Ch Kittur Taluk Prathmik Shala Shivshak Kiyat Pattin Sahakar Sangh NY Vs ITO (ITAT Panaji)
Summary: The assessee, an AOP, filed its return for AY 2021-22 declaring nil income after claiming a deduction of ₹35.20 lakh under Section 80P(2)(a)(i). Based on information appearing in the tax records, the Assessing Officer concluded that the assessee had earned interest from Canara Bank and treated ₹10.91 lakh as bank-interest income, which was subsequently confirmed by the CIT(A). Before the Tribunal, the assessee relied upon Form 26AS and its Canara Bank statement to contend that the transaction did not represent interest income, but reflected TDS under Section 194N/194NF on cash withdrawals, and not TDS under Section 194A on interest. The Panaji ITAT found that Form 26AS did not disclose TDS under Section 194A for interest from Canara Bank, the deduction was under Section 194N in relation to cash withdrawals, the bank statement corroborated the assessee’s explanation and the Revenue did not controvert the documentary evidence. Accordingly, the Tribunal reversed the CIT(A)’s finding and deleted the addition of ₹10,90,787, holding that the amount was not interest income earned from Canara Bank. The appeal was allowed.
The assessee, an AOP, filed its return for AY 2021-22 declaring nil income after claiming a deduction of ₹35.20 lakh under Section 80P(2)(a)(i).
Based on information appearing in the tax records, the AO concluded that the assessee had earned interest from Canara Bank and treated ₹10.91 lakh as bank-interest income. The CIT(A) upheld the addition.
Before the Tribunal, the assessee produced Form 26AS and its Canara Bank statement, contending that the transaction did not represent interest income. The relevant entry reflected TDS under Section 194N/194NF on cash withdrawals, and not TDS under Section 194A on interest.
The Panaji ITAT found that:
- Form 26AS did not disclose any TDS under Section 194A in respect of interest from Canara Bank;
- the deduction was under Section 194N in relation to cash withdrawals;
- the bank statement corroborated the assessee’s explanation; and
- the Revenue did not controvert this documentary evidence.
Accordingly, the Tribunal held that the amount was not interest income, reversed the CIT(A)’s findings and deleted the addition of ₹10,90,787.
FULL TEXT OF THE ORDER OF ITAT PANAJI
The captioned appeal at the instance of assessee pertaining to A.Y. 2021-22 is directed against the order dated 02.03.2026 framed by National Faceless Appeal Centre, Delhi arising out of Assessment Order dated 23.12.2022 passed u/s.143(3) r.w.s.144B of the Income Tax Act, 1961 (in short 8the Act’).
2. Assessee raised grounds of appeal against the disallowance u/s.80P(2) (a)(i) of the Act for the alleged interest earned from Nationalised Banks. Assessee has also raised various other legal issues viz., (1) Erroneous Addition based on system mismatch in AIS; (2) Failure to recognize the True Nature of section 194N transactions (3) Wrong Application of Judicial Precedents (Totgar Case); (4) Non -Admission of Primary Documentary Evidence by CIT(A); (5) Request for Admission of Additional Evidence under Rule 29; (6) Levying of Consequential Interest and Penalties.
3. We have heard the rival contentions and perused the record placed before us. We observe that the assessee is an Association of Persons (AOP) and filed the return of income for A.Y. 2021- 22 on 10.03.2022 declaring income at Nil after claiming deduction u/s.80P(2) (a)(i) of the Act at Rs.35,20,360/-. After the case being selected for scrutiny through CASS followed by validly serving statutory notices, ld. Assessing Officer observed that the assessee has earned interest income from Canara Bank at Rs.10,97,787/-. The action of the Assessing Officer has been subsequently confirmed by ld.CIT(A).
4. Before us, ld. Counsel for the assessee making reference to the bank statement as well as Form No.26AS submitted that ld. Assessing Officer grossly erred in observing that assessee has earned interest income from Canara Bank. However, the fact is that no such interest has been earned from Carana Bank and as per Form No.26AS TDS has been deducted u/s.194NF of the Act for the cash withdrawal from Canara Bank and this fact is verifiable from Form No.26AS itself as well as copy of bank statement. He submitted inspite of providing these details before the lower authorities, they have not taking into cognizance.
5. On the other hand, ld. DR vehemently argued supporting the order of ld.CIT(A).
6. However, we on going through these details find force in the cont ention of ld. Counsel for the assessee and observe that as per Form No.26AS no tax has been deducted at source u/s. l94A of the Act for any interest income earned by the assessee society as alleged by ld. Assessing Officer rather it is deduction of tax at source u/s.194NF of the Act for the cash withdrawals from Canara Bank. This fact remains uncontroverted by the Revenue authorities and further the bank statement also confirms this fact. We therefore reverse the finding of ld.CIT(A) and allow the assessee’s appeal and delete the addition of Rs.10,90,787/- made by the Assessing Officer as it is not in the nature of any interest income earned from Canara Bank. Grounds of appeal raised by the assessee are allowed.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on this 21st day of August, 2026.
