Vallapuzha Service Co-Operative Bank Ltd. Vs Assessment Unit (Kerala High Court)
The petitioner challenged a penalty order passed under Section 270A of the Income Tax Act, 1961. The assessment for Assessment Year 2021-22 had been completed under Section 143(3) by order dated 19.12.2022. Although the computation reflected nil tax liability, the assessment disallowed a deduction of ₹1,11,62,396/-, leading to initiation of penalty proceedings under Section 270A and the passing of the impugned penalty order.
During the pendency of the writ petition, the petitioner succeeded in the first appeal against the assessment order. By the appellate order, the benefit of deduction under Section 80P was granted. The appellate order was subsequently implemented through an order dated 20.02.2026.
The High Court observed that the assessment had been revised in accordance with the appellate order granting the Section 80P deduction. Consequently, there was no tax liability remaining against the petitioner. Since the basis for initiating and sustaining the penalty proceedings under Section 270A no longer existed, the penalty could not be sustained.
Accordingly, the High Court allowed the writ petition and set aside the penalty order passed under Section 270A.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Heard Sri.V.P.Narayanan, the learned counsel for the petitioner, as well as Sri.Navaneeth N.Nath, the learned Standing Counsel for the Income Tax department.
2. The petitioner is an assessee under the Income Tax Act, 1961 (for short ‘the Act’). The assessment for the year 2021-22 has been finalised pursuant to Ext.P1 order dated 19.12.2022 under Section 143(3) of the Act. As per Ext.P2 computation sheet, though the liability was zero, as per Ext.P1 assessment order, a deduction claimed for Rs.1,11,62,396/- was disallowed. On the basis of the disallowance as above, steps for imposing penalty under Section 270A were initiated, leading to Ext.P9 order of penalty. It is seeking to challenge the afore order of penalty that the petitioner has approached this Court through the captioned writ petition.
3. It is pointed out by Sri.Narayanan, the learned counsel for the petitioner that during the pendency of the writ petition as above, the assessment order at Ext.P1 under Section 143(3) was challenged by the petitioner by filing a first appeal and by the appellate order at Ext.P14, the benefit sought for under Section 80P has been extended to the petitioner. He also points out that the order of the appellate authority having been implemented, as evidenced by Ext.P15 order dated 20.02.2026, the very basis for imposition of penalty under Section270A does not survive any longer.
4. I have considered the rival submissions made as above.
5. A perusal of Ext.P15 order shows that assessment for the year 2021-22 has been considered with reference to the Appellate order at Ext.P14, granting deduction as sought for and directed in the Appellate order. Therefore, there is no Tax liability for the petitioner and hence, the proceedings under Section 270A cannot be sustained.
Hence, this writ petition would stand allowed, setting aside Ext.P9 penalty order.
