2023 (1) TMI 272 - AT - Income Tax

Penalty u/s 270A - deduction u/s 80P(2)(d) - Addition of a sum on the ground that the assessee was not entitled to deduction u/s 80P, since the receipt of income was not from the co-operative society - HELD THAT - On perusal of the computation of statement of income filed along with the return, it is clear that the assessee has not claimed deduction u/s 80P(2)(d) of the I.T.Act with reference to the interest income received from RECL. Since the assessee has not claimed deduction u/s 80P(2)(d) of the I.T.Act with reference to the interest income earned on investments with RECL, we find penalty u/s 270A of the I.T.Act cannot be imposed. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
Imposition of penalty under section 270A of the Income Tax Act for non-entitlement of deduction under section 80P for interest income received from Rural Electrification Corporation Limited (RECL) by a Cooperative Society for the assessment year 2018-2019.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore was directed against the order of the CIT(A) imposing a penalty under section 270A of the Income Tax Act amounting to Rs.1,85,214 for the assessment year 2018-2019. The assessee, a Cooperative Society, had filed a return declaring 'Nil' income after claiming deduction under section 80P of the Income Tax Act. However, the Assessing Officer made an addition to the income on the grounds of non-entitlement to the deduction under section 80P due to interest income received from RECL. The penalty was imposed after the Assessing Officer issued a show cause notice under section 270A and the subsequent rejection of the assessee's contentions by the CIT(A).

The assessee contended that no deduction under section 80P(2)(d) was claimed for the interest income received from RECL and that there was no underreporting or misreporting of income. The Tribunal noted that the computation of the statement of income filed by the assessee did not include a claim for deduction under section 80P(2)(d) for the interest income. Therefore, it was held that since the assessee did not claim the deduction, the penalty under section 270A of the Income Tax Act could not be imposed. Consequently, the appeal was allowed in favor of the assessee, and the penalty was set aside.

In conclusion, the Tribunal's decision was based on the fact that the assessee had not claimed the deduction under section 80P(2)(d) for the interest income from RECL, which was the basis for the penalty under section 270A. The Tribunal found that since there was no claim for the deduction, the penalty could not be upheld, leading to the allowance of the appeal filed by the assessee.

Judgment Delivered:
The appeal filed by the assessee was allowed, and the penalty imposed under section 270A of the Income Tax Act was set aside by the Appellate Tribunal ITAT Bangalore on January 5th, 2023.