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Facts
The assessee firm's appeal against a penalty order under section 271AAC(1) was dismissed by the CIT(A) due to a delay of 284 days. The assessee contended that the delay was due to genuine reasons and that the quantum assessment, which led to the penalty, had been set aside by the ITAT.
Held
The Tribunal held that since the quantum appeal's delay was condoned by the ITAT based on similar reasons, the delay in the penalty appeal should also be condoned. The CIT(A)'s order dismissing the appeal on limitation was set aside.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal on limitation without considering the same reasons for delay as accepted in the quantum appeal? Whether the penalty levied under section 271AAC(1) should be adjudicated on merits after fresh assessment?
Sections Cited
271AAC(1), 143(3), 69A, 188A, 143(2), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee firm is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 17/09/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 271AAC(1) of the Income Tax Act, 1961 (for short, “the Act”), dated 24/02/2022 for the Assessment Year (AY) 2017-18. The GK Constructions Co vs. ITO assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:
1. The order of the Ld. CIT(A) in dismissing the appeal against order u/s. 271AAC (1) is not sustainable with regards to the facts as well as in law.
The Ld. CIT(A) ought not to have dismissed the appeal solely rejecting the petition for condonation of delay, as the delay was caused by genuine and Bonafide reasons, which are clearly explained before the Ld. CTT(A).
3. The Ld. CIT(A) ought to have adjudicated the case of the Appellant on merits without merely dismissing basing on delay in filing of the appeal, which is not sustainable.
The Ld. CIT(A) failed to consider that the penalty was levied u/s. 271AAC(1) amounting to Rs. 24,73,758/-mechanically without going into facts of the case.
5. The Ld. CIT(A) ought to have considered that there is no scope for making addition towards secured loans as unexplained investment since the Appellant has furnished the information before the Ld. CIT(A) which ought to have been adjudicated.
6. The Ld. CIT(A) ought to have observed the fact that the addition of capital contribution of the partners of the firm cannot be made in the hands of the Appellant, as such the levy of penalty on such addition made is bad in law.
7. The Ld. CIT(A) ought to have considered the detailed submissions, wherein the source of capital contribution of each partner was clearly explained, and ought to have observed that there is no reason for the Ld. AO to treat the same as unexplained investment u/s 69 and penalty levied on such addition is liable to be deleted.
The Ld. CIT(A) ought to have observed that the Appellant has submitted the sources and established the identity of the partner and genuineness of the partners’ capital contribution, and hence there was no scope for making addition in the hands of the Appellant firm.
9. The Appellant craves to add/leave/alter/modify any other ground of appeal at the time of hearing.”
GK Constructions Co vs. ITO 2. Succinctly stated, the assessee firm, which is engaged in the business of real estate, had e-filed its return of income for AY 2017-18 on 17/02/2018, declaring an income of Rs. NIL. Subsequently, the case of the assessee firm was selected for scrutiny assessment under section 143(2) of the Act. Thereafter, the AO vide his order passed under section 143(3) of the Act, dated 25/12/2019 determined the income of the assessee firm at Rs.5,94,54,724/- after making two additions, viz., (i) addition of the capital introduced by the partner with the assessee firm: Rs.3,20,22,764/-; and (ii) addition of the secured loans disclosed in the balance sheet of the assessee firm: Rs.2,74,31,960/-.
Thereafter, the assessee firm assailed the quantum assessment before CIT(A). However, as the appeal filed by the assessee firm before the CIT(A), involved delay of 1076 days, the same was dismissed vide order dated 17/09/2025 on the ground of limitation itself.
4. In the meantime, the AO vide his order under section 271AAC(1) of the Act, had with respect to the addition that was made under section 69A of the Act of Rs.30,22,764/- imposed penalty upon the assessee firm.
Aggrieved, the assessee firm assailed the order passed by the AO under section 271AAC(1) of the Act, dated 24/02/2022, before the GK Constructions Co vs. ITO CIT(A). However, as the appeal filed by the assessee involved a delay of 284 days, the same was dismissed in limine on the ground of limitation.
The assessee firm, aggrieved with the order of the CIT(A), who had upheld the penalty imposed by the AO under section 271AAC(1) of the Act, carried the matter in appeal before us.
We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below, and the material available on record.
8. Shri Avinash, CA, Learned Authorized Representative (for short, “Ld.AR”) for the assessee, at the threshold of the hearing of the appeal submitted that the Tribunal while disposing of the quantum appeal filed by the assessee firm in dated 19/12/2025 had set aside the order passed by the CIT(A), dated 17/09/2025, wherein he had declined to condone the delay of 1076 days involved in the appeal filed before him and had dismissed the appeal on the ground of limitation. The Ld. AR had placed on our record the order passed by the Tribunal in dated 19/12/2025. The Ld. AR submitted that the Tribunal vide its aforesaid order had accepted the assessee’s contention that it had gathered about the framing of the GK Constructions Co vs. ITO assessment in its case by the AO vide his order passed under section 143(3) of the Act, dated 25/12/2019 only when the Department had issued notice under section 188A of the Act, dated 28/11/2022. Elaborating further on his contention, the Ld. AR submitted that the Tribunal, after accepting the bona fide explanation of the assessee regarding the delay of 1076 days involved in filing of the quantum appeal before the CIT(A), had set aside the latter’s order and restored the matter to his file with a direction to readjudicate the appeal afresh after affording an opportunity of being heard to the assessee firm. The Ld. AR took us through the observations recorded by the Tribunal while disposing of the quantum appeal of the assessee firm. The Ld. AR submitted that for the same reason that had resulted to the unawareness of the assessee about the passing of the assessment and the imposition of penalty under section 271AAC(1) of the Act, dated 24/02/2022 that a delay of 284 days was involved in filing the appeal before the CIT(A). The Ld. AR submitted that the assessee firm, on learning about the imposition of penalty under section 271AAC(1) of the Act, dated 24/02/2022, had, thereafter, involving no further loss of time, filed the appeal before the CIT(A), which, however, was dismissed by him on the ground of limitation. The Ld. AR submitted that as the quantum assessment has been set aside by the Tribunal to the file of the AO for fresh adjudication, therefore, in GK Constructions Co vs. ITO all fairness and in the interest of justice, the penalty imposed by the AO under section 271AAC(1) of the Act, dated 24/02/2022 may also on the same lines be set aside to the file of the AO with a direction to take up the same after framing of the de novo assessment.
Per contra, Shri D. Praveen, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”), relied on the orders of the authorities below.
We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.
Ostensibly, it is a matter of fact discernible from the record that the quantum assessment framed by the AO vide his order under section 143(3) of the Act, dated 25/12/2019 had been set aside by the Tribunal vide its order passed in dated 19/12/2025 to his file with a direction to frame a fresh assessment after affording a reasonable opportunity of being heard to the assessee firm.
Admittedly, it is a matter of fact that the CIT(A) had declined to condone the delay of 284 days involved in the appeal that was filed by the assessee firm against the order passed by the AO under section 271AAC(1) of the Act, dated 24/02/2022. In our view, as the Tribunal
GK Constructions Co vs. ITO vide its order passed in dated 19/12/2025, while disposing of the quantum appeal of the assessee firm has found favour with its explanation regarding the delay of 1076 days involved in the appeal filed before the CIT(A), therefore, finding no reason to take a different view, we are of a firm conviction that the delay of 284 days involved in the appeal filed by the assessee firm against the order passed by the AO under section 271AAC(1) of the Act, dated 24/02/2- 22, which is based on the same reason merits to be condoned.
We thus, in terms of our aforesaid observations set aside the order passed by the CIT(A), wherein he had declined to condone the delay of 284 days and restore the matter to the file of the AO with a direction to take up the same after framing of the de novo assessment pursuant to the directions given by the Tribunal vide its order in dated 19/12/2025.