Ganesh Chit Fund Vs ITO (ITAT Cuttack)
Income Tax Appellate Tribunal (ITAT), Cuttack Bench, has dismissed an appeal filed by Ganesh Chit Fund, confirming the levy of a penalty under Section 270A of the Income-tax Act, 1961, for the Assessment Year 2017-18. The Tribunal’s decision, pronounced on July 17, 2025, hinged on the assessee’s failure to adhere to the prescribed procedural requirements for claiming immunity from penalty under Section 270AA of the Act.
The case originated from an assessment completed under Section 143(3) of the Income-tax Act, 1961, against Ganesh Chit Fund. During this assessment, the Assessing Officer (AO) disallowed certain expenditures, specifically remuneration and salary, as well as interest on capital paid to the partners of the firm. This disallowance led to an increase in the assessee’s taxable income and, consequently, the imposition of a penalty under Section 270A for under-reporting of income.
Following the assessment order, which was passed on December 16, 2019, a tax demand of Rs. 3,06,290/- was raised. The assessee, Ganesh Chit Fund, subsequently paid this demanded tax along with accrued interest on January 3, 2020. This payment was made within 30 days of the assessment order, a fact noted by the Tribunal.
The core of the dispute revolved around the assessee’s attempt to seek immunity from the Section 270A penalty. On January 14, 2020, Ganesh Chit Fund sent a letter to the Assessing Officer. This letter, addressed to the Income-Tax Officer, Ward-2, Berhampur, explicitly referenced the assessment order and the payment of the demanded tax. It stated: “I have paid the demanded tax on 03/01/2020 vide challan No-00001, BSR Code-0320125. Herewith I upload the challan for your kind verification. I request your good self please kindly drop the penalty proceedings U/S 270A of I.T. Act, 1961 for which I shall be ever grateful.” The assessee’s representative, Shri Bibhuti Bhusan Panda, argued before the ITAT that this letter constituted a valid claim for immunity under Section 270AA of the Act, and therefore, the AO ought to have dropped the penalty proceedings.
