CRP RISK MANAGEMENT LIMITED ,MUMBAI vs. ITO WARD CENTRAL CIRCLE 7(2), MUMBAI

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in dismissing the appeal ex-parte for non- prosecution without adjudicating the issues on merits, which is illegal, void and bad in law.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in mechanically confirming the penalty of Rs.43,02,207/- levied u/s 271(1)(c) without independent application of mind and without examining the facts and explanations of the appellant.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has erred in initiating and levying penalty u/s 271(1)(c) without recording proper and specific satisfaction as to whether the penalty is for concealment of income or for furnishing of inaccurate particulars of income, thereby rendering the penalty proceedings void ab initio.

All the Grounds of Appeal are without prejudice to each-other.

The Appellant craves leave to add, alter, and amend the grounds of appeal at the time of hearing.

Briefly stated, the assessee filed its return of income on 29.09.2012 declaring income of Rs. 4,09,23,988/-, which was originally assessed under section 143(3) at Rs. 4,14,56,970/-. Subsequently, on the basis of information regarding alleged accommodation entries from M/s Nissim Traders Pvt. Ltd., the assessment was reopened under section 148. The reassessment

Consequent to the quantum appellate order, the Assessing Officer issued notice dated 24.02.2023 under section 271(1)(c). As no reply was filed, he treated the sustained addition of Rs. 1,32,60,000/- as concealed income arising from accommodation entries and, vide order dated 21.03.2023, levied penalty of Rs. 43,02,207/-, being 100 per cent of the tax sought to be evaded. The assessee’s appeal was thereafter decided ex parte by the learned CIT(A), who noted repeated non-compliance, upheld the penalty on merits and dismissed the appeal by order dated 14.11.2025 passed under section 250 of the Act.

Before us, the learned Authorised Representative (AR) submitted that the quantum additions which formed the very foundation of the impugned penalty had already been restored by the Co-ordinate Benchto the file of the Assessing Officer for fresh adjudication.

The learned AR placed record copy of the order dated 13.01.2023 passed by the Co-ordinate Bench in ITA No. 548/Mum/2022 for assessment year 2012-13 in the assessee’s

The learned Departmental Representative fairly raised no objection to the prayer made by the learned AR for restoration of the penalty proceedings to the file of the Assessing Officer.

We have considered the rival submissions and perused the material available on record. We have also gone through the order dated 13.01.2023 passed by the Co-ordinate Bench in the assessee’s quantum appeal.

It is not in dispute that the penalty under section 271(1)(c) of the Act was levied with reference to the additions arising from the transactions of the assessee with M/s Nissim Traders Pvt. Ltd. The penalty was computed on the income of Rs. 1,32,60,000/-, which, according to the Assessing Officer, represented bogus accommodation entries.

We find that, in the quantum appeal, the Co-ordinate Bench noticed that the objections filed by the assessee against the reasons recorded for reopening the assessment had not been disposed of by the Assessing Officer. The Tribunal further observed that the statement of Shri Jitendra Salecha, on which the reopening was founded, had not been furnished to the assessee despite its request. It was also noticed that the contract dated 01.04.2010, under which the assessee claimed to have rendered services to M/s Nissim Traders Pvt. Ltd., had not been examined by either of the lower authorities.

Having regard to the aforesaid circumstances, the Co- ordinate Bench, in paragraph 12 of its order, held as under:

Thus, the quantum additions which constituted the sole foundation of the penalty have been set aside and restored to the file of the Assessing Officer for fresh adjudication. The additions have, therefore, ceased to possess finality and their very

Penalty proceedings under section 271(1)(c) of the Act are consequential to, though distinct from, the assessment proceedings. Where the underlying addition has been set aside and restored for fresh determination, the penalty founded upon such addition cannot independently survive for adjudication in its existing form. The fate of the penalty must necessarily abide by the determination made in the quantum proceedings.

In the present case, both the parties are also ad idem that the penalty issue may be restored to the file of the Assessing Officer. We, therefore, consider it just and proper to set aside the impugned order dated 14.11.2025 passed by the learned CIT(A) and restore the issue relating to levy of penalty under section 271(1)(c) of the Act to the file of the Assessing Officer.

The Assessing Officer shall consider the penalty proceedings afresh after deciding the restored quantum assessment proceedings. He shall afford a reasonable opportunity of hearing to the assessee and shall pass a speaking order in accordance with law, having regard to the final outcome of the quantum proceedings. All the contentions available to the assessee, including the jurisdictional contention concerning the satisfaction recorded and the precise charge under section 271(1)(c) of the Act, are left open for consideration in the restored proceedings.

In view of our decision restoring the penalty proceedings to the file of the Assessing Officer, Ground Nos. 1 to 3 are allowed for statistical purposes. Ground Nos. 4 and 5 are general in nature and require no separate adjudication.

In the result, the appeal of the assessee is allowed for statistical purposes.