MADHU SATISH KHANNA ,MUMBAI vs. ITO WARD 24(2)(1), MUMBAI

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ITA 1336/MUM/2026Status: DisposedITAT Mumbai04 June 2026AY 2012-134 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 noted that the quantum appeal against the ex-parte assessment order had already been set aside and the matter was restored to the AO for a fresh order. Consequently, the penalty order, which was based on the quantum assessment, was no longer sustainable.

What were the facts?

The assessee appealed against a penalty order under Section 271(1)(c) of the Income Tax Act. The penalty was confirmed by the CIT(A) for the Assessment Year 2012-13. The assessee raised grounds regarding non-service of notice and incorrect assessment of rental income.

What were the issues?

Whether the penalty under Section 271(1)(c) can survive when the underlying assessment order has been set aside. Whether the notice under Section 274 was properly served on a senior citizen.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 64(i)(iv),Section 144,Section 148

AI-generated summary — verify with the full judgment below

Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR

For Appellant: Shri Ajay R. Singh & Shri AkshayPawar
For Respondent: Shri SwapnilChoudhari, (Sr. AR.)
Hearing: 29.04.2026Pronounced: 04.06.2026

आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 27.10.2025is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the penalty order passed u/s. 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated20.01.2022for the Assessment Year [A.Y.] 2012-13.

2.

The grounds of appeal are as under:

ITA No. 1336/Mum/2026; Madhu Satish Khanna “1. The Id CIT(A) erred in confirming the levy of penalty u/s. 271(1) (c) of the Act of Rs. 4,91,187/- ignoring the fact that notice u/s 274 r.w.s. 271(1)(c) of the Act is not served on the assessee who is a senior citizen. 2. The Id CIT(A) erred in confirming the levy of penalty u/s. 271(1)(c) of the Act in regards to the alleged addition of Rs. 29.70 lakhs being rental income assessed under the head "Income from House Property" based on Form 26AS, however, the actual rental income reflected in Form 26AS is only Rs.14.85 lakhs. More importantly, this income has been incorrectly assessed in assessees hands, when in fact, it is already taxed in the hands of husband, Mr. SatishkumarKartadayal Khanna PAN:- AUSPK1251H, as per Section 64(i)(iv) of the Act, therefore penalty ought to be deleted.” 3. At the outset,it was noticed that the instant appeal was delayed by 35 days.In this regard,the assessee filed a condonation application submitting that he is aged 76 and relied on the CA who was looking after all the tax related matters.Unfortunately, he expired in May 2025.As such,he was not aware of the appellate order and only in the month January 2026 he came to know of such order, when penalty notice was brought to his knowledge by the new Consultant.The delay is stated to be neither intentional nor deliberate and may be condoned.On careful consideration,taking a sympathetic view of the matter,we condone the delay and proceed to adjudicate the appeal.

4.

In this case,the assessment order was passed u/s 144 of the Act on account of non compliance to the notice u/s 148 of the Act and the subsequent notices, determining total income of Rs 21,06,270/-.It was noticed from the Departmental data that the assessee had rental income of Rs 29.70 lakh and interest income of Rs 0.27 lakh.Penalty proceeding was intiatetd u/s 271(1)© of the Act.However,still there was no compliance and the AO proceeded to impose penalty of Rs 4,91,187/-.The said penalty order was upheld by the ld.CIT(A).

ITA No. 1336/Mum/2026; Madhu Satish Khanna 5. Before us,the ld.AR has intimated that in this case ,the quantum appeal against the ex parte order of the AO has already been set aside and the entire matter is restored to the AO for passing de novo order by the hon’ble ITAT vide order in ITA No.7687/Mum/2025 dated 16.3.2026.Therefore,the penalty order does not survive and may also be set aside.The ld.DR, on other hand relies on the orders of lower authorities.

6.

Since the quantum order is already remitted to the AO for fresh order, the instant appellate order upholding the penalty order does not survive and is therefore, set aside. Accordingly, the penalty order stands quashed.

7.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 04/06/2026.

Sd/- Sd/- SAKTIJIT DEY PRABHASH SHANKAR (उपाध्यक्ष/ VICE PRESIDENT) (लेखाकारसदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai ददनाुंक /Date 04.06.2026 Soumili Das / PS

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.

ITA No. 1336/Mum/2026; Madhu Satish Khanna सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण

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