Vande Matharam Vividhoddesha Souharda Sahakari Limited Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes Section 270A Penalty Where AO Initially Accepted Section 80P Deduction and Assessee Acted Under Bona Fide Belief
The Bangalore ITAT deleted the penalty levied under section 270A on a co-operative society that had claimed deduction under section 80P(2)(a)(i) on interest earned from deposits with co-operative and scheduled banks. The deduction was originally accepted by the Assessing Officer in the scrutiny assessment under section 143(3) and again in an earlier rectification order under section 154. It was only in a subsequent rectification proceeding that the AO withdrew the deduction based on later judicial precedents and initiated penalty proceedings for under-reporting of income.
The Tribunal held that the assessee had made the claim under a bona fide belief, which was reinforced by the AO himself having accepted the claim on more than one occasion. Therefore, the assessee could not be said to have under-reported income. The case fell within the protection of section 270A(6), as the explanation offered by the assessee was genuine and acceptable.
The ITAT further observed that section 270A(1) uses the word “may”, indicating that levy of penalty is discretionary and not automatic. The authorities must consider the surrounding facts and circumstances before imposing penalty.
The Tribunal also found the penalty proceedings to be defective because the show-cause notice and penalty order merely referred to section 270A without specifying the relevant sub-clause or limb under which the penalty was proposed. Following settled Tribunal decisions, it held that such an omnibus notice cannot sustain a penalty.
Accordingly, the Bangalore ITAT set aside the orders of the lower authorities and directed the Assessing Officer to delete the penalty under section 270A.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
