SRIDHAR MALLAMPATI,HYDERABAD vs. DCIT, CENTRAL CIRCLE - 1(2), HYDERABAD

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ITA 2054/HYD/2025Status: DisposedITAT Hyderabad15 July 2026AY 2021-227 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that a penalty under Section 271AAC(1) is leviable only against additions made in assessment proceedings. Therefore, the outcome of the quantum appeal has a direct bearing on the penalty. Deciding the penalty appeal before the quantum appeal is inappropriate.

What were the facts?

The assessee's appeal against a penalty order under Section 271AAC(1) was decided by the CIT(A) before the adjudication of the main assessment appeal. The assessee argued that the penalty appeal should be decided only after the outcome of the quantum appeal.

What were the issues?

Whether the penalty appeal can be adjudicated before the quantum appeal. The impact of the quantum appeal's outcome on the penalty levied under Section 271AAC(1).

Which sections of the Income-tax Act were involved?

Section 271AAC(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G

Pronounced: 15.07.2026

आदेश / ORDER PER VIJAY PAL RAO, VICE PRESIDENT: This appeal by the Assessee is directed against the Order dated 16.09.2025 of Ld. CIT(A)-11, Hyderabad arising from penalty order passed u/sec.271AAC (1) of the Income Tax Act [in short "the Act"], 1961, for the assessment year 2021-2022.

2.

The Assessee has raised the following grounds of appeal:

“The penalty order of the Ld. CIT(A) dated 16.09.2025 is 1) erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant. 2) The Ld. CIT(A) ought to have appreciated that the Assessing Officer erred in levying penalty of Rs.72,000/- u/s 271AAC(1) of the Act without appreciating the facts of the case. 3) The Ld. CIT(A) failed to appreciate the fact that the penalty was levied solely on presumptions and without any corroborative evidence establishing that the cash loan given to the assessee. 4) The Ld. CIT(A) ought to have considered that the figures as appearing in SL. No.17 of Annexure ANN/GPB/RES/28 are based on only dumb documents as such no penalty u/s 271AAC (1) is sustainable.

5) The Ld. CIT(A) failed to appreciate the fact that the mere inclusion of figures in Annexure ANN/GPB/RES/28 does not constitute as undisclosed income and as such imposition of penalty u/s 271AAC(1) is unwarranted and liable to be quashed. 6) The Ld. CIT(A) ought to have considered that the AO failed to consider the evidences viz., Agreement of sale, supplementary agreement of sale in respect of purchase of property from GSVP Bhushan. 7) The appellant may add OR alter OR amend OR modify OR substitute OR delete and/ OR rescind all OR any of the grounds of appeal at any time before OR at the time of hearing of the appeal.”

3.

At the time of hearing the learned Authorised Representative of the Assessee has submitted that the appeal filed by the assessee against the assessment order is pending adjudication before the learned CIT(A). He has filed the screen shot of e-filing ITBA portal showing the status of the appeal proceedings and submitted that the appeal is pending before the learned CIT(A) however, the learned CIT(A) has passed the impugned order against the penalty before adjudicating of the appeal in the quantum matter. Thus, the learned Authorised Representative of the Assessee has submitted that the impugned order of the learned CIT(A) be set aside and the matter be remanded to the record of the learned CIT(A) for deciding the appeal against the penalty order after the outcome of the appeal filed by the assessee against the assessment order.

4.

On the other hand, the learned DR has relied upon the Order of the learned CIT(A).

5.

We have considered the rival submissions as well as relevant material on record. It is pertinent to note that the penalty u/sec.271AAC (1) is leviable only against the addition made by the Assessing Officer in the assessment proceedings and therefore, the outcome of the quantum appeal has a direct bearing on the levy of penalty u/sec.271AAC(1). Therefore, deciding the appeal against the penalty order before adjudication of quantum appeal is not appropriate. Accordingly, the learned CIT(A) ought to have decided the penalty appeal only after the outcome of the quantum appeal. The learned Authorised Representative of the Assessee has filed the status of the appeal filed by the assessee as per e- proceeding portal of the department showing the appeal is pending as under:

5.1. Therefore, in the facts and circumstances of the case, when the quantum appeal is still pending adjudication before the learned CIT(A), the Order passed by the learned CIT(A) dismissing the appeal of the assessee against the penalty u/sec.271AAC(1) is not justified and the same is set aside. Accordingly, the matter is remanded to the record of the learned CIT(A) for adjudication of the appeal of the assessee against the penalty u/sec.271AAC(1) only after the outcome of the quantum appeal pending adjudication before the learned CIT(A). Needless to say, the assessee be given an opportunity of hearing before passing the fresh order.

6.

In the result, appeal of the Assessee is allowed for statistical purposes. Order pronounced in the open court on 15.07.2026.

Sd/- Sd/- MANJUNATHA G. VIJAY PAL RAO ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, dated 15th day of July, 2026 VBP Copy to: SRIDHAR MALLAMPATI, C/O., P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 SOMAJIGUDA, HYDERABAD-500082, TELANGANA 2 DCIT, CENTRAL CIRCLE - 1(2), HYDERABAD, TELANGANA 3 THE Pr. CIT-(CENTRAL), HYDERABAD. 4 THE D.R., ITAT, HYDERABAD SMC-BENCH, HYDERABAD 5 GUARD FILE Digitally signed TRUE COPY VADREVU by VADREVU PRASADA RAO PRASADA Date: ASSISTANT REGISTRAR / I.T.A.T., HYDERABAD RAO 2026.07.15 11:58:00 +05'30'

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