SHAIK NAZIMA,KURNOOL vs. INCOME TAX OFFICER, WARD-9(1), HYDERABAD

ITA 1265/HYD/2026Status: DisposedITAT Hyderabad23 October 2026AY 2015-163 pages
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What did the Tribunal hold?

The Tribunal decided both issues in favor of the assessee. For AY 2015-16, the Tribunal held that the penalty under section 271(1)(c) had no basis to stand upon, as the underlying additions were quashed and deleted by a co-ordinate bench of the Tribunal in a prior order (ITA No.1264/Hyd/2026). Consequently, the penalty for AY 2015-16 was ordered to be deleted. For AY 2016-17, the Tribunal noted that the quantum additions issue had been restored to the CIT(A) by a co-ordinate bench (ITA No.1263/Hyd/2025). Since the findings on quantum additions would influence the sustainability of the penalty, the Tribunal held it appropriate to restore the penalty appeal to the file of the CIT(A) for decision along with the quantum appeal. The ratio for AY 2015-16 is that a penalty under section 271(1)(c) cannot survive if the additions leading to it are deleted. The ratio for AY 2016-17 is that penalty proceedings should be adjourned or restored to the lower appellate authority when the underlying additions are subject to further adjudication.

What were the facts?

The assessee, Shaik Nazima, filed appeals against separate orders of the Learned Commissioner of Income Tax (Appeals) (NFAC), Delhi, dated 20/02/2026 and 11/02/2026, for Assessment Years (AY) 2015-16 and 2016-17, respectively. The appeals challenged the confirmation of penalties levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961. The assessee's counsel presented orders from a co-ordinate bench of the Tribunal concerning the quantum additions for the same assessment years. For AY 2015-16, the Tribunal had quashed the assessment and deleted the additions. For AY 2016-17, the Tribunal had restored the quantum additions issue to the CIT(A).

What were the issues?

1. Whether the penalty levied under section 271(1)(c) of the Income Tax Act, 1961, for AY 2015-16 is sustainable in light of the Tribunal's order quashing the assessment and deleting the additions. (Question of law) 2. Whether the penalty levied under section 271(1)(c) of the Income Tax Act, 1961, for AY 2016-17 should be decided along with the quantum additions, which have been restored to the CIT(A) by the Tribunal. (Question of mixed law and fact) Assessee's Contentions: For AY 2015-16, the assessee argued that since the additions forming the basis of the penalty were deleted by the Tribunal, the penalty cannot survive. The assessee relied on the Tribunal's order in ITA No.1264/Hyd/2026 for AY 2015-16. For AY 2016-17, the assessee contended that the penalty appeal should be restored to the CIT(A) to be decided along with the quantum appeal, as the CIT(A)'s findings on quantum would impact the penalty's sustainability. The assessee relied on the Tribunal's order in ITA No.1263/Hyd/2025 for AY 2016-17. Revenue's Contentions: The judgment records no specific contentions for the revenue.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SANJAY GARG & SHRI MADHUSUDAN SAWDIA

Per Sanjay Garg, Judicial Member:

The captioned appeals have been preferred by the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 20/02/2026 and, dated 11/02/2026 for the Assessment Year (AY) 2015-16 and 2016-17, respectively.

ITA 1265 & 1266

The order continues below.

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