ITAT Dismisses Appeal of Urban Co-operative Credit Society for Improper Filing Against Penalty u/s 271D of Income Tax Act 1961 [Read Order]

In a recent ruling, the Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the appeal filed by Shri Sant Gajanan Maharaj Urban Co-operative Credit Society for the assessment year 2018–19, arising from the penalty imposed under Section 271D of the Income Tax Act, 1961. The appeal, which contested the levy of a penalty amounting to ₹63,52,742, was dismissed in limine as the assessee had sought withdrawal due to a filing before the wrong forum.

During the hearing, the assessee’s Authorised Representative (AR) submitted a letter dated 20 January 2025, requesting permission to withdraw the appeal. It was submitted that the appeal before the ITAT had been filed mistakenly against the penalty order passed under Section 271D by the Joint Commissioner of Income Tax (JCIT). In contrast, a proper appeal against the said order had already been filed before the Commissioner of Income Tax (Appeals) in Form 35.

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The Tribunal noted that the penalty was imposed by the JCIT under Section 271D of the Act, for contravention of the provisions of Section 269SS, which prohibits the acceptance of loans or deposits in cash exceeding the prescribed limit. The assessee, a co-operative credit society, had raised several grounds in its appeal, including arguments that transactions with its members did not constitute loans or deposits under Section 269SS, and that it acted under a bona fide belief in accepting cash from its members in a fiduciary capacity.

However, given the subsequent realisation of the procedural error, the assessee sought to withdraw the appeal, clarifying that it had already filed the appeal before the CIT(A) in the prescribed manner.

The Tribunal, comprising Shri V. Durga Rao, Judicial Member, and Shri K.M. Roy, Accountant Member, having considered the submission made by the parties, allowed for the withdrawal and dismissed the appeal without examining the merits of the case.

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The Tribunal asserted on the importance of adhering to the correct appellate procedure when challenging penalty orders. With the dismissal of the appeal, the matter was remanded to the Commissioner of Income Tax (Appeals), where the assessee's contentions regarding the nature of transactions with its members, the applicability of Section 269SS, and the presence of reasonable cause under Section 273B will be adjudicated.

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