MEGHANA UDAY ZAOBA ,MUMBAI vs. ITO WARD 28(2)(1), MUMBAI

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ITA 8281/MUM/2025Status: DisposedITAT Mumbai30 April 2026AY 2013-146 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 the penalty on the addition relating to tenancy rights should be deleted as it was based on a deeming fiction similar to another addition where penalty was deleted. Regarding the interest income, the Tribunal noted that the addition was agreed upon due to inadvertent omission and not deliberate concealment, thus deleting the penalty.

What were the facts?

The assessee's income was assessed at a higher amount than initially declared, including additions for tenancy rights and interest income. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) after the assessment. The assessee withdrew their quantum appeal before the CIT(A) due to a favorable valuation report for a different addition.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on additions made under a deeming fiction and on income inadvertently omitted from return, especially when the assessee had withdrawn the quantum appeal.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 50C,Section 143(3),Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI GIRISH AGRAWAL

For Appellant: Ms. Mona Solanki, CA
For Respondent: Shri Annavaram Kosuri, Sr. DR
Hearing: 05.03.2026Pronounced: 30.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER and SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 8281/MUM/2025 Assessment Year: 2013-14 Meghana Uday Zaoba Income Tax Officer, 12 Seba Co Op Hsg Soc. Ltd vs Ward 28(2)(1), Plot No 5A, Sector No. 16 Mumbai Avashi Thane, Maharashtra, 400703 (PAN: AAFPZ3610C) Appellant Respondent Present for: Appellant by : Ms. Mona Solanki, CA Respondent by : Shri Annavaram Kosuri, Sr. DR Date of Hearing : 05.03.2026 Date of Pronouncement : 30.04.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of National Faceless Appeal Centre (NFAC), Delhi / CIT(A), vide order no. ITBA/NFAC/S/250/2025-26/1082968778(1), dated 25.11.2025, passed against the assessment order by the Assessment Unit, u/s 271(1)(c) of the Income-tax Act (hereinafter referred to as the “Act”), dated 02.02.2024, for Assessment Year 2013-14.

ITA No. 8281/Mum/2025 Meghna Uday Zaoba AY 2013-14

2.

Grounds taken by the assessee are reproduced as under:

1.

On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in partly confirming the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, amounting to penalty relatable to additions of Rs. 8,39,252/- (tenancy rights) and Rs. 81,898/-(interest income).

2.

On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the penalty proceedings are distinct from assessment proceedings and mere acceptance or withdrawal of quantum appeal does not automatically justify levy of penalty under section 271(1)(c).

3.

On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) and the Id AO has erred in levying penalty u/s 271(1)(c) of the Act amounting to Rs. 9,21,150/-. Requesting Your Honor, to kindly delete the penalty levied on the Assessee.

4.

On the facts and in the circumstances of the case, the Ld. Assessing Officer erred in law in levying a composite penalty under section 271(1)(c) of the Act on multiple additions without recording separate and specific satisfaction in respect of each addition. The Ld. AO failed to bring on record any independent satisfaction for the additions relating to tenancy rights and interest income, as mandated under law. In the absence of issue-wise satisfaction, the penalty proceedings are vitiated and the penalty so levied and partly sustained by the Ld. CIT(A) deserves to be deleted in full.

5.

On the facts and in the circumstances of the case, the Ld. Assessing Officer as well as the Ld. CIT(A) erred in recording a conclusion of 'concealment of income' while simultaneously sustaining the penalty on the allegation of 'furnishing inaccurate particulars of income', without clearly identifying the applicable limb of section 271(1)(c). Such contradictory and interchangeable use of expressions vitiates the penalty proceedings.

6.

On the facts and in the circumstances of the case, the Ld. CIT(A) exceeded his appellate jurisdiction in confirming the penalty on issues for which no clear and specific satisfaction was recorded by the Assessing Officer. By sustaining penalty on selected additions, the Ld. CIT(A) effectively assumed the role of the Assessing Officer, which is impermissible under the scheme of the Act.

ITA No. 8281/Mum/2025 Meghna Uday Zaoba AY 2013-14 3. By the present appeal, assessee is contesting levy of penalty u/s. 271(1)(c) amounting to Rs.6,50,000/- on addition made of Rs.8,39,252/- in respect of tenancy rights u/s 50C and on Rs.81,898/- in respect of interest earned on FDs. Fact of the case are that assessee filed return of income on 31.07.2013, reporting total income at Rs.3,56,496/-. Assessment was completed u/s. 143(3) whereby total income was assessed at Rs.33,57,101/- which included the following addition:

i. Long term capital gain u/s.50C on sale of property – Rs.23,19,455/-.

ii. Long term capital gain on relinquishment of tenancy rights u/s.50C – Rs.8,39,252/-

iii. Interest income on FDs – Rs.81,898/-

3.1. Assessee had furnished all the primary facts and documentary evidences in respect of the aforesaid additions. Ld. Assessing Officer subsequent to the assessment, initiated penalty proceedings u/s. 271(1)(c) by issuing notice u/s. 274, whereby penalty of Rs.6,50,000/- was levied. Against this, assessee went in appeal before the ld. CIT(A). During the pendency of first appeal, a favourable valuation report from the ld. District Valuation Officer (DVO) was received as reference was made u/s.50C in respect of transaction of sale of property. In this valuation report, the fair market value of the property was determined at Rs. 2,47,93,735/- which was substantially lower than the stamp duty value adopted by the ld. Assessing Officer. Based on this favourable report by the ld. DVO, assessee moved an application for rectification u/s.154 before the ld. Assessing Officer under a bonafide

ITA No. 8281/Mum/2025 Meghna Uday Zaoba AY 2013-14 belief that the very basis of major addition made u/s.50C shall be rectified. Assessee in the meantime withdrew the quantum appeal filed before the ld. CIT(A) to avoid parallel proceedings and multiplicity of litigation. The said appeal was dismissed as withdrawn vide order dated 11.10.2022.

3.2. Subsequently, impugned penalty order u/s.271(1)(c) was passed, dated 02.02.2024, levying penalty of Rs.6,50,000/- on the additions made in the course of assessment. Against the imposition of the said penalty, matter went into first appeal, whereby penalty on addition made in respect of long term capital gain on sale of property u/s.50C was deleted for which ld. CIT(A) held that this addition was purely on account of deeming fiction and that the said valuation was supported by the valuation done by the ld. DVO. However, penalty on the two other additions in respect of long term capital gain on tenancy rights u/s. 50C and interest income on FDs was confirmed. Assessee is in appeal before the Tribunal in respect of the penalty confirmed for the two additions made by ld. Assessing Officer.

4.

In respect of the addition made for the long term capital gain arising on account of transfer of tenancy rights made by applying section 50C, we note that the observations and findings of ld. CIT(A) while giving relief from the imposition of penalty on the long term capital gain on sale of property for which addition was made u/s. 50C was deleted by holding that this addition is on account of deeming fiction. These findings of ld. CIT(A) apply analogously to the addition made in respect of long term capital gains on tenancy rights for which also, ld. Assessing Officer has applied the provisions of section 50C. Accordingly, the penalty imposed by the ld. Assessing Officer on this component of addition is deleted.

ITA No. 8281/Mum/2025 Meghna Uday Zaoba AY 2013-14

4.1. The other component on which penalty is imposed is interest income of Rs.81,898/- earned by the assessee on FDs. In this regard, ld. Assessing Officer noted that assessee has concealed the income and furnished inaccurate particulars for initiating penalty proceedings u/s. 271(1)(c). He also, observed in para-6 of the assessment order that ld. Authorised Representative of the assessee agreed for the addition in this regard.

4.2. On this issue, we find that an amount of Rs.10,81,898/- was credited in the bank account which represents maturity amount of FDs of Rs.10 lakhs made by the assessee. It is important to note that investment made by the assessee in the FD is not in question and not doubted. What the assessee has received in his bank account is the maturity amount including interest component which remained to be reported in the return of income, inadvertently, to which consent was given for making the addition. The sole basis adopted by the ld. Assessing Officer for imposition of penalty is that assessee has withdrawn her first appeal filed before the ld. CIT(A) and therefore, the addition made is accepted which tantamount to concealment of income. It is a settled position of law that imposition of penalty is not automatic. Facts and circumstances of the case for each item of disallowance/addition have to be considered before drawing an adverse view for imposition of penalty. Merely because an addition has been sustained, penalty is not automatically attracted. Accordingly, we do not ascribe to the stance taken by the ld. Assessing Officer for imposing the penalty. In view of this, we delete the penalty so imposed on the component of interest income of Rs.81,898/-. Accordingly, grounds raised by the assessee in this regard are allowed.

ITA No. 8281/Mum/2025 Meghna Uday Zaoba AY 2013-14 5. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 30.04.2026.

Sd/- Sd/- [Narender Kumar Choudhry] [Girish Agrawal] Judicial Member Accountant Member Dated: 30 April, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai

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