BRINEL VALERIAN PIAS, MANGALURU,MANGALURU vs. INCOME TAX OFFICER, WARD-42(2)(1), MUMBAI, MUMBAI

PER RATNA DASGPUTA, AM

The captioned appeal by the assessee arises from order dated 24/03/2026 passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘Ld. CIT(A)’] under section 250 of the

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Income tax Act,1961 [ hereinafter referred to as “the Act”] for A.Y. 2016-17, on the following grounds:-

i. “The appellate order passed by the learned Commissioner of Income-tax [Appeals] NAFC, under Section 250 of the Act for the Assessment Year 2016-17, dated 24/03/2026 being appeal preferred by the appellant against the order of penalty passed by the learned assessing officer under section 271[1][c] of the Act, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case, may be quashed. ii. The appellant denies himself liable for penalty imposed by the learned assessing officer under section 271 [1] [c] of the Act and confirmed by the learned Commissioner of Income-tax [Appeals], amounting to Rs. 25,64,700/-, on the facts and circumstances of the case. iii. The learned Commissioner of Income-tax [Appeals] failed to appreciate that learned assessing officer is not justified in making an addition of investment made by the appellant in purchase of flat amounting to Rs. 83,00,000/- as unexplained investment by invoking the provisions of section 69 of the Act and consequently no penalty under section 271 [1] [c] of the Act could have been imposed and ought to have deleted imposition of penalty on the erroneous addition made, on the facts and circumstances of the case.

iv. The learned Commissioner of Income-tax [Appeals] and the learned assessing officer failed to properly appreciate that the source for making the investment in purchase of immovable property are from loan availed by the appellant from Citizen Credit Co-operative Bank Ltd., and also from his past savings, thus the source for investment are all from available and explainable sources and consequently without properly appreciating the same have made an erroneous addition under

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section 69 of the Act amounting to Rs. 83,00,000/-, which is arbitrary, based on suspicion, surmise and conjecture without any proper basis and consequently ought not to have imposed penalty under section 271 [1] [c] of the Act, on the facts and circumstances of the case.

v. The learned Commissioner of Income-tax [Appeals] failed to appreciate the fact that the Notice for initiation of penalty issued under section 274 r.w.s. 271[1][c] is not in accordance with law and suffers from various irregularities, since the Notice of penalty is not clear under which limb of penalty the penalty proceedings have been initiated whether for concealment of income or furnishing of inaccurate particulars of income and consequently the learned Commissioner of Income- tax [Appeals] ought to have cancelled the order of penalty, on the facts and circumstances of the case.

vi. The learned Commissioner of Income-tax [Appeals] failed to appreciate the fact that the levy of penalty is not automatic and the learned assessing officer ought to have exercised his discretion before levying penalty, on the facts and circumstances of the case.

vii. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the penalty proceedings are independent with that of the assessment proceedings and ought to have verified the facts of the case independently, on the facts and circumstances of the case. viii. The learned Commissioner of Income-tax [Appeals] failed to appreciate the fact that the order passed by the learned assessing officer under section 271 [1] [c] of the Income-tax Act, 1961 is without assumption of proper jurisdiction as the mandatory conditions for invoking the provisions of section 271 [1] [c] of the Act has not been complied with, on the facts and circumstances of the case.

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ix. Without prejudice to the above though not conceding for the sake of argument, the penalty levied is highly excessive and liable to be reduced substantially, on the facts and circumstances of the case. x. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. xi. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.” 2. Briefly stated, the facts are that the assessee had not filed return of income during the year under consideration. The case was, however, flagged as per Risk Management Strategy formulated by CBDT, leading to initiation of re-assessment proceedings by issue of notice under section 148 of the Act. In these proceedings, the Ld. Assessing Officer (AO) made addition of Rs, 83,00,000/- as unexplained investment on the ground that although the assessee had invested the aforesaid amount in immovable property, the source of the same had remained unexplained due to persistent non-compliance from the assessee’s end. Penalty proceedings u/s 271(1)(c) were initiated for concealment of particulars of income, and penalty of Rs.25, 64, 700/- was levied @ 100% of the tax sought to be evaded. 2.1 Aggrieved with the penalty imposed by the Ld. AO, the assessee carried the mattered in appeal before the Ld. CIT(A). In the

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appellate proceedings the assessee contended that he was an NRE employed abroad, with no taxable income in India. He submitted that he had no access to the physical address where notices were sent by the Department, and that he was not registered on the e- filing portal till July, 2024. Regarding the source of the investment, he stated that the same was fully explainable his housing loan and NRE account transfers. The Ld. CIT(A), however, did not find the explanation satisfactory. He held that the defence being put up by the assessee was applicable to the quantum appeal and not to the penalty appeal. He also observed that non- receipt of notices was not a valid excuse since statutory obligation rests upon the assessee to ensure that his communication address is updated with the Department. On these grounds the Ld. CIT(A) upheld the penalty imposed by the Ld. AO. 3. It is against the aforesaid order of the Ld. CIT(A) that the assessee has preferred appeal before this Tribunal. 4. Before us, the Ld. Authorized Representative (AR) for the assessee, appearing virtually, argued the case on merits, stating that penalty on account of unexplained investment could not be imposed where the assessee was in a position to explain the source of such investment through his housing loan and NRE account transfers. Without prejudice to the same, he pointed out that the quantum appeal in the assessee’s case for the same

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assessment year has been remanded back by the Tribunal to the CIT(A) for de novo adjudication. 5. Per contra, the Ld. AR for the Department supported the orders of the Ld. CIT(A). 6. We have heard the submission of both the sides in the light of the material placed before us. The Co-ordinate Bench of the Mumbai Tribunal, in the assessee’s own case for same assessment year, has remanded the quantum appeal back to the file of the Ld. CIT(A), holding that since the assessment order was passed exparte, and the Ld. CIT(A) had also dismissed the appeal solely on the ground of delay, the scales of justice demand that the matter should be verified and revisited at the level of the CIT(A). Since the impugned penalty under section 271(1)(c) is an offshoot of the assessment proceedings which have been restored to the file of the Ld. CIT(A), we deem it appropriate to restore the said penalty proceedings also to the Ld. CIT(A) for fresh adjudication as per law. Needless to state, the Ld. CIT(A) shall afford the assessee sufficient opportunity of being heard. The assessee is also directed to co-operate in the appellate proceedings with the CIT(A) and furnish necessary information/documents that may be called for.

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Order pronounced in the open Court on 24/09/2026

Sd/- Sd/- (BEENA PILLAI) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 24/09/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai