VINOD KUMAR GUPTA,ALIGARH vs. ITO WARD 4(1)(3), ALIGARH, ALIGARH

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ITA 541/AGR/2026Status: DisposedITAT Dehradun27 October 2026AY 2017-187 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the penalty under Section 271AAC(1) was levied by the AO in respect of a cash deposit of Rs. 10,70,000 during the demonetization period. The assessee had opted for the DTVSV Scheme, 2024, and had paid the requisite tax demand. However, Form 4, which would entitle the assessee to a waiver of penalty, had not yet been issued by the Principal CIT, Agra-1, despite the assessee's request. The AO had levied the penalty precisely because Form 4 had not been issued. The Tribunal found the assessee's request to be reasonable, considering the circumstances. Therefore, the Tribunal set aside the impugned order of the learned CIT(A) and directed the learned CIT(A) to keep the appeal pending until the matter regarding the issuance of Form 4 under the DTVSV Scheme is finally decided by the learned PCIT, Agra-1. All grounds of appeal were allowed for statistical purposes. The Tribunal did not decide the merits of the penalty itself but remanded the matter for procedural completion.

What were the facts?

The assessee, Vinod Kumar Gupta, is an individual who filed his income for Assessment Year 2017-18 declaring Rs. 4,24,110. His case was selected for limited scrutiny regarding cash deposits during demonetization. The Assessing Officer (AO) added Rs. 10,70,000 under Section 69A of the Income Tax Act, 1961, and initiated penalty proceedings under Section 271AAC. The assessee's appeal to the CIT(A) was dismissed. Subsequently, the assessee opted for the Direct Tax Vivad se Vishwas (DTVSV) Scheme, 2024. The assessee's appeal before the ITAT was dismissed on 01.04.2025 due to this opting for the scheme. However, the AO initiated penalty proceedings under Section 271AAC(1) for Rs. 82,657. The assessee argued that while taxes were paid under the DTVSV Scheme, Form No. 4, granting waiver of penalty, was pending. The AO levied the penalty as Form 4 was not issued. The CIT(A) again dismissed the assessee's appeal.

What were the issues?

1. Whether the learned CIT(A) erred in confirming the penalty levied under Section 271AAC(1) of the Income Tax Act, 1961, when the underlying addition under Section 69A was disputed and the assessee had opted for the Vivad se Vishwas Scheme? (Question of law and fact, concerning Section 271AAC(1) and Section 69A). 2. Whether the penalty proceedings can survive independently if the quantum addition is deleted, especially when the assessee has opted for dispute resolution under the Vivad se Vishwas Scheme? (Question of law, concerning the survival of penalty proceedings). 3. Whether the learned CIT(A) erred in confirming the penalty when the assessee had opted to settle the dispute under the Vivad se Vishwas Scheme, paid the requisite tax demand, and the issuance of Form 4 was pending due to procedural delay, warranting the penalty proceedings to be kept in abeyance? (Question of law and fact, concerning the DTVSV Scheme and procedural delays). Assessee's Contentions: - The underlying addition was made without valid material or justification. - Penalty is arbitrary, bad in law, and lacks jurisdiction as substantive additions are disputed and the assessee initiated dispute resolution under the Vivad se Vishwas Scheme. - Penalty proceedings cannot survive independently if the quantum addition is deleted. - The assessee opted to settle under VSVS2 and paid the requisite tax demand; issuance of Form 4 is pending due to procedural delay, and penalty proceedings should have been kept in abeyance. - Principles of natural justice were violated without adequate opportunity to explain the genuineness of transactions. - Penalty under Section 271AAC(1) is not automatic; no deliberate intention to furnish inaccurate particulars or conceal income was established. - The penalty amount ignored a rectification order under Section 154 which reduced the tax due demand. - The matter should be set aside to the CIT(A) with directions to keep the appeal pending until Form 4 is decided by the PCIT. Revenue's Contentions: - The learned Sr. DR supported the orders of the authorities below but did not raise serious objections regarding the assessee's plea for setting aside the matter to the CIT(A).

Which sections of the Income-tax Act were involved?

Section 69A,Section 271AAC,Section 271AAC(1),Section 250,Section 143(3),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA (SMC

Before: SHRI SUNIL KUMAR SINGH & SHRI BRAJESH KUMAR SINGH

For Appellant: Shri Rajiv Bansal, CA
For Respondent: Shri Anil Kumar, Sr. DR
Hearing: 31.08.2026Pronounced: 27.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE : SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER

ITA No. 541/Agr/2026 Assessment Year: 2017-18 Vinod Kumar Gupta, Vs. Income-tax Officer, 134, Avas Vikas Colony, Sasni Ward 4(1)(3), Income-tax Gate, Aligarh - 202001. Office, Marris Road, Aligarh- 202001. PAN : AEDPG1964N (Appellant) (Respondent) Assessee by Shri Rajiv Bansal, CA Department by Shri Anil Kumar, Sr. DR Date of hearing 31.08.2026 Date of pronouncement 27.10.2026 ORDER PER : BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER: This appeal is directed against the impugned order dated 22.04.2026 passed in appeal No. NFAC/2016-17/10547165 by the ld. Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18, wherein ld. CIT(A) has dismissed assessee’s appeal.

ITA No.541/Agr/2026

2.

Brief facts of the case: The assessee is an individual and had filed his return of income on 08.07.2017, declaring total income of Rs.4,24,110/-. The case was selected for limited scrutiny for examination and verification of cash deposit during the demonetization period. After considering the explanation of the assessee, which was not accepted by the AO, the AO added a sum of Rs.10,70,000/- u/s. 69A of the Act. The AO also initiated penalty proceedings u/s. 271AAC of the Act in respect of the aforesaid addition made vide order u/s. 143(3) of the Act dated 09.09.2019. Aggrieved with the said order, the assessee filed an appeal before the learned CIT(A) on 27.09.2019, which was dismissed by the learned CIT(A) vide order dated 24.09.2024. Further, being aggrieved with the said order of the learned CIT(A), the assessee filed an appeal before this Tribunal. However, subsequently, vide application dated 06.03.2025 (placed at page No. 54-55 of the paper book) before this Tribunal, the assessee submitted that he had opted for DTVSV Scheme, 2024. On the basis of the said application, the appeal of the assessee was dismissed by this Tribunal vide order dated 01.04.2025 (ITA No. 425/Agr/2024).

2.1 Thereafter, the AO initiated penalty proceedings u/s. 271AAC(1) of the Act. Before the AO, the assessee submitted that in respect of the 2 | P a g e

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impugned addition of Rs.10,70,000/- u/s. 69A of the Act on account of cash deposit in his bank account during the demonetization period, the assessee had deposited the due taxes under DTVSV Scheme, 2024, but Form No. 4 was yet to be received from the PCIT, Agra-1. The assessee also submitted the copy of screenshot, wherein, it was stated that Form No.4 was still pending. Taking note of the above fact, the AO made enquiries from the office of learned Principal CIT regarding the pending Form No.4 and also asked the assessee to furnish Form No.4, which was not produced before the AO. Therefore, the AO noted that since the waiver of penalty was subject to the issuance of Form 4 under DTVSVS and as per information available with the system and as per the submission of the assessee, no Form4 was issued till date and hence, considered that it was a fit case for levy of penalty u/s. 271AAC(1) of the Act. Accordingly, the AO levied the penalty amounting to Rs.82,657/- u/s. 271AAC(1) of the Act.

2.2 Aggrieved with the said order, the assessee filed an appeal before the learned CIT(A), who again dismissed the appeal of the assessee on the ground that since Form 4 was not issued, the AO was justified in levying penalty.

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3.

Aggrieved with the said order, the assessee is in appeal before us on the following grounds of appeal:

“1. That the learned CIT(A), NFAC erred in law and on facts in confirming the penalty levied by the Assessment Unit (NFAC) under Section 271AAC(1) of the Income Tax Act, 1961 without appreciating that the underlying addition was made without any valid material or justification. 2. That the penalty order confirmed by learned CIT(A). NFAC and passed under section 271AAC (1) of the Income Tax Act, 1961 is arbitrary, bad in law, and lacks jurisdiction as the substantive additions are highly disputed and the appellant has already initiated the dispute resolution process under the Vivad Se Vishwas Scheme. 3. That the learned CIT(A), NFAC erred in confirming the penalty when the quantum addition under Section 69A/115BBE itself is under challenge/dispute as penalty proceedings cannot survive independently if the quantum addition is deleted. 4. That the learned CIT(A) NFAC failed to appreciate the appellant had opted to settle the dispute under VSVS2 and has paid the requisite tax demand as per Form 2. The issuance of Form 4 is merely pending due to a procedural delay in payment, and therefore the penalty proceedings should have been kept in abeyance instead of being adjudicated. 5. That the learned CIT(A) erred in confirming the penalty, in violation of the principles of natural justice, without providing adequate opportunity to the appellant to explain the genuineness of the transactions and the circumstances of the case. 6. That the penalty under Section 271AAC(1) is not automatic. The AO and learned CIT(A) failed to establish that there was any deliberate intention on the part of the appellant to furnish inaccurate particulars or conceal income and the penalty levied is disproportionate and excessive. 7. That on the facts of the case ld. CIT(A) NFAC confirmed the penalty amount imposed by Assessment Unit, NFAC which has ignored the Rectification Order passed under Section 154 of the Income Tax Act where tax due demand had been reduced to Rs. 6,74,043-00 from Rs. 8,26,575-00. 4 | P a g e

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8.

That the appellant craves leave to add/ alter any of the grounds of appeal before or at the time of hearing. 9. Any other relief as the Bench may feel appropriate in the facts & circumstances of the case and in law.”

4.

At the time of hearing, the learned AR submitted that the learned CIT(A) NFAC failed to appreciate that the appellant had opted to settle the dispute under DTVSV and had paid the requisite tax demand as per Form 2. It was further submitted that the issuance of Form 4 was pending due to a procedural delay in payment, and therefore the penalty proceedings should have been kept in abeyance instead of being adjudicated. The learned AR also drew our attention to the copy of the letter written to Pr. CIT, Agra-1 dated 03.04.2026 sent on email, requesting for issue of Form No. 4 (placed at page No. 34-35 of the paper book) and requested that the matter may be set aside to the file of the learned CIT(A) with the direction to the learned CIT(A) to keep the appeal pending till the matter regarding the issue of Form 4 under DTVSV Scheme, 2024 is finally decided by the learned PCIT, Agra-1.

5.

On the other hand, learned Sr. DR supported the orders of the authorities below, but did not raise any serious objection regarding the

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plea of the assessee for setting aside the matter to the file of learned CIT(A).

6.

We have heard both the parties and perused the material on record. The penalty u/s. 271AAC(1) of the Act has been levied by the AO in respect of cash deposit of Rs.10,70,000/- in assessee’s bank account during the demonetization period. The assessee opted for DTVSV Scheme, 2024, but till date Form 4 entitling him for waiver of penalty has not been issued by the learned PCIT, Agra-1, for which necessary request has been placed by the assessee to the learned PCIT, Agra-1 vide letter dated 03.04.2026 (placed at page No. 34-35 of the paper book). The AO levied the penalty on the ground that Form No. 4 granting immunity from penalty had not been issued by the learned PCIT, Agra-1. Therefore, under the given facts of the case, we find the request of the assessee to be reasonable for setting aside the matter to the file of learned CIT(A) till the matter regarding the issue of form-IV under DTVS Scheme is finally settled by the learned PCIT, Agra-1. Accordingly,we set aside the impugned order of ld. CIT(A) with a direction to keep the appeal pending till the matter regarding the issue of Form 4 under DTVSV Scheme, 2024 is finally decided by the learned PCIT, Agra-1. All the grounds of appeal are allowed for statistical purposes. 6 | P a g e

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7.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27/ 10/2026.

Sd/- Sd/- (SUNIL KUMAR SINGH) (BRAJESH KUMAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27/10/2026 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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