RATAN JAMSHEDJI BATLIBOI,MUMBAI vs. INCOME TAX OFFICER 19(3)(1), MUMBAI

The brief facts of the case are that the assessee, an individual, filed his return of income for A.Y. 2012-13 declaring total income of Rs.12,52,430/-. Subsequently, the assessment was reopened under Section 147 of the Act, and the reassessment was completed under Section 143(3) r.w.s. 147 of the Act on 19.11.2019 at a total income of Rs.83,87,840/-, inter alia, by making an addition of Rs.7,29,480/- on account of interest under Section 244A of the Act. Penalty proceedings under Section 271(1)(c) of the Act were also initiated for furnishing inaccurate particulars of income. The assessee challenged the quantum addition before the Ld. CIT(A). The said appeal was dismissed and the addition of Rs.7,29,480/- was confirmed. Thereafter, the Ld. AO proceeded with the penalty proceedings and, vide order dated 29.03.2024, levied penalty of Rs.2,25,409/- under Section 271(1)(c), being 100% of the tax payable in respect of the amount considered as furnishing of inaccurate particulars of income. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A) against the penalty order. The Ld. CIT(A) upheld the penalty of Rs.2,25,409/- and dismissed the appeal of the assessee. Hence, the assessee is in appeal before us.

The Ld. AR submitted that the penalty under Section 271(1)(c) has been levied entirely on the basis of the quantum addition and, therefore, the fate of the penalty proceeding is dependent upon the ultimate determination of the quantum proceedings. It was further submitted that the quantum matter has not attained finality and is presently pending for fresh adjudication before the Ld. CIT(A). In this regard, it was pointed out that the Coordinate Bench of the Tribunal, vide order dated 20.04.2023 in ITA Nos. 456 & 391/Mum/2023 for A.Ys. 2012-13 and 2013-14, had set aside the earlier appellate order and restored the quantum matter for fresh adjudication. The impugned penalty appellate order itself records the said remand order of the Tribunal.

The Ld. AR, therefore, submitted that adjudication of the penalty appeal at this stage, while the very foundation of the penalty is pending adjudication in the quantum proceedings, would be premature. Accordingly, the Ld. AR prayed that the penalty matter may also be restored to the file of the Ld. CIT(A) to be considered afresh after adjudication of the quantum appeal.

The Ld. DR relied upon the orders of the revenue authorities and submitted that the Ld. CIT(A) had duly considered the issue before confirming the penalty under Section 271(1)(c) of the Act.

We have heard the rival submissions and perused the material available on record. The penalty of Rs.2,25,409/- under Section 271(1)(c) has its genesis in the quantum addition. The penalty order itself records that the penalty was imposed with reference to the addition of Rs.7,29,480/-. We further note that the Coordinate Bench of the Tribunal had earlier restored the quantum proceedings for fresh adjudication and the impugned penalty appellate order also acknowledges that the Tribunal's order dated 20.04.2023 had set aside the earlier appellate order in the quantum proceedings for providing a fresh opportunity of hearing. Considering that the quantum proceedings, which constitute the very foundation of the impugned penalty, are stated to be pending before the Ld. CIT(A), we consider it appropriate to restore the present penalty matter also to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, having regard to the final determination in the corresponding quantum proceedings.

Accordingly, the impugned order of the Ld. CIT(A) relating to penalty under Section 271(1)(c) is set aside and the matter is restored to the file of the Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) shall afford reasonable opportunity of being heard to the assessee and shall thereafter decide the penalty appeal in accordance with law. We have not expressed any view on the merits of the penalty or the underlying quantum addition, and all contentions of both sides are kept open.

In the result, the appeal of the assesse bearing ITA No.2241/Mum/2026 is allowed for statistical purpose. Order pronounced in the open court on 31st day of August 2026 Sd/- Sd/- (ARUN KHODPIA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 31/08/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file.