Shri Holehucheshwar Co-operative Credit Society Ltd. Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, allowed the assessee’s appeal and deleted the penalty imposed under Section 270A of the Income Tax Act, 1961, which had been confirmed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for Assessment Year 2017-18.
The assessee, a co-operative credit society engaged in providing credit facilities to its members, filed its return of income declaring nil income after claiming deduction under Section 80P. During scrutiny assessment, the Assessing Officer examined the financial statements and found that the assessee had earned interest income from fixed deposits made with BDCC Bank out of idle funds. Relying on the jurisdictional High Court’s decision in Totgars Co-operative Sale Society dated 16.06.2017, the Assessing Officer held that the assessee was not entitled to deduction under Sections 80P(2)(a)(i) and 80P(2)(d) on such interest income. The Assessing Officer made an estimated disallowance by computing 9.38% of the net profit at ₹9,42,445. The assessee did not challenge the quantum addition before the appellate authorities.
The Assessing Officer initiated penalty proceedings under Section 270A for alleged misreporting of income. In response, the assessee submitted that the interest earned on bank deposits had been fully disclosed and claimed as deductible under Section 80P because the deposits were maintained as statutory reserves with the District Central Co-operative Bank. It further contended that the addition had been made on an estimated basis and involved interpretation of law regarding the taxability of interest income, and therefore did not amount to under-reporting or misreporting of income. The assessee requested that the penalty proceedings be dropped.
