KINJAL BHAVESH GANDHI,MUMBAI vs. INCOME TAX OFFICER WD22(2)(1), MUMBAI

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ITA 4163/MUM/2026Status: DisposedITAT Mumbai15 October 2026AY 2015-20165 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the assessee did not appear for the hearing, despite due notice, and proceeded ex parte. The Tribunal observed that the assessee had not filed a return of income and that the AO had made additions and initiated penalty proceedings under Section 271(1)(c) for concealment of income amounting to Rs. 2,68,62,229/-. It was also noted that the CIT(A) had set aside the quantum additions to the file of the AO for fresh assessment. In light of the assessee's non-appearance and the setting aside of the quantum assessment, the Tribunal imposed a cost of Rs. 5,000/- on the assessee, to be deposited in the Prime Minister's National Relief Fund within 30 days. The matter was restored to the file of the AO for fresh adjudication, with a direction to provide adequate opportunity of hearing to the assessee and for the assessee to remain cooperative. The Tribunal clarified that this decision did not express any opinion on the merits of the dispute. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Kinjal Bhavesh Gandhi, filed an appeal before the Income Tax Appellate Tribunal (ITAT) Mumbai Bench against an order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2015-2016. The appeal challenged a penalty imposed under Section 271(1)(c) of the Income Tax Act. The assessee did not appear for the hearing before the ITAT, despite due notice. The Revenue was represented by the Senior Departmental Representative. The assessee had not filed a return of income for the year under consideration, and the Assessing Officer (AO) had made additions of Rs. 2,68,62,229/- on account of unexplained financial transactions and initiated penalty proceedings. The NFAC had confirmed the penalty. The assessee's grounds of appeal argued that the penalty was unsustainable as the underlying assessment order had been set aside by the CIT(A) for fresh adjudication.

What were the issues?

1. Whether the penalty under Section 271(1)(c) can be confirmed when the underlying assessment order, which forms the basis of the penalty, has been set aside for fresh adjudication by the CIT(A)? (Mixed law and fact) 2. Whether the 'tax sought to be evaded' becomes indeterminate and thus the penalty cannot be sustained when an assessment is set aside for de novo consideration or remanded? 3. Whether the CIT(A) erroneously relied on judicial precedents like Union of India v. Dharmendra Textile Processors, misapplying the concept of strict civil liability for penalty in the absence of a valid quantum addition? 4. Whether the penalty appeal was prematurely adjudicated by the CIT(A) without awaiting the outcome of the fresh assessment proceedings, leading to a penalty confirmed against a non-existent demand? Assessee's Contentions: The assessee argued that the penalty under Section 271(1)(c) is invalid if the assessment order is set aside, as the penalty is predicated on a valid and subsisting assessment. They contended that the 'tax sought to be evaded' becomes indeterminate upon setting aside the assessment, rendering the penalty unsustainable. The assessee also argued that the CIT(A) misapplied precedents and prematurely adjudicated the penalty appeal, leading to a legally unsustainable situation. (No specific authorities were named by the assessee in the provided text, but the grounds refer to the principle of judicial annulment or remand). Revenue's Contentions: The Revenue, through the Ld. DR, argued that a penalty was imposed for concealment of income, and the assessee failed to appear or respond to multiple notices from the AO. The Ld. DR was ready with arguments. (Specific arguments or authorities relied upon by the Revenue are not detailed in the provided text).

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, MUMBAI BENCHES, MUMBAI

Before: SANDEEP GOSAIN & SHRI BIJAYANANDA PRUSETH

Pronounced: 15.10.2026

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. NFAC DELHI vide DIN: ITBA/NFAC/S/250/2025-26/1085987579(1) dated 13- Feb-2026 for the Assessment Year 2015-2016. The Assessee has raised the following grounds of appeal:

1) Absence of a Subsisting Assessment Order The learned CIT(A) erred in law and on facts by confirming the penalty u/s 271(1)(c) when the underlying assessment order dated 31/01/2024—the very foundation of the penalty—was set aside for fresh adjudication via CIT(A) order dated 03/03/2025. 2) Indeterminacy of "Tax Sought to be Evaded" The learned CIT(A) failed to appreciate that once an assessment is set aside for de novo consideration, the "tax sought to be evaded" (on which penalty is computed) becomes indeterminate. The penalty cannot be sustained on an assessment that has been judicially annulled OR remanded. 3) Erroneous Reliance on Judicial Precedents The learned CIT(A) misapplied the ratio of Union of India v. Dharmendra Textile Processors. While penalty may be a "strict civil liability," it cannot exist in a vacuum without a valid, subsisting quantum addition. 4) Premature Adjudication of Penalty Appeal The learned CIT(A) erred in not keeping the penalty appeal in abeyance OR remanding it to follow the outcome of the fresh assessment proceedings, thereby leading to a legally unsustainable situation WHARE a penalty stands confirmed against a non-existent demand. 5) General Ground: The Appellant craves leave to add, amend, OR modify any of the grounds of appeal before OR at the time of the hearing. (The Grounds of Appeal Nos. 2 to 5 pertain to the same penalty and do not represent independent tax effects. Accordingly, the tax effect has been considered only once, and NIL has been mentioned against the other grounds to avoid duplication and to ensure correct computation of total tax effect.)

2.

None appeared on behalf of the assessee when the case was called repeatedly. From the records, we noticed that despite due service of notice of hearing through speed post/registered post/electronic mode at the address provided in Form No. 36, nobody appeared on behalf of the assessee, and no application seeking adjournment was filed. Therefore, drawing an inference from the General Clauses Act, it is presumed that the service has been duly effected. Despite such service, the assessee has not appeared. Therefore, we proceed to hear the appeal ex parte.

3.

On the other hand, the Ld. DR present in the court is ready with the arguments; therefore, we have decided to proceed with the hearing of the appeal ex parte.

4.

We have heard the Ld. DR and perused the material placed on record. From the records, we noticed that a penalty was imposed upon the assessee on account of concealment of income. Even during the penalty proceedings, the assessee did not appear, despite several opportunities being granted. The Ld. DR pointed out that multiple notices were issued to the assessee by the AO; however, the assessee failed to respond.

5.

From the records, we also noticed that the assessee had not filed a return of income for the year under consideration, despite having undertaken several financial transactions, the sources of which remained unexplained. Therefore, apart from making additions, the AO also initiated penalty proceedings under section 271(1)(c) of the Income-tax Act for concealment of particulars of income vide the assessment order dated 31.01.2024, in respect of the concealed income of Rs. 2,68,62,229/-.

6.

As per Ground No. 1 raised by the assessee, the quantum additions made by the AO were challenged before the Ld. CIT(A). Since the assessment order was passed ex parte, the Ld. CIT(A), in the quantum appeal, had set aside the matter to the file of the AO for making a fresh assessment.

7.

Thus keeping in view these facts, we impose a cost of Rs. 5,000/- upon the assessee for non-appearance before the Bench. The said amount shall be deposited by the assessee in the Prime Minister's National Relief Fund within 30 days from the date of receipt of this order, and a copy of the receipt shall be placed on record before the AO within 30 days from the date of receipt of this order. With these directions, we also restore the matter to the file of the AO for fresh adjudication, keeping in view the order passed by the Ld. CIT(A) in the quantum appeal.

8.

Needless to mention, the AO shall provide adequate opportunity of hearing to the assessee. The assessee shall not seek adjournments on frivolous grounds and shall remain cooperative during the course of the proceedings.

9.

Before parting, we make it clear that our decision to restore the matter to the file of the AO shall in no way be construed as reflecting or expressing any opinion on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with the law.

10.

In the result, appeal filed by the Assessee stands allowed for statistical purposes.

Order pronounced in the open court on 15.10.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 15.10.2026 RY-SrPS Copy to: KINJAL BHAVESH GANDHI, 502/503,KALPAVRUKSHA, JUHU BREEZE CHS, 5A TAGORE ROAD, ANIL M MARG, 1 SANTACRUZ WEST, MUMBAI-400054, MAHARASHTRA

INCOME TAX OFFICER WD22(2)(1), 2 PIRAMAL CHAMBERS, MUMBAI-400012, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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