VIJAY LALSING SURADKAR,CHIKHLI vs. ITO WARD-2, NAGPUR

PER KHETTRA MOHAN ROY, AM: This appeal filed by the assessee is directed against the order of National Faceless Appeal Centre, Delhi, (for short, “CIT(A)”), dated 30/08/2023 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the penalty order dated 23.09.2022

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) passed u/s. 271AAC(1) of the Act by the ITO, Ward-2, Khamgaon for the Assessment Year (AY) 2017-18.

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) 382], we condone the delay of 573 days and admit the appeal for adjudication on merits.

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) Income-tax Act, 1961, making an addition of Rs. 5,54,000/- as unexplained investment under section 69A and disallowing the deduction claimed under section 80G. Aggrieved, the assessee preferred an appeal before the CIT(A). Vide order dated 05.10.2023, the CIT(A) deleted the addition of Rs. 5,54,000/- made under section 69A by observing that the fixed deposit in question represented reinvestment of the maturity proceeds of an earlier deposit along with accrued interest and, therefore, could not be treated as an unexplained investment. However, the disallowance of deduction under section 80G was sustained for want of supporting evidence. Meanwhile, during the pendency of the appellate proceedings, the Assessing Officer initiated penalty proceedings and passed an order dated 23.09.2022 under section 271AAC(1) of the Act levying a penalty of Rs. 42,796/-. 5. Aggrieved by the penalty order, assessee preferred appeal before the learned CIT(A). However, the learned CIT(A), observing that the assessee had failed to pursue the appeal, dismissed the same and confirmed the penalty 4

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) levied under section 271AAC(1) of the Act. While doing so, the learned CIT(A) placed reliance on various judicial precedents, including the decision of the Hon'ble Supreme Court in CIT v. B.N. Bhattacharya [(1979) 118 ITR 461 (SC)]. 6. Learned counsel for the assessee submitted that the penalty under section 271AAC(1) was levied solely on the addition of Rs. 5,54,000/- made under section 69 of the Act. It was contended that the said addition has subsequently been deleted by the learned CIT(A) in the quantum proceedings after accepting that the fixed deposit represented reinvestment of the maturity proceeds of an earlier deposit along with accrued interest. Thus, the very foundation on which the penalty was levied no longer survives. It was further submitted that once the addition germane to the penalty initiation has been deleted in appellate proceedings, the penalty cannot be sustained independently. Therefore, the orders of the lower authorities sustaining the penalty deserve to be quashed.

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) 7. Learned Departmental Representative relied upon the orders of the Assessing Officer and the Ld.CIT(A). It was submitted that assessee had failed to satisfactorily explain the source of the investment during the assessment proceedings, which necessitated the addition under section 69 and consequent levy of penalty under section 271AAC(1) of the Act. The learned DR, therefore, supported the impugned order and prayed that the appeal of the assessee be dismissed. 8. We have heard rival submissions and perused the material available on record. The undisputed fact emerging from the record is that the penalty under section 271AAC(1) was levied with reference to the addition of Rs. 5,54,000/- made under section 69 of the Act. We note that Ld.CIT(A), while adjudicating the quantum appeal, has deleted the aforesaid addition after recording a categorical finding that the fixed deposit in question represented reinvestment of the maturity proceeds of an existing deposit together with accrued interest and, therefore, could not be treated as unexplained investment under 6

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) section 69A of the Act. Once the quantum addition itself has been deleted, the very basis for levy of penalty ceases to exist. It is a settled proposition of law that where the addition giving rise to penalty does not survive, the consequential penalty also cannot be sustained. In the present case, since the addition made under section 69 has already been deleted in appellate proceedings, the penalty levied under section 271AAC(1) has no legs to stand on. Reliance is placed on the decisions of the Coordinate Benches to this effect. i. ACIT vs. M/s. Aerens Buildwell Ltd. (ITA No.2180/DEL/2019, dated 31.03.2022) ii. DCIT vs. Milan Kavin Parikh (ITA No.1240/MUM/2022, dated 10.08.2022)

Accordingly, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the penalty by relying on the well know legal maxim Sublato Fundamento Cadit Opus.

ITA No. 341/NAG/2025 (Vijay Lalsing Suradkar) 9. In the result, the appeal of the assessee is allowed. Order pronounced in open Court on 16.06.2026

sd/- sd/- ANUBHAV SHARMA KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER Nagpur: Dated: 16/06/2026 vr/- Copy to: 1. The Assessee 2. The Revenue 3. The Pr.CIT concerned. 4. The DR, ITAT, Nagpur 5. Guard file. By order Vukkem Digitally signed by Vukkem Rambabu Rambabu Date: 2026.06.17 13:21:24 +05'30' Senior Private Secretary ITAT, Nagpur