DEEPA KAMAL KISHORE SHARMA,AHMEDABAD vs. ITO, WARD 7(2)(1), AHMEDABAD, AHMEDABAD

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ITA 2632/AHD/2025Status: DisposedITAT Ahmedabad22 April 2026AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that since the quantum assessment, which is the basis for the penalty, was set aside and restored for de novo adjudication in the assessee's own case, the penalty cannot be sustained. Penalty proceedings are dependent on the outcome of quantum proceedings.

What were the facts?

The assessee's assessment was completed under section 144 read with section 147, with an addition for unexplained investment. A penalty under section 271(1)(c) was imposed. The CIT(A) dismissed the assessee's appeal in limine due to delay without adjudicating on merits.

What were the issues?

Whether penalty under section 271(1)(c) can be sustained when the underlying quantum addition has been set aside for fresh adjudication. Whether the CIT(A) erred by dismissing the appeal due to delay without considering the merits.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Sammit Jain, AR
For Respondent: Shri Girish Parihar, Sr. DR
Hearing: 23.03.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.2632/Ahd/2025 (Assessment Year: 2012-13) Deepa Kamal Kishore Sharma, Vs. Income Tax Officer, I-81, Orchid Whitefield, Ward-7(2)(1), Makarba, Jivraj Prak S.O., Ahmedabad Ahmedabad-380051 [PAN No.BAHPS1962B] (Appellant) .. (Respondent) Appellant by : Shri Sammit Jain, AR Respondent by: Shri Girish Parihar, Sr. DR Date of Hearing 23.03.2026 22.04.2026 Date of Pronouncement O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 14.11.2025 passed for A.Y. 2012-13.

2.

The assessee has raised the following grounds of appeal:

“1. That the learned CIT(Appeal) / National Faceless Appeal Centre, Delhi has erred in law and facts by not admitting and adjudicating the appeal on the ground of time barred appeal before him and therefore the order passed by the learned AO is required to be quashed and the learned AO is to be directed to delete the penalty. 2. Without prejudice to ground No. 1 the learned CIT(Appeal) / National Faceless Appeal Centre, has erred in law and facts by not condoning the delay in filing of the appeal and therefore the Ld. CIT(Appeal) / National Faceless Appeal Centre, be directed to condone the delay in the filing of the appeal and admit and adjudicate the appeal on the-merits. 3. Without prejudice to above grounds of appeal, the learned C1T(Appeal)/ National Faceless Appeal Centre, Delhi has erred in law and facts by not adjudicating/considering the ground of appeal for penalty imposed of

ITA No. 2632/Ahd/20256 Deepa Kamal Kishore Sharma vs. ITO Asst.Year –2012-13 - 2– Rs.2,44,513/-u/s 271(l)(c) of the Act, and therefore the learned AO should be directed to delete the impugned penalty of Rs.2,44,513/-. 4. That your appellant craves a leave to add, alter or amend any grounds at the time of hearing.” 3. The brief facts of the case are that the assessee is an individual whose assessment for the relevant assessment year was completed under section 144 read with section 147 of the Income-tax Act, 1961 ("the Act"), wherein the Assessing Officer made an addition of Rs. 11,74,934/- treating the same as unexplained investment. Consequent to the said addition, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act on the ground that the assessee had concealed particulars of income and furnished inaccurate particulars thereof. In the course of penalty proceedings, the Assessing Officer observed that the assessee had failed to satisfactorily explain the source of investment and had also not complied with statutory notices during assessment proceedings. The Assessing Officer held that the case was fit for levy of penalty, and accordingly penalty under section 271(1)(c) of the Act was imposed.

4.

Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(Appeals). The assessee submitted that the penalty was not leviable as the addition itself was made ex parte under section 144 of the Act without proper verification and that there was neither concealment nor furnishing of inaccurate particulars. However, the CIT(Appeals) dismissed the appeal in limine primarily on the ground of delay in filing the appeal and held that the assessee failed to demonstrate sufficient cause for condonation of delay. The CIT(Appeals), therefore, upheld the penalty order without adjudicating the issue on merits.

ITA No. 2632/Ahd/20256 Deepa Kamal Kishore Sharma vs. ITO Asst.Year –2012-13 - 3– 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

6.

We have heard the rival submissions and perused the material available on record. It is an undisputed position that the penalty levied under section 271(1)(c) of the Act is based on the addition of Rs. 11,74,934/- made in the quantum assessment proceedings.

7.

We find that the Coordinate Bench of the Tribunal in the assessee’s own case in quantum proceedings has already set aside the assessment to the file of the Assessing Officer for de novo adjudication. The said order has been passed by the ITAT, Ahmedabad “SMC” Bench in the case of Deepa Kamal Kishore Sharma Vs ITO in ITA Nos. 2208 & 2209/Ahd/2025 vide order dated 28.01.2026, wherein the Tribunal has restored the entire matter to the file of the Assessing Officer after noting that the issues were not adjudicated on merits and required fresh consideration.

8.

Once the very foundation of the penalty, i.e., the quantum addition, has been set aside and restored for fresh adjudication, the penalty levied under section 271(1)(c) of the Act cannot be sustained at this stage. It is a settled position of law that penalty proceedings are dependent on the outcome of the quantum proceedings. The Hon’ble Supreme Court in K.C. Builders v. ACIT (2004) 265 ITR 562 (SC) has held that when the basis for levy of penalty does not survive, the penalty cannot be sustained. Similarly, in CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC), it has been held that penalty is not automatic and must be based on clear findings of concealment or furnishing of inaccurate particulars.

ITA No. 2632/Ahd/20256 Deepa Kamal Kishore Sharma vs. ITO Asst.Year –2012-13 - 4– 9. In the present case, since the quantum assessment itself has been restored for fresh adjudication, the question whether there was any concealment of income or furnishing of inaccurate particulars remains open and undecided. Therefore, the penalty proceedings cannot be independently sustained without final determination of the quantum.

10.

Respectfully following the decision of the Coordinate Bench in the assessee’s own case and in light of the settled legal principles, we set aside the impugned order of the learned CIT(Appeals) and restore the matter to the file of the Assessing Officer with a direction to adjudicate the issue of penalty under section 271(1)(c) of the Act afresh after completion of the quantum assessment proceedings and in accordance with law, after providing adequate opportunity of being heard to the assessee.

11.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 22/04/2026

Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 22/04/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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