Bonafide Belief of Interest Income on Bank Deposits Eligible for Deduction u/s 80P : ITAT Deletes Penalty u/s 271(1)(c) [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271(1)(c) of the Income Tax Act 1961, as the assessee had the bonafide belief of interest income on the bank deposit was eligible for deduction under Section 80P of the Income Tax Act.

The assessee Khanpur Vibhag Madhyamik Shala Karmchari Dhiran & Grahak Sahakari Mandali Limited was an employee Co-operative Credit Society engaged in the business of banking. The Assessing Officer observed that the assessee had shown deposit with banks in its Balance Sheet.

The assessee had shown in Profit & Loss account, interest income as the assessee claimed deduction under Section 80P(2)(a)(i) of the Income Tax Act as interest income received from Baroda Guj. Gramin Bank & Bank of Baroda. The return of income was filed on 23.03.2016 declaring total income at Rs.NIL by the assessee.

The Assessing Officer on the basis of Supreme Court decision in Totgars Cooperative Sale Society Limited vs. ITO allowed deduction under Section 80P(2)(a)(i) of the Income Tax Act on income earned from members only and disallowed the claim of 80P(2)(a)(i) of the Income Tax Act on the income, interest earned from financial institutions.

Subsequently, the Assessing Officer imposed a penalty under Section 271(1)(c) of the Income Tax Act for filing inaccurate particulars of income.

Jaimin Gandhi,on behalf of the assessee submitted that for the purpose of levying penalty under Section 271(1)(c) of the Income Tax Act  the revenue had to point out furnishing of inaccurate particulars. Since the only document to furnish particulars was the return of income, penalty could be levied only if there was furnishing of inaccurate particulars of income in the return of income filed by the assessee.

R.R. Makwana,appeared on behalf of the revenue.

A Single Bench of Suchitra Kamble, (Judicial Member) relied upon the Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. deleted the penalty under Section 271(1)(c) of the Income Tax Act on failure of furnishing inaccurate particulars of income as the assessee was under bonafide belief that interest income earned on bank deposits was also coming under the purview of claim for deduction under Section 80P of the Income Tax Act.

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