VAMA DEPARTMENT STORE PRIVATE LIMITED,MUMBAI vs. ITO CIRCLE 5(3)(1), MUMBAI

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ITA 4565/MUM/2026Status: DisposedITAT Mumbai16 October 2026AY 2016-175 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the penalty under section 271(1)(c) of the Act, having been computed with reference to the income assessed in the quantum proceedings, would have a direct bearing on its foundation and extent. The decision in the quantum appeal would be crucial. While the levy of penalty must be examined independently, the statutory scheme contemplates reconsideration of penalty in consequence of the appellate determination of the underlying assessment. Given the pendency of the quantum appeal and the common request of both parties, the Tribunal considered it appropriate, in the interest of justice, to restore the penalty matter to the Assessing Officer. The Tribunal refrained from adjudicating the substantive grounds challenging the penalty at this stage. The impugned order of the CIT(A) and the penalty order were set aside, and the issue of levy of penalty was restored to the Assessing Officer for fresh adjudication after the disposal of the assessee's quantum appeal by the CIT(A). The Assessing Officer was directed to consider the outcome of the quantum appeal, afford the assessee a reasonable opportunity of being heard, and pass a reasoned order. The Assessing Officer shall independently examine whether the requirements for penalty levy are satisfied for any surviving additions. All contentions of the assessee concerning the validity and merits of the penalty were left open. The Tribunal expressed no opinion on the merits of the quantum additions or the leviability of penalty.

What were the facts?

The assessee, Vama Department Store Private Limited, is in appeal against the order of the CIT(A) dated 12.02.2026, which confirmed a penalty of Rs. 1,51,77,923/- levied under section 271(1)(c) of the Income-tax Act, 1961, for Assessment Year 2016-17. The assessment was completed under section 147 read with section 144 on 29.09.2021, determining total income at Rs. 4,59,06,069/-, which included estimated rental income from sister concerns. The penalty was levied on 16.03.2022, being 100% of the tax sought to be evaded. The assessee's appeal against the quantum assessment was pending before the CIT(A) when the penalty appeal was disposed of. The assessee requested the penalty matter be restored to the Assessing Officer for fresh consideration after the quantum appeal is decided.

What were the issues?

1. Whether the penalty under section 271(1)(c) of the Act can be sustained when the additions forming the basis of the penalty have been deleted or set aside in the cases of sister concerns (VAIPL and VML) for earlier assessment years, on similar underlying facts? 2. Whether the penalty for concealment of income can be sustained against the appellant for the same underlying facts for which additions were deleted for sister concerns? 3. Whether the Assessing Officer erred in estimating rent from Vama Motors Ltd. (VML) on the assumption of premises occupation, when VML had vacated the premises since AY 2001-02? Assessee's Contentions: - The penalty appeal was disposed of while the underlying quantum assessment appeal was pending before the CIT(A). - The penalty matter should be restored to the Assessing Officer for fresh consideration after the disposal of the quantum appeal. - The additions for unaccounted rent and service charges were deleted for sister concerns (VAIPL and VML) for earlier assessment years, and therefore, no penalty for concealment can be sustained against the appellant for the same underlying facts. - The Assessing Officer erred in estimating rent from VML as they had vacated the premises. Revenue's Contentions: - The revenue agreed with the procedural position that the penalty matter could be restored to the Assessing Officer for adjudication in light of the outcome of the quantum appeal. - The revenue agreed that adjudication of the penalty on merits at the present stage would be premature.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 250,Section 148,Section 147,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SAKTIJIT DEY & SHRI MAKARAND VASANT MAHADEOKAR

आयकर अपीलीय अिधकरण, मुंबई पीठ�, मुंबई INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: F BEFORE SAKTIJIT DEY, VICE PRESIDENT AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 4565/MUM/2026 (िनधा�रण वष�/Assessment Year: 2016-17) VAMA DEPARTMENT STORE ITO CIRCLE 5(3)(1) PRIVATE LIMITED AAYAKAR BHAWAN, KANCHANJUNGA, 72 PEDDAR MARINE LINES Vs. ROAD, MUMBAI-400026, MUMBAI-400020, MAHARASHTRA MAHARASHTRA अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AAACV1262E

अपीलाथ� �ारा/Appellant represented by: Shri Ashok Mehta, Ld. C.A. ��थ� �ारा/Respondent represented by: Shri Mohammad Arshad, Ld. Sr. DR. सुनवाई की तारीख / Date of conclusion of hearing: 13-Aug-2026 घोषणा की तारीख / Date of pronouncement: 16-10-2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER: This appeal by the assessee is directed against the order dated 12.02.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)”], under section 250 of the Income-tax Act, 1961 (“the Act”), confirming the penalty of Rs.1,51,77,923/- levied under section 271(1)(c) of the Act for the assessment year 2016-17.

2.

The assessee has raised the following grounds of appeal: 1. The Learned Assessing Officer erred in levying a penalty of Rs. 1,51,77,923/- based on additions that have been deleted or set aside in the cases of sister concerns, Vama Apparels (I) Pvt. Ltd. (VAIPL) and Vama Motors Ltd. (VML).

ITA NO. 4565/MUM/2026 VAMA DEPARTMENT STORE PRIVATE LIMITED 2. Since the additions for unaccounted rent and service charges were deleted for VAIPL (AY 2000-01 to 2002-03) and VML (AY 2000-01 to 2001-02), no penalty for concealment of income can be sustained against the appellant for the same underlying facts. 3. The Learned Assessing Officer erred in estimating rent from Vama Motors Ltd. (VML) on the assumption they occupied the premises, while the entity had actually vacated the premises since AY 2001-02. The assessee craves leave to add, alter, amend and delete any of the above grounds of appeal. 3. Briefly stated, the assessee had not filed its return of income for the year under consideration. The assessment was reopened by issuance of notice under section 148 of the Act dated 06.02.2020. Thereafter, the Assessing Officer completed the assessment under section 147 read with section 144 of the Act on 29.09.2021, determining the total income at Rs.4,59,06,069/-. The assessed income comprised income from house property of Rs.4,55,16,299/-, after allowing standard deduction, interest income of Rs.1,92,265/- and income from contractual services of Rs.1,97,505/-. The assessment included rental income estimated in respect of premises stated to have been occupied by the assessee’s sister concerns.

4.

Consequent to the assessment, proceedings under section 271(1)(c) of the Act were initiated. The Assessing Officer noted that the assessee had not furnished any explanation despite opportunities afforded during the penalty proceedings. By order dated 16.03.2022, the Assessing Officer levied penalty of Rs.1,51,77,923/-, being 100% of the tax sought to be evaded. The learned CIT(A) confirmed the penalty, observing that the assessee had neither complied with the notices issued during the appellate proceedings nor furnished material warranting interference with the penalty order.

5.

Aggrieved, the assessee is in appeal before us.

6.

At the hearing, the learned Authorized Representative (AR) submitted that the assessee’s appeal against the quantum assessment, involving the

ITA NO. 4565/MUM/2026 VAMA DEPARTMENT STORE PRIVATE LIMITED income in respect of which the impugned penalty was levied, remained pending before the learned CIT(A). It was submitted that the penalty appeal had been disposed of while the underlying quantum issues were yet to be adjudicated. The learned AR accordingly requested that the penalty matter be restored to the Assessing Officer for fresh consideration after disposal of the quantum appeal.

7.

The learned Departmental Representative (DR) agreed with the aforesaid procedural position and fairly submitted that the penalty matter could be restored to the Assessing Officer for adjudication in the light of the outcome of the quantum appeal. Thus, both parties agreed that adjudication of the penalty on merits at the present stage would be premature and that the matter should be reconsidered by the Assessing Officer after the learned CIT(A) decides the quantum appeal.

8.

We have considered the rival submissions and perused the material available on record. The limited question presently requiring consideration is whether the impugned penalty should be adjudicated on merits while the underlying quantum assessment remains under challenge before the learned CIT(A). The pendency of the quantum appeal has been stated by the learned AR and accepted by the learned DR.

9.

The penalty under consideration has been computed with reference to the income assessed in the quantum proceedings. The decision of the learned CIT(A) in the quantum appeal would, therefore, have a direct bearing on the foundation and extent of the penalty requiring consideration. At the same time, the question whether penalty is leviable must be examined independently with reference to the statutory requirements and the assessee’s explanation. Mere confirmation of an addition would not, by itself, dispense with such examination. The statutory scheme also contemplates reconsideration of penalty in consequence of the appellate determination of the underlying assessment. 3

ITA NO. 4565/MUM/2026 VAMA DEPARTMENT STORE PRIVATE LIMITED 10. Having regard to these circumstances and the common request of the parties, we consider it appropriate, in the interest of justice, to restore the penalty matter to the Assessing Officer. Such restoration would enable consideration of the penalty with reference to the income as determined after giving effect to the order of the learned CIT(A) in the quantum appeal. We accordingly refrain from adjudicating the substantive grounds challenging the penalty at this stage.

11.

Consequently, the impugned order of the learned CIT(A) and the penalty order dated 16.03.2022 are set aside, and the issue of levy of penalty under section 271(1)(c) of the Act is restored to the file of the Assessing Officer for fresh adjudication after disposal of the assessee’s quantum appeal by the learned CIT(A). The Assessing Officer shall take into consideration the outcome of that appeal and the consequential determination of income, afford the assessee a reasonable opportunity of being heard, and pass a reasoned order in accordance with law, subject to the applicable statutory provisions, including limitation. In respect of any addition that survives, the Assessing Officer shall independently examine whether the requirements for levy of penalty are satisfied.

12.

All contentions of the assessee concerning the validity and merits of the penalty are left open. Nothing stated herein shall be construed as expressing any opinion on the merits of the quantum additions or the leviability of penalty. The grounds of appeal are disposed of in terms of the aforesaid directions.

13.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 16-10-2026.

Sd/- Sd/- SAKTIJIT DEY MAKARAND VASANT MAHADEOKAR VICE PRESIDENT ACCOUNTANT MEMBER Mumbai Dated: 16-10-2026

ITA NO. 4565/MUM/2026 VAMA DEPARTMENT STORE PRIVATE LIMITED

Copy to: VAMA DEPARTMENT STORE PRIVATE LIMITED, 1 KANCHANJUNGA, 72 PEDDAR ROAD, MUMBAI-400026, MAHARASHTRA

ITO CIRCLE 5(3)(1), 2 AAYAKAR BHAWAN, MARINE LINES, MUMBAI-400020, MAHARASHTRA

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

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