appeal against the quantum assessment order passed by the A.O under Sec. 143(3), dated 02.12.2016 with the CIT(A) well within the prescribed time therein clearly rules out any lackadaisical approach on its part in dealing with its income-tax matters. Rather, there could also be no malafide reason on the part of the assessee in adopting any delaying tactics in filing of the appeal against the order passed by the A.O under Sec. 271(1)(c) As deposed by Shri. Sanjay D. Salvi, Chairman of the assessee society, after learning about the requirement of filing a separate appeal against the penalty order passed by the A.O under Sec. 271(1)(c) the assessee had deposited the requisite appeal fees on 22.08.2017. However, as the appeal was to be electronically filed and digital signatures of the assessee were required, therefore, some time would have been exhausted in doing the needful on the part of the assessee as well as its chartered accountant. We are unable to persuade ourselves to subscribe to the declining on the part of the CIT(A) to condone the delay involved in filing of the present appeal. Apart from that, as the assessee's claim for deduction under Sec. 80P(2)(d) of the interest income received by it from M/s. Saraswat Cooperative Bank Ltd. had been allowed by the CIT(A), thus, the very addition as regards which the impugned penalty under Sec. 271(1)(c) was imposed on the assessee does no more survive. - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Entitlement to deduction under Sec. 80P and penalty under Sec. 271(1)(c).

Issue 1: Condonation of delay in filing the appeal:
The appeal filed by the assessee involved a delay of 31 days, although initially claimed as 14 days. The assessee explained that they believed the penalty order would merge with the quantum assessment appeal before the CIT(A), thus no separate appeal was filed. The CIT(A) rejected the condonation of delay, leading to the dismissal of the appeal. However, the ITAT found the explanation reasonable, noting the timely filing of the quantum assessment appeal. The delay was due to genuine belief and procedural requirements for electronically filing the appeal. The ITAT concluded that the delay was justifiable and set aside the CIT(A)'s order, allowing the appeal.

Issue 2: Entitlement to deduction under Sec. 80P and penalty under Sec. 271(1)(c):
The assessee, a cooperative society, declared Nil income but was assessed by the A.O for interest income received from a cooperative bank. The A.O disallowed the deduction under Sec. 80P based on a Supreme Court judgment, resulting in an addition to the income. Penalty proceedings under Sec. 271(1)(c) were initiated. The CIT(A) allowed the deduction under Sec. 80P in a separate quantum appeal, making the basis for the penalty imposition redundant. The ITAT held that since the deduction was allowed, the penalty could not stand on its own and vacated the penalty imposed by the A.O. The appeal was allowed, and the penalty of ?33,000 was set aside.

In conclusion, the ITAT Mumbai allowed the appeal, condoning the delay in filing the appeal and vacating the penalty imposed under Sec. 271(1)(c) due to the allowance of deduction under Sec. 80P. The judgment emphasized the genuine belief of the assessee and the procedural aspects involved in electronically filing the appeal.