VIJAY SANGH MITRA CHS LIMITED,MUMBAI vs. ITO-WARD 32(2)(1), MUMBAI, MUMBAI

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ITA 2636/MUM/2026Status: DisposedITAT Mumbai20 May 2026AY 2016-174 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that once the quantum assessment, which formed the basis for the penalty, was set aside, the penalty order could not survive independently. The penalty is consequential to the assessment, and its foundation ceases to exist when the assessment is restored for fresh determination.

What were the facts?

The assessee, a Co-operative Housing Society, had its assessment completed under Section 147 r.w.s. 144 of the Income Tax Act. Subsequently, a penalty was levied under Section 271(1)(c) based on the additions made in that assessment. However, the quantum assessment itself was later set aside by the CIT(A) and restored to the Assessing Officer for fresh assessment.

What were the issues?

Whether a penalty levied under Section 271(1)(c) can be sustained when the underlying assessment order, on which the penalty is based, has been set aside.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHARY & SHRI JAGADISH

For Appellant: Ms. Sruti Kalyanikar, Adv
For Respondent: Shri Amit Gurav, SR. DR
Hearing: 20.05.2026Pronounced: 23.06.2026

Per: SHRI JAGADISH, A.M.: 1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 11.02.2026 for Assessment Year 2016-17 arising out of penalty order passed u/s 271(1)(c) of the Income Tax Act, 1961.

2.

The assessee has raised various grounds challenging the confirmation of penalty of Rs.55,10,978/- levied u/s 271(1)(c) of the Act. Since the issue involved is common, all the grounds are disposed of together.

ITA No.2636/M/2026 Vijay Sangh Mitra CHS Limited 3. Briefly stated, the assessee is a Co-operative Housing Society. The assessment for A.Y. 2016-17 was completed u/s 147 r.w.s. 144 of the Act determining total income at Rs.1,59,24,000/-. Consequent thereto, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act and levied penalty of Rs.55,10,978/- vide order dated 21.08.2024. The Ld. CIT(A) confirmed the penalty and aggrieved by the same, the assessee is in appeal before us.

4.

The Ld. Authorised Representative submitted that subsequent to the levy of penalty, the quantum assessment itself has been set aside by the Ld. CIT(A) vide appellate order dated 19.03.2025 and the matter has been restored to the file of the Assessing Officer for framing a fresh assessment. It was submitted that once the very basis on which the penalty has been levied no longer survives, the penalty itself cannot stand. The Ld. Departmental Representative fairly relied upon the orders of the lower authorities.

5.

We have heard the rival submissions and perused the material available on record. We find that the impugned penalty u/s 271(1)(c) has been levied solely with reference to the addition made in the assessment framed u/s 147 r.w.s.144 of the Act. It is not in dispute that subsequently the Ld. CIT(A), vide order dated 19.03.2025 passed in the quantum proceedings, has set aside the assessment and restored the matter to the file of the Assessing Officer for de novo adjudication.

6.

Once the quantum assessment itself has been set aside, the foundation on which the impugned penalty rests ceases to exist. The penalty order is merely consequential to the assessment order and cannot survive independently when the very assessment giving rise to such penalty has been restored for fresh determination. In our considered view, after the

ITA No.2636/M/2026 Vijay Sangh Mitra CHS Limited quantum order has been set aside, the impugned penalty has no leg to stand.

7.

At the same time, the restoration of the quantum proceedings does not prejudice the rights of the Revenue. Upon completion of the fresh assessment proceedings, if any addition warranting initiation of penalty proceedings survives, the Assessing Officer shall be at liberty to initiate and levy penalty in accordance with law on the basis of the outcome of such fresh assessment. Therefore, cancellation of the present penalty would not preclude the Assessing Officer from taking appropriate action consequent to the fresh assessment.

8.

In view of the aforesaid facts and circumstances, we set aside the order of the Ld. CIT(A) and cancel the penalty of Rs.55,10,978/- levied u/s 271(1)(c) of the Act. However, the Assessing Officer is at liberty to initiate and levy penalty, if so warranted, in the fresh assessment proceedings in accordance with law.

9.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 23/06/2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHARY) (JAGADISH) Judicial Member Accountant Member

Mumbai, Dated: 23/06/2026 Aniket Chand Sr. Private Secretary

ITA No.2636/M/2026 Vijay Sangh Mitra CHS Limited Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai

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