GAURANG CHIMANBHAI KAPADIA,KHEDA vs. INCOME TAX OFFICER WARD 1 NADIAD, NADIAD KHEDA

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.94/Ahd/2026 (Assessment Year: 2016-17) Gaurang Chimanbhai Kapadia, Vs. Income Tax Officer, C.o. M/s. Silk Palace, Ward-1, Bhavasarwad Nadia, Nadiad Kheda-387001 [PAN No.ADMPK6603N] (Appellant) .. (Respondent) Appellant by : Shri Ramesh Thete, AR Respondent by: Shri Abhijit, Sr. DR Date of Hearing 20.04.2026 Date of Pronouncement 22.04.2026 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 07.10.2025 passed for A.Y. 2016-17.

“1. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, has erred in law and on facts in dismissing the appeal of the appellant, merely on the ground of dismissal of the quantum appeal, without properly appreciating the facts and circumstances of the case. 2. That the learned CIT(A) failed to consider the detailed submissions made by the appellant and has passed the impugned order without dealing with the merits of the case, thereby violating the principles of natural justice. 3. That the learned CIT(A) has grossly erred in ignoring the material fact that the quantum appeal in the appellant’s case had already been remanded back to the file of the learned CIT(A) by the Hon’ble Income Tax Appellate Tribunal, Ahmedabad, vide order dated 18-07-2025 passed in ITA No. ITA/215/Ahd/2024. 4. That once the quantum appeal was restored by the Hon’ble ITAT to the file of the learned CIT(A) for fresh adjudication, the penalty appeal could not have

ITA No. 94/Ahd/2026 Gaurang Chimanbhai Kapadia vs. ITO Asst.Year –2016-17 - 2– been dismissed without adjudicating the quantum issues on merits, and therefore the impugned order is bad in law, arbitrary and unsustainable. 5. That the impugned order passed by the learned CIT(A) is contrary to the settled legal position that penalty proceedings are dependent on the outcome of the quantum proceedings, and hence the dismissal of the appeal without proper adjudication is legally untenable. 6. That the appellant submits that the order passed by the learned CIT(A) deserves to be quashed and the matter be restored back for fresh adjudication in accordance with law and after providing adequate opportunity of being heard to the appellant. 7. That the appellant craves leave to add, amend, alter, modify, substitute or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal.” 3. The brief facts of the case are that the assessee was subjected to penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 for A.Y. 2016-17 pursuant to additions made in the assessment framed under section 143(3) of the Act. The Assessing Officer, having made certain additions in the quantum proceedings, initiated penalty proceedings alleging concealment of income and furnishing of inaccurate particulars of income. Thereafter, vide order dated 11.03.2025, the Assessing Officer levied penalty under section 271(1)(c) of the Act on the basis of the additions sustained in the assessment order.

ITA No. 94/Ahd/2026 Gaurang Chimanbhai Kapadia vs. ITO Asst.Year –2016-17 - 3– forming the basis of penalty stood confirmed at the first appellate stage, the penalty levied under section 271(1)(c) of the Act was justified. Without independently examining the merits of the penalty or the factual matrix of the additions, the CIT(Appeals) proceeded to confirm the penalty solely on the ground that the quantum additions had attained finality at that stage. Accordingly, the appeal of the assessee against the penalty order was dismissed.

ITA No. 94/Ahd/2026 Gaurang Chimanbhai Kapadia vs. ITO Asst.Year –2016-17 - 4–

adjudication of penalty at this stage would be premature and unsustainable in law. Therefore, in the interest of justice, we deem it appropriate to set aside the impugned order of the CIT(Appeals) and restore the issue of levy of penalty under section 271(1)(c) of the Act to the file of the CIT(Appeals), to be decided afresh in accordance with law after the final outcome of the quantum proceedings.

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