SRI GOWRI PRIMARY AGRICULTYRAL CO-OPERATIVE SOCIETY LIMITED NO.W/22,ANAKAPALLE V. .INCOME TAX OFFICER, WARD-1, ANAKAPALLE

ITA 352/VIZ/2024

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The case involves Sri Gowri Primary Agricultural Co-operative Society Limited appealing against the penalty imposed by the Income Tax Officer (ITO) under section 270A of the Income Tax Act, 1961, for underreporting income. The society had initially claimed deductions under section 80P and provisions for bad debts, which were disallowed by the ITO, leading to a reassessed income and subsequent penalty. The CIT(A) upheld the penalty, which was contested in the Tribunal. The Tribunal's decision was based on the principle that penalties do not survive when the quantum addition itself is deleted, leading to a reduction in the penalty amount.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 46567 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 142(1); 143(2); 80P

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM श्री दुव्वुरु आरएल रेड्डी, उपाध्यक्ष एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE VICE-PRESIDENT & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.352/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2017-18) Sri Gowri Primary Agricultural Co-operative Society Limited W/22, Gavarapalem Raithu Sangam Street Anakapalle – 531002 Andhra Pradesh [PAN: AAHAS8727J] v. ITO – Ward – 1 Income Tax Office, Aayakar Bhavan Gandhi Nagar, Anakapalle – 531001 Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri GVN HARI, AR राजस्व का प्रतततितित्व/ Department Represented by : Dr. Aparna Villuri, Sr.AR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 16.12.2024 घोर्णध की तधरीख/Date of Pronouncement : 20.12.2024 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1067176138(1) dated 31.07.2024 for the I.T.A.No.352/VIZ/2024 Sri Gowri Primary Agricultural Co-operative Society Limited Page No. 2 A.Y.2017-18 arising out of order passed under section 270A of the Income Tax Act, 1961 (in short ‘Act’) dated 28.03.2023. 2. Brief facts of the case are that, Assessee is registered co-operative society under Adhra Pradesh Co-operative Societies Act, 1964. Assessee on 26.01.2018 filed its return of income for the A.Y. 2016-17 admitting a total income of Rs.NIL after claiming deduction under section.80P under VI-A of Rs.18,49,313/-. The case was selected for scrutiny under 'CASS' and accordingly, statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response, assessee submitted information as called for. During the course of assessment proceedings, it is noticed by the Ld.Assessing Officer [hereinafter in short “Ld. AO\"] that assessee claimed deduction under secion.80P under Chapter-VI-A of Rs. 18,49,313/- and also debited an amount of Rs.58,64,822/- towards provision for bad and doubtful debts. Ld. AO issued notice dated 22.11.2019 and asked assessee to show- cause, as to why, the deduction claimed under section 80P of the Act and expenditure claimed under provision for bad and doubtful debts, should not be disallowed. The assessee has not filed any reply to the notices. As assessee not complied to the notice, Ld. AO proceeded to complete the assessment and determined the income of the assessee at Rs.77,14,135/- by disallowing an amount of Rs.18,49,313/- as claimed under section 80P of the Act and Rs.58,64,822/- as claimed under provision for bad debts. Being aggrieved by the order of the Ld. AO, assessee preferred an appeal before the Ld. CIT(A) and I.T.A.No.352/VIZ/2024 Sri Gowri Primary Agricultural Co-operative Society Limited Page No. 3 filed its submissions. After considering the submissions, Ld. CIT(A) vide order dated 24.12.2019 partly allowed the appeal of the assessee. Consequent to the order dated 24.12.2019, Ld. AO passed a consequential order dated 25.01.2022 and determined the income of the assessee at Rs. 45,398/. 3. Subsequently, Ld. AO initiated penalty proceedings and issued notice under section 270A of the Act dated 15.03.2023 and asked the assessee why order imposing penalty should not be initiated. In response, assessee filed its reply and requested to drop the penalty proceedings. Not convinced with the submissions of the assessee, Ld. AO levied penalty for under reporting income considering Rs.2354254 + 1819313/- totalling to Rs.41,73,567/- and levied penalty of Rs.22,18,764/- being 200% of the tax payable of Rs. 11,09,382/-. 4. Being aggrieved by the order of the Ld. AO, assessee preferred appeal before Ld. CIT(A) and filed its submissions, after considering the submissions of the assessee, Ld. CIT(A) dismissed the appeal of the assessee. 5. Aggrieved by the order of the Ld. CIT(A), assessee is in appeal by raising following grounds of appeal : - ‘1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the penalty of Rs.22,78,764 levied by the assessing officer u/s 270A of the Act. 3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have held that penalty shall be restricted to Rs.14,028 being 100% of the tax payable on the difference of Rs.45,398 I.T.A.No.352/VIZ/2024 Sri Gowri Primary Agricultural Co-operative Society Limited Page No. 4 between income assessed consequent to the order of learned Commissioner of Income Tax (Appeals) in quantum appeal and the income returned by the appellant. 4. Any other ground that may be urged at the time of appeal hearing.” 6. At the time of hearing, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the quantum of penalty levied by the Ld. AO is erroneous. Ld. AO computed the total under reported income as Rs.41,73,567 (23,54,254+18,19,313) as against the correct amount of Rs.45,398/-. Further, Ld.AR submitted that Ld. CIT(A) ought to have held penalty shall be restricted to Rs.14,028 being 100% of the tax payable on the difference of Rs.45,398/- between income assessed consequent to the order of Ld. CIT(A) in quantum appeal and the income returned by the assessee. Ld.AR prayed to set-aside the order of the Ld. CIT(A). 7. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the orders of the Revenue Authorities. 8. We have heard both the sides and perused the material available on record. We notice that various judicial pronouncement have held that “The penalty does not survive when the quantum addition itself is deleted”. In the instant case, quantum addition was partly deleted by the Ld. CIT(A) vide order dated 20.12.2021. Therefore, levying of penalty on the total under reported income of Rs. 41,73,567 (23,54,254/- + 18,19,313/) is not justifiable. Further, we find merit in the submissions of the Ld.AR as the quantum addition is partly I.T.A.No.352/VIZ/2024 Sri Gowri Primary Agricultural Co-operative Society Limited Page No. 5 deleted, the penalty be restricted to tax applicable on income of Rs. 45,398/- [as per consequential order dated 25.01.2022] which come to Rs. 14,028/-. Accordingly, we direct the Ld. AO to recompute the penalty as per our above observation. Grounds raised by the assessee are allowed. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 20th December, 2024. Sd/- (दुव्वूरु आर.एल रेड्डी)) (DUVVURU RL REDDY) उपाध्यक्ष /VICE PRESIDENT Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखासदस्य/ACCOUNTANT MEMBER Dated: 20.12.2024 Giridhar, Sr.PS आदेश की प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Sri Gowri Primary Agricultural Co-operative Society Limited W/22, Gavarapalem Raithu Sangam Street Anakapalle – 531002 Andhra Pradesh 2. रधजस्व/ The Revenue : ITO – Ward – 1 Income Tax Office, Aayakar Bhavan Gandhi Nagar, Anakapalle – 531001 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "