BEAU MONDE B TOWER COOPERATIVE HOUSING SOCIETY LIMITED,MUMBAI vs. WARD 22(1)(6), INCOME TAX OFFICER, MUMBAI

At the outset, there is a delay of 161 days in filing the appeal before the learned CIT(A). During the course of hearing before us, ld.AR submitted that the assessee had filed an affidavit explaining the circumstances which resulted in the delay. It was submitted that Shri Ashok Kacker, one of the members of the Managing Committee of the assessee-society, was one of the key persons involved in taking decisions relating to the tax matters and litigation of the society. However, owing to certain health issues, he could not attend to the affairs of the society regularly. Consequently, the order passed by the learned CIT(A) in the quantum proceedings as well as the penalty proceedings remained unattended. It was submitted that immediately upon the matter being reviewed and after necessary consultation with the Authorised Representative, steps were taken to file the appeal before the Tribunal without any further delay.

The learned Authorised Representative (ld.AR) submitted that the delay was neither intentional nor deliberate but had occurred on account of bona fide and unavoidable circumstances beyond the control of the assessee. He further relied upon the decision of the Hon'ble Supreme Court in the case of Western Union Financial Services Inc. [153 taxmann.com 704] and submitted that the expression “sufficient cause” has to be considered having regard to the facts and circumstances of each case and that substantial justice should not be defeated on account of technicalities. The Departmental Representative (ld.DR) relied upon the orders passed by the learned CIT(A).

We have considered the submissions of the ld.AR and the ld. DR and perused the affidavit filed by the assessee. The explanation furnished by the assessee attributes the delay to the circumstances relating to the person who was looking after the tax and litigation matters of the society and his inability to attend to the affairs of the society on account of health issues. We find that the explanation cannot be said to be wholly devoid of substance. It is also relevant that the assessee has pursued the matter before the Tribunal immediately upon the issue coming to its notice. Having regard to the totality of the circumstances and the principles governing condonation of delay, we are of the view that the assessee has made out sufficient cause for the delay of 161 days.

Accordingly, in the interest of substantial justice, the delay of 161 days in filing the appeal before the learned CIT(A) is condoned. Consequently, the impugned order of the learned CIT(A), insofar as the appeal was dismissed without adjudication of the grounds on merits, cannot be sustained. We proceed to consider the issue arising from the levy of penalty on merits.

The penalty under section 271(1)(c) was levied by the Assessing Officer in respect of the disallowance of deduction claimed by the assessee under section 80P(2)(d) of the Act. From the penalty order, it is seen that the Assessing Officer treated the claim of deduction in respect of interest income as concealment of income and/or furnishing of inaccurate particulars of income and levied penalty of Rs.11,15,609/-, being 100% of the tax sought to be evaded.

The Ld.AR submitted that the very quantum addition forming the basis of the impugned penalty has subsequently been considered by this Tribunal in ITA No.7191/Mum/2026 for Assessment Year 2016-17, vide order dated 21.08.2026. It was submitted that the Tribunal, while deciding the quantum appeal, has set aside the matter to the file of the jurisdictional Assessing Officer for the purpose of verifying the factual position regarding receipt of interest from co-operative banks and for passing an order afresh after considering the decision of the learned Commissioner of Income-tax (Appeals) for Assessment Years 2015-16 and 2017-18 on similar issues, after affording reasonable opportunity of being heard to the assessee.

We have considered the rival submissions and perused the material available on record. The penalty under section 271(1)(c) has been levied with reference to the addition/disallowance made in the quantum proceedings. It is not in dispute that the said quantum issue has subsequently been set aside by the Tribunal for fresh consideration by the Assessing Officer. Thus, the quantum addition which constituted the basis for levy of the impugned penalty has not attained finality and is presently subject to fresh adjudication by the Assessing Officer in terms of the directions contained in the order of the Tribunal dated 21.08.2026.

In these circumstances, the foundation on which the impugned penalty was levied is presently not in existence in its concluded form. The issue whether the assessee was entitled to deduction under section 80P(2)(d) in respect of the interest income and, consequently, whether any income had been concealed or inaccurate particulars had been furnished, would necessarily depend upon the outcome of the fresh quantum proceedings. Therefore, the penalty levied with reference to the earlier quantum addition cannot be sustained in its present form.

We also note that the learned CIT(A), having declined to condone the delay, did not adjudicate the assessee's grounds challenging the levy of penalty on merits. Thus, there has been no adjudication by the first appellate authority on the question whether the assessee's claim under section 80P(2)(d) was bona fide or whether the ingredients of section 271(1)(c) were otherwise satisfied. In view of the subsequent order of the Tribunal in the quantum proceedings, it would not be appropriate for us to adjudicate those issues at this stage.

In view of the foregoing discussion, we set aside the impugned penalty order passed under section 271(1)(c) of the Act. The Assessing Officer shall be at liberty to consider afresh, in accordance with law, whether or not penalty is leviable, having regard to the outcome of the fresh quantum proceedings and the facts and circumstances of the case.

In the result, the appeal filed by the assessee is allowed for statistical purposes.