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ITAT Quashes Penalties Citing Revised Audit Report, Rules No Intentional Misreporting by Cooperative Society [Read Order]

The society contested the penalty before the Commissioner of Income Tax (Appeals), but its appeal was dismissed due to a delay of 396 days in filing

Adwaid M S
ITAT Quashes Penalties Citing Revised Audit Report, Rules No Intentional Misreporting by Cooperative Society [Read Order]
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The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has quashed penalties totaling ₹7,78,502 imposed on a cooperative society, under Section 270A of the Income Tax Act, 1961. The tribunal ruled that the society had not intentionally misreported income and accepted its revised audit report as valid grounds to delete the penalty. The case involved Panhera Gramin Bigarsheti,...


The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has quashed penalties totaling ₹7,78,502 imposed on a cooperative society, under Section 270A of the Income Tax Act, 1961. The tribunal ruled that the society had not intentionally misreported income and accepted its revised audit report as valid grounds to delete the penalty.

The case involved Panhera Gramin Bigarsheti, a cooperative society based in Buldhana, which had claimed a deduction of ₹61,63,310 under Section 80P(2)(a)(i) of the Income Tax Act for the assessment year 2020-21. The Assessing Officer (AO) had initially disallowed ₹49,90,406 of this claim, citing an audit report (Form 3CD) that stated only ₹11,72,904 was admissible. This led to the imposition of a penalty for alleged underreporting of income.

The society contested the penalty before the Commissioner of IncomeTax (Appeals), but its appeal was dismissed due to a delay of 396 days in filing. The matter then reached the ITAT, where the society submitted a revised audit report clarifying that the earlier report contained an error and that the full deduction claimed was legitimate.

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The bench observed that the revised audit report substantiated the society’s claim, negating any intention to misreport income. The tribunal noted that penalties under Section 270A require proof of deliberate misrepresentation, which was absent in this case.

Additionally, the tribunal waived a separate penalty of ₹30,000 levied for non-compliance with statutory notices under Section 142(1). The society had cited staff shortages and lack of tax expertise as reasons for the delay in responding. Accepting this explanation, the ITAT emphasized the principle ofnatural justice and quashed the penalty.

The bench, comprising V. Durga Rao (Judicial Member ) and K.M. Roy (Accountant Member), allowed both appeals filed by the cooperative society, bringing relief to the taxpayer. The order underscores that penalties cannot be sustained without evidence of wilful default or malintent, especially when errors are rectified through proper documentation.

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