I.T.O. 23 2 1, MUMBAI vs. NATVARLAL BHIMBHAI DESAI, BANDRA(W), MUMBAI.

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 788/Mum/2026 (Assessment Year: 2007-08) ITO 23(2)(1) Indira Natvarlal Desai 512, 5th Floor, Piramal (Legal heir of Late Chambers, Lalbaug, Vs. Shri Natvarlal Mubmai-400 012 Bhimbhai Desai), 701, 7th Floor, Qubelisque, Nargis Dutt Road, Bandra (W), Mumbai-400 050 PAN/GIR No. AGFPD0655B (Applicant) (Respondent) Assessee by Shri Vijay Mehta a/w Shri Tarang Mehta, Ld. ARs Revenue by Shri Hemanshu Joshi, Ld. DR Date of Hearing 12.06.2026 Date of Pronouncement 15.06.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal filed by the Revenue is directed against the order dated 18.11.2025 passed by the learned Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter referred to as "the

2 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) CIT(A)"] under section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] for Assessment Year 2007-08 arising from the penalty order passed by the Assessing Officer under section 271(1)(c) of the Act dated 01.04.2015. 2. The present appeal filed by the Revenue came up for hearing before the B Bench on 13.04.2026. On a request made on behalf of the assessee, it was brought to the notice of the Bench that the assessee's quantum and penalty appeals arising from the same assessment and penalty proceedings for A.Ys. 2006-07 and 2007- 08 were already fixed for hearing before the C Bench. It was further submitted that the present appeal filed by the Revenue also arose from the very same penalty proceedings and involved interconnected issues. Accordingly, a request was made for consolidation of all connected appeals and for their analogous hearing before one Bench in order to avoid conflicting decisions and multiplicity of proceedings. 3. Considering the aforesaid request, the B Bench, vide order- sheet entry dated 14.05.2026, observed that the present appeal was a cross appeal arising out of the same assessment and penalty proceedings and accordingly directed that all connected appeals be placed before the Hon'ble Vice President for appropriate orders regarding consolidation and listing before the C Bench for analogous hearing. The appeals identified for consolidation were ITA Nos. 613, 614, 615, 617, 788 and 789/Mum/2026 relating to A.Ys. 2006-07 and 2007-

3 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) 08.Subsequently, the connected appeals came to be adjudicated by the coordinate bench vide consolidated order dated 21.05.2026 in ITA Nos. 613 to 617 and 789/Mum/2026. 4. Facts in brief are such that the assessee, late Shri Natvarlal Bhimbhai Desai, was subjected to reassessment proceedings pursuant to information received from French Tax Authorities regarding an alleged undisclosed HSBC Geneva Bank account. Assessment for A.Y. 2007-08 was completed under section 143(3) r.w.s. 147 vide order dated 24.03.2015 wherein an addition of Rs.33,77,784/- being equivalent of USD 77,481 was made under section 69 of the Act as unexplained investment in the alleged foreign bank account. Consequent to the assessment, the Assessing Officer passed a penalty order under section 271(1)(c) dated 01.04.2015 levying penalty of Rs.32,42,583/- being 300% of the tax sought to be evaded. Aggrieved, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A), vide order dated 18.11.2025, held that out of the balance of USD 77,481 reflected in the HSBC Base Note for A.Y. 2007-08, the amount of USD 70,717 already stood subjected to tax in A.Y. 2006-07 and, therefore, only the incremental amount of USD 6,764 equivalent to Rs.2,94,876/- could be considered for addition in the year under consideration. Consequently, while sustaining the penalty in principle, the learned CIT(A) restricted the quantum of penalty to the tax relatable to the addition sustained at Rs.2,94,876/-.

4 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) 5. Aggrieved by the aforesaid relief granted by the learned CIT(A), the Revenue is in appeal before us. In substance, the grievance of the Revenue is that the learned CIT(A) erred in restricting the penalty under section 271(1)(c) to the addition sustained by him instead of confirming the penalty levied by the Assessing Officer on the entire addition made in the assessment order. According to the Revenue, once the finding regarding concealment and beneficial ownership of the foreign bank account was upheld, the learned CIT(A) was not justified in granting partial relief in the penalty proceedings. 6. At the time of hearing, the learned Authorised Representative (AR) submitted that the very reassessment proceedings, quantum additions and consequential penalty proceedings arising in assessee's case for A.Ys. 2006-07 and 2007-08 have already been adjudicated by the coordinate bench in the consolidated order dated 21.05.2026 passed in ITA Nos. 613 to 617 and 789/Mum/2026. 7. The learned AR submitted that the present appeal was one of the appeals specifically directed to be consolidated with the connected appeals and, therefore, once the coordinate bench has already adjudicated the common controversy and cancelled the penalty proceedings, nothing survives for separate adjudication in the present appeal. 8. The learned Departmental Representative fairly conceded that the issue arising in the present appeal stands covered by the

5 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) aforesaid order of the coordinate bench and raised no objection to the contention advanced on behalf of the assessee.

"We heard the rival submissions and considered the documents available on record. The assessee has challenged the validity of reassessment proceedings primarily on the ground that the Ld. AO issued notice under section 143(2) of the Act prior to disposal of objections filed against the reopening proceedings. On perusal of the chronology of events placed before us, it is evident that the notice under section 143(2) of the Act and notice under section 142(1) of the Act were issued before furnishing the reasons recorded and before disposal of objections raised by the assessee. The objections filed by the assessee were ultimately disposed of only on 04.03.2015. We find substantial force in the submissions of the Ld. AR." (para 9) "The contention of the Ld. DR that issuance of notice under section 143(2) of the Act prior to disposal of objections is merely a procedural irregularity and does not cause prejudice to the assessee cannot be accepted... Accordingly, respectfully following the binding precedents

6 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) discussed herein above, we hold that the reassessment order passed under section 143(3) read with section 147 of the Act is bad in law and liable to be quashed." (para 10) 12. Thereafter, while dealing with the consequential penalty proceedings, the coordinate bench held as under:

"Since the quantum appeals have already been adjudicated in favour of the assessee and the corresponding assessment orders have been quashed, the penalty proceedings being consequential to the quantum additions do not survive. Accordingly, all the penalty orders are hereby cancelled and the appeals filed by the assessee are allowed. Further, the appeal filed by the revenue in ITA No.789/Mum/2026 also stands dismissed, as the appeal itself has already been decided in favour of the assessee." (para 11) 13. From the aforesaid findings, it is evident that the very reassessment proceedings which constituted the foundation for the impugned penalty order have already been quashed by the coordinate bench. Once the assessment itself has been annulled and the consequential penalty proceedings have been held to be unsustainable, no separate adjudication survives in the present appeal arising from the same set of proceedings.

7 ITA No. 788/Mum/2026 Indira Natvarlal Desai (Legal heir of Late Shri Natvarlal Bhimbhai Desai) Order pronounced in the open court on 15.06.2026.

Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 15/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. संबंधधत आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai