Case Law Details
Lauda Samabay Krishi Unnayan Samity Limited Vs ACIT (ITAT Kolkata)
The issue before the ITAT was whether a penalty under Section 271AAC(1) of the Income-tax Act, 1961 could be sustained after the underlying addition under Section 69A, made in an assessment under Section 147 read with Section 144B, had been deleted in revision proceedings under Section 264.
The assessee, a registered co-operative society functioning as a Primary Agricultural Credit Society, was assessed under Section 147 read with Section 144B for AY 2019-20. The Assessing Officer made an addition of Rs. 7,95,66,456 under Section 69A, invoked Section 115BBE, and raised a tax demand. Subsequently, the Principal Commissioner of Income Tax, exercising powers under Section 264, deleted the entire addition. The Assessing Officer thereafter passed an order giving effect to the revision order and assessed the income of the assessee as NIL.
Despite the deletion of the addition, the Assessing Officer proceeded to pass a penalty order under Section 271AAC(1). The assessee challenged the penalty, contending that once the addition had been deleted and the assessment order had merged with the revision order under Section 264, no basis remained for imposing penalty. The first appellate authority dismissed the appeal, leading to the present appeal before the ITAT.
The ITAT observed that the Section 69A addition had already been deleted by the revision order under Section 264, and the Assessing Officer had given effect to that order by determining the assessee’s income as NIL. In these circumstances, the Tribunal held that the penalty order passed under Section 271AAC(1) was illegal and without any basis. It held that once the addition itself had been deleted, the Assessing Officer could not impose penalty under Section 271AAC(1).
Accordingly, the ITAT set aside the penalty order and allowed the assessee’s appeal.
Key Legal Proposition / Finding: Once the Section 69A addition is deleted under Section 264 and the revised order is given effect, the Assessing Officer cannot sustain or pass a penalty order under Section 271AAC(1), as the very foundation for the penalty ceases to exist. ITAT Kolkata
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This Appeal is filed by the Assessee against the order of the NFAC, Delhi (Appeal) [“the Ld. CIT(A)”, for short], dated 14.11.2025passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) for the assessment year 2019-20.
2. The Brief facts of the case as stated in the order of the CIT(A) are as under: –
“1. The Appellant is a registered Co-Operative Society acting as a Primary Agricultural Credit Society (i.e.. PACS) engaged in the business of banking as well as providing credit facilities to its members and also engaged in the purchase of items intended for agriculture and supplying them to its members.
2. Learned Assessing Officer of National Faceless Assessment Centre (i.e., Ld. AO of NeAC in short) has passed the assessment order u/s 147 r.w.s. 144B on 19.03.2024 for the Assessment Year 2019-20 making addition u/s 69A of the I.T. Act, 1961 assessing the total income at Rs. 7,95,66,456/- raising tax demand of Rs. 12,90,98,581/-invoking provisions of section 115BBE of the Act.
3. The Appellant preferred revision petition before the Learned Jurisdictional PCIT-9. Kolkata on 18.04.2024. Ld. PCIT-9, Kolkata has graciously disposed off the petition u/s 264 in favour of the appellant on 28.05.2024 and the entire addition was deleted.
4. Following the principle of merger, the Order u/s 147 dated 19.03.2024 for the assessment year 2019-20 has been merged with the Order u/s 264 of the Act on 28.05.2024 and therefore no addition u/s 69A was sustained for being taxable u/s 115BBE of the Act and consequent penalty thereupon leviable u/s 271AAC of the Act was thus become infructuous as well as ex-facie null.
5. Two Orders u/s 264 of the Act for the assessment years 2018-19 and 2019-20 had been passed both on 28.05.2024. Both the orders were available as well visible in the ITBA portal. The appellant has brought the information of existence of order u/s 264favouring the Assessee to the knowledge of the Ld. AO of NeAC during penalty proceeding but inadvertently made the mistake of providing the Order u/s 264 relating to the Assessment Year 2018-19 in place of Order for AY 2019-20. Ld. AO of NeAC acting mechanically did not bother to verify from the ITBA portal to see whether any order u/s 264 for the AY: 2019-20 was available or not and also ignoring the effect given consequent upon the Order u/s 264 by the Ld. JAO deleting the entire addition u/s 69A of the Act and imposed the penalty u/s 271AAC of the Act on the appellant.”
3. Aggrieved by the order of the penalty passed u/s 271AAC(1) of the Act, Assessee preferred an Appeal before the Ld. CIT(A). However, the Ld. CIT(A) vide its order dated 14.11.2025, dismissed the Appeal filed by the Assessee. As against the order of the Ld. CIT(A) dated 14.11.2025, Assessee preferred an Appeal before the captioned Appeal.
4. Learned Counsel for the Assessee submitted that after passing of the Assessment Order u/s 147 of the Act on 19.03.2024, a Revision Order u/s 264 of the Act came to be passed on 28.05.2024 wherein the addition of Rs.7,95,66,456/- made by the Assessing Officer u/s 147 of the Act has been deleted. Thereafter, an order giving effect has also been passed u/s 264 of the Act by assessing the income of the Assessee as NIL on 19.06.2024. The Learned Counsel for the Assessee further submitted that though there is no addition subsists against the Assessee, the penalty proceedings has been initiated and order of penalty came to be passed on 27.09.2024, which has been erroneously confirmed by the Ld. CIT(A) on 14.11.2025 vide order impugned. Thus, submitted that Appeal of the Assessee is allowed.
5. Per Contra, the Ld. DR relied on the orders of the Lower Authorities sought for dismissal of the Appeal.
6. We have heard the parties and perused the material on record. In the present case, an Assessment Order came to be passed u/s 147 of the Act on 19.03.2024 by making an addition of Rs.7,95,66,456/-u/s 69A of the Act. Thereafter, an Order u/s 264 of the Act came to be passed on 28.05.2024 by deleting the said addition. The said order passed u/s 264 of the Act has been given effect by the Assessing Officer on 19.06.2024 by assessing the income of the Assessee as NIL. Even after deleting the addition by way of Revision Order u/s 264 of the Act, the impugned penalty order has been passed u/s 271AAC(1) of the Act. In our considered opinion, the said order of penalty not only illegal but also without any basis. Once the addition is deleted, the Assessing Officer cannot pass the order of penalty order u/s 271AAC(1) of the Act. Accordingly, the order impugned is hereby set aside.
7. In the result, Appeal of the Assessee is allowed.
Order pronounced on 17.06.2026.
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