MADHYA BHARAT INTERNATIONAL PVT LTD,INDORE vs. NFAC NEW DELHI, NEW DELHI

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ITA 642/IND/2024Status: DisposedITAT Indore28 July 2025AY 2016-173 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty matter should be remanded to the file of the AO for a fresh adjudication. The reasoning was based on the fact that the CIT(A) had already set aside the assessment order dated 24.09.2021 and remanded the case back to the AO for a fresh assessment on a de novo basis. Consequently, the penalty order, which was consequential to the addition made in the original assessment order, should also be subject to fresh adjudication by the AO. The Tribunal directed that before finalizing the penalty matter, the AO shall provide a fresh opportunity to the assessee and consider its submissions. The ratio decidendi is that when the foundation of a penalty (the assessment order) is nullified and remitted for fresh determination, the consequential penalty also requires a fresh determination based on the outcome of the revised assessment. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Madhya Bharat International Pvt. Ltd., is in appeal before the Income Tax Appellate Tribunal (ITAT) against an order dated 16.07.2024 passed by the CIT(A), NFAC, Delhi. This order arose from a penalty order dated 22.01.2022 passed by the National Faceless Assessment Centre (AO) under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was levied for Assessment Year 2016-17, consequent to an addition of Rs. 1,33,00,000/- made under Section 56(2)(viib) in the assessment order dated 24.09.2021. The assessee had appealed the assessment order to the CIT(A). The CIT(A), in its order dated 25.10.2024, set aside the assessment order and remanded the case back to the AO for a fresh assessment on a de novo basis.

What were the issues?

1. Whether the penalty order passed under Section 271(1)(c) for AY 2016-17 should be adjudicated afresh by the AO, given that the underlying assessment order has been set aside and remanded for de novo assessment by the CIT(A)? Assessee's Contention: The assessee argued that since the assessment order, which formed the basis for the penalty, has been set aside and remanded for fresh adjudication, the penalty order should also be restored to the file of the AO for a fresh determination based on the outcome of the new assessment. The assessee relied on the CIT(A)'s order setting aside the assessment. Revenue's Contention: The learned DR for the revenue fairly agreed to the submission and prayer made by the learned AR for the assessee.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 56(2)(viib),Section 147,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI

For Appellant: Ms. Shreya Jain, AR
For Respondent: Shri Ashish Porwal Sr. DR
Hearing: 24.07.2025Pronounced: 28.07.2025

आदेश/ O R D E R

Per B.M. Biyani, AM:

1.

Feeling aggrieved by order of first-appeal dated 16.07.2024 passed by learned CIT(A), NFAC, Delhi [“CIT(A)”], which in turn arises out of penalty-order dated 22.01.2022 passed by the learned National Faceless Assessment Centre, Delhi [“AO”] u/s 271(1)(c) of the Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2016-17, the assessee has filed this appeal on the grounds as mentioned in Appeal-Memo (Form No. 36).

2.

Heard the learned Representatives of both sides and case-record perused.

3.

Ld. AR for assessee briefly summarized the facts of case like this : For AY 2016-17 under consideration, the assessment of assessee was completed by Ld. AO u/s 147 r.w.s. 144 vide assessment-order dated 24.09.2021 after making an addition of Rs. 1,33,00,000/- u/s 56(2)(viib) in respect of share application money. Thereafter, vide penalty-order dated 22.01.2022, the Ld. AO also imposed penalty of Rs. 43,97,379/- u/s 271(1)(c) qua the addition of Rs. 1,33,00,000/- made in assessment-order. Against aforesaid assessment-order, the assessee filed appeal before CIT(A) and the CIT(A) has already decided assessee’s appeal vide order dated 25.10.2024, a copy of the order is placed on record. Drawing our attention to Para No. 5.5 & 6 of this order of CIT(A), Ld. AR demonstrated that the CIT(A) has set aside the aforesaid assessment-order dated 24.09.2021 and remanded case back to AO for a fresh assessment on de novo basis. Ld. AR’s limited prayer in this situation is such that when the assessment-order stands set aside to the file of AO for a fresh adjudication, the penalty-order imposing penalty u/s 271(1)(c) qua the addition made in assessment-order, should also be restored at the level of AO for a fresh adjudication based on outcome of fresh assessment-order.

4.

Ld. DR fairly agreed to the submission and prayer of Ld. AR.

5.

In view of the above facts and submissions of parties, we remand this penalty-matter to the file of AO for a fresh adjudication on the basis of outcome Assessment Year 2016-17 of fresh assessment-order. Needless to mention that before finalizing penalty- matter, the AO shall give a fresh opportunity to assessee and consider assessee’s submissions.

6.

In the result the appeal of assessee is allowed for statistical purpose.

Order pronounced in open court on 15/07/2025

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