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Facts
The assessee, an individual, did not file a return of income for AY 2015-16. The AO reopened the assessment based on information of cash and time deposits and made an addition. A penalty was levied under section 271(1)(c) for concealment of income.
Held
The Tribunal held that since the assessment order, which formed the basis of the penalty, was set aside by a coordinate bench for fresh assessment, the penalty levied thereon cannot survive.
Key Issues
Whether penalty under Section 271(1)(c) can survive when the assessment order on which it is based has been set aside for fresh assessment?
Sections Cited
147, 144B, 69A, 271(1)(c)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2015-16 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 07.07.2025 in the matter of assessment framed by the Assessing Officer [AO] u/s. 147 r.w.s 144B of the Income-tax Act,1961 (hereinafter “the Act”) dated 13.03.2023.
The assessee is an individual and has not filed the return of income for the relevant assessment year. The A.O, on the basis of information that the assessee had made cash deposits of Rs.22,35,000/- and time deposits of Rs.49,50,000/- in VDCC and KVB, Ulundurpet, reopened the assessment. The A.O thereafter completed the assessment u/s. 147 of the Act and made an addition of Rs.71,90,000/- under section 69A of the Act, as the assessee had failed to explain the nature and source of the deposits. The A.O also initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of income and furnishing of inaccurate particulars thereof. Since the assessee did not comply with the notices issued, the A.O levied a penalty of Rs.21,64,916/- under section 271(1)(c) of the Act.
Aggrieved, the assessee preferred an appeal before the Ld. CIT(A).
However, the Ld. CIT(A) dismissed the appeal ex-parte on the ground that the assessee had neither filed the return of income nor paid the amount equal to the advance tax payable, and accordingly held the appeal to be infructuous.
The Learned Authorized Representative (Ld. A.R) submitted before us that the assessment order, based on which the penalty was levied, has been restored to the file of the A.O for denovo assessment by the Hon’ble ITAT, Chennai Bench, in dated 29.05.2024. Therefore, it was contended that the penalty order passed with reference to the original assessment does not survive.
The Learned Departmental Representative (Ld. D.R) relied on the orders of the lower authorities and requested that the appeal be dismissed.
We have heard the rival submissions and perused the materials available on record. The A.O had levied a penalty of Rs.21,64,916/- under section 271(1)(c) of the Act for concealment of particulars of income. The Ld. CIT(A) dismissed the appeal as not maintainable. We note that the assessment order, based on which the penalty was levied, has been set aside by the Coordinate Bench of the Tribunal in vide order dated 29.05.2024, with a direction to the A.O to frame the assessment afresh. Once the very basis of the penalty i.e., the original assessment order has been set aside, the penalty levied thereon cannot survive. The A.O will, however, be at liberty to reinitiate penalty proceedings, in the fresh assessment proceedings. Accordingly, the penalty levied under section 271(1)(c) of the Act is hereby cancelled.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 30th day of October, 2025 at Chennai.