SHRI. VIJAYSINGH MADHAVRAO PATWARDHAN,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX-26(1),MUMBAI (NOW DCIT-41(1)(1),MUMBAI), MUMBAI

The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying the penalty of Rs. 1,89,60,000/-u/s.271(1)(c) of the Income Tax Act, 1961, being 300% of the tax sought to be evaded, without considering the facts and circumstances of the case.

On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in levying a penalty of on the issue of addition made of Rs.1,89,41,053/- u/s.69 of the Income Tax Act, 1961 by treating the peak balance of Foreign bank account as alleged Unexplained Investment, without considering the facts and circumstances of the case.”

Brief facts of the case are that the assessee is an individual and had filed his return of income dated 31.10.2006, declaring total income at Rs. 20,29,400/- which was subsequently revised to Rs. 13,42,690/-. Assessment u/s. 143(3) of the Act was completed on 04.09.2012 where the ld. AO determined the total income at Rs. 14,32,990/-. The assessee’s case was reopened u/s. 147 of the Act based on the information that the assessee had a foreign bank account in HSBC, Geneva and the ld. AO observed that the deposits in the said account and income on account of transactions were not reported by the assessee in his return of income. The assessee contended that the assessee was NRI from 1991 to 2004 and the said deposits in the foreign account are savings of the assessee of that period and that on returning back to India in 2004, the assessee is said to have donated all his savings to his daughter. The ld. AO after duly considering the assessee’s submission passed the assessment order u/s. 143(3)/147 of the Act dated 30.03.2015, determining total income at Rs. 2,03,55,050/- after making addition of Rs. 1,89,41,053/- as unexplained investment u/s. 69 of the Act and Rs. 29,993/- as short term capital gain @10%. The ld. AO also initiated penalty proceedings Shri Vijaysingh Madhavrao Patwardhan u/s. 271(1)(c) of the Act, for concealment of income and furnishing inaccurate particulars of income. The ld. AO then passed the penalty order dated 27.08.2015, u/s. 271(1)(c) of the Act, thereby levying a penalty of Rs. 1,89,60,000/- for furnishing inaccurate particulars of income as being 300% of the tax sought to be evaded. 5. The assessee was in appeal before the first appellate authority, who vide order dated 26.03.2025 dismissed the appeal filed by the assessee and upheld the penalty levied by the ld. AO. 6. The assessee is in appeal before us, challenging the order of the ld. CIT(A). 7. The learned Authorised Representative ('ld. AR' for short) for the assessee stated that the addition made in the hands of the assessee for the relevant A.Y. was deleted by the Tribunal by holding that the reopening of assessment and the assessment order was itself invalid. The ld. AR further contended that since the assessment order was already quashed by the Tribunal, the resultant penalty levied by the ld. AO is unsustainable and prayed that the appeal of the assessee be allowed. 8. The learned Departmental Representative ('ld. DR' for short) for the revenue on the other hand had nothing to controvert the same. 9. We have heard the rival submissions and perused the materials available on record. It is observed that the Tribunal in ITA No. 2688/Mum/2025, vide order dated 09.06.2025 had quashed the reassessment proceeding on legal ground, thereby quashing the entire assessment order to be invalid in the eyes of law. Since the assessment order itself has been held to be invalid, the penalty order arising out of the said assessment order does not have any legs to stand and thereby invalidate the penalty proceeding. On this note, Shri Vijaysingh Madhavrao Patwardhan we deem it fit to delete the penalty levied by the ld. AO and upheld by the ld. CIT(A) in the hands of the assessee. 10. In the result, the appeal filed by the assessee is hereby allowed. Order pronounced in the open court on 30.09.2025 (OMKARESHWAR CHIDARA) JUDICIAL MEMBER

The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,