PRADEEP JEYAVELU,TIRUVALLUR vs. ITO, WARD-1,, TIRUVALLUR

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

The captioned appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi, [CIT(A)] dated 20.01.2026 for Assessment Year 2016-17. 2. Brief facts: The assessee is an individual who had not filed the return of income under section 139(1) of the Income-tax Act, 1961 (“the Act”). Subsequently, the assessee filed the return of income declaring total income at Rs.13,91,143/-. During the course of

ITA No 620/Chny/2026 (AY 2016-17) Pradeep Jeyavelu Vs ITO W-1 :: 2 :: assessment proceedings, the Assessing Officer (“AO”) observed that the assessee had earned long-term capital gains on sale of immovable property which, according to the AO, had not been properly offered to tax. Accordingly, the AO completed the assessment determining the total income at Rs.41,11,687/- after making an addition of Rs.27,20,544/- on account of long-term capital gains. Consequent to the aforesaid addition, the AO initiated penalty proceedings under section 271(1)(c) of the Act for concealment of income/furnishing of inaccurate particulars of income and issued notice under section 274 read with section 271(1)(c) dated 25.03.2024. Thereafter, the AO levied penalty of Rs.2,35,076/-, being 100% of the tax sought to be evaded. 3. Aggrieved by the penalty order, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) [“CIT(A)”] and contended that the penalty was not sustainable in law in view of the judgment of the Hon’ble Supreme Court in the case of K.C. Builders vs. ACIT reported in 265 ITR 562 (SC). However, the learned CIT(A), vide order dated 20.01.2026, dismissed the appeal and confirmed the penalty levied by the AO. 4. Being further aggrieved, the assessee has preferred the present appeal before the Tribunal. The learned Authorised Representative (“AR”) for the assessee submitted that the quantum addition forming the very basis of levy of penalty under section 271(1)(c) of the Act has already been deleted by the Tribunal in the quantum proceedings. It was submitted that once the addition itself no longer survives, the consequential penalty imposed on the basis of such addition cannot stand independently. The learned AR placed reliance upon the judgment of the Hon’ble Supreme Court in the case of K.C.

ITA No 620/Chny/2026 (AY 2016-17) Pradeep Jeyavelu Vs ITO W-1 :: 3 :: Builders vs. ACIT, 135 Taxman 461 (SC), wherein it was held that once the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, the penalty cannot survive and is liable to be cancelled. Reliance was also placed on the judgment of the Hon’ble Delhi High Court in the case of Principal CIT vs. Fortune Technocomps Pvt. Ltd. in ITA No.313/2016 dated 13.05.2016, wherein it was held that when the assessment order in quantum proceedings is altered substantially by the appellate authority, the very basis for initiation of penalty proceedings ceases to exist. The learned AR further relied upon the judgments of the Hon’ble Allahabad High Court in the cases of Shadiram Balmukand [1972] 84 ITR 183 and Dwarka Prasad Subhas Chandra [1974] 94 ITR 154, as well as the judgment of the Hon’ble Gujarat High Court in the case of Lakkdhir Lalji [1972] 85 ITR 77, to contend that once the original basis for initiation of penalty proceedings is altered or deleted by the appellate authority, the authority initiating penalty proceedings loses jurisdiction to continue such proceedings. Accordingly, it was prayed that the penalty levied under section 271(1)(c) of the Act be deleted. 5. Per contra, the learned Departmental Representative (“DR”) supported the orders of the lower authorities. It was submitted that the assessee had failed to disclose the correct income arising from long-term capital gains and, therefore, the AO was justified in levying penalty under section 271(1)(c) of the Act. The learned DR accordingly prayed that the order passed by the learned CIT(A) confirming the penalty be upheld. 6. We have heard the rival submissions and perused the material available on record. It is an admitted position that the quantum addition of Rs.27,20,544/-, which constituted the very basis for levy

ITA No 620/Chny/2026 (AY 2016-17) Pradeep Jeyavelu Vs ITO W-1 :: 4 :: of penalty under section 271(1)(c) of the Act, has already been deleted by the Tribunal in the quantum proceedings. The Revenue could not controvert this factual position. It is a settled proposition of law that when the very foundation on the basis of which penalty proceedings were initiated ceases to exist, the consequential penalty cannot survive independently. The Hon’ble Supreme Court in the case of K.C. Builders vs. ACIT (supra) has categorically held that once the additions made in the assessment order are deleted, the penalty levied on the basis of such additions is liable to be cancelled. Similarly, the Hon’ble Delhi High Court in the case of Principal CIT vs. Fortune Technocomps Pvt. Ltd. (supra) has held that where the assessment order in quantum proceedings is materially altered by the appellate authority, the basis for initiation of penalty proceedings no longer survives. 7. Respectfully following the aforesaid judicial precedents, and considering the fact that the quantum addition itself has been deleted by the Tribunal, we are of the considered view that the penalty levied under section 271(1)(c) of the Act cannot be sustained. Accordingly, the penalty imposed by the AO and sustained by the learned CIT(A) is hereby directed to be deleted. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on the 01st day of June 2026, in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER

ITA No 620/Chny/2026 (AY 2016-17) Pradeep Jeyavelu Vs ITO W-1 :: 5 :: चे�नई/Chennai, +दनांक/Dated: 01st June, 2026. SNDP, Sr. PS

आदेश क! ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF