SUDHIR GANDHI,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 61(1), DELHI, DELHI

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ITA 4596/DEL/2025Status: DisposedITAT Delhi13 February 2026AY 2018-194 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 quantum appeal filed by the assessee had already been restored to the NFAC. Consequently, the Tribunal found it appropriate to restore the penalty appeal as well. The Tribunal held that the appeal of the assessee is allowed and restored to the file of the NFAC to decide afresh after giving the assessee an opportunity of being heard. The reasoning is based on the principle of consequential relief and the need for a fresh adjudication of the penalty in light of the restored quantum appeal. The ratio decidendi is that if the primary assessment order is set aside or restored for fresh consideration, consequential penalty proceedings should also be re-examined. The operative direction is to restore the appeal to the NFAC for fresh adjudication.

What were the facts?

The assessee, Sudhir Gandhi, is in appeal against the order of the National Faceless Appeal Centre (NFAC) Delhi dated 28-05-2025, which upheld a penalty of Rs.9,41,635/- imposed under Section 271AAC(1) of the Income-tax Act, 1961. The assessment year in question is 2018-19. The assessee filed its return of income, which was processed by CPC. Additions were made during assessment proceedings, leading to the initiation of penalty proceedings. The Assessing Officer (AO) levied the penalty. The assessee appealed to the NFAC, which dismissed the appeal. The assessee is now before the Income Tax Appellate Tribunal (ITAT). The procedural history indicates that the quantum appeal of the assessee has already been allowed and sent back to the NFAC for a fresh decision.

What were the issues?

1. Whether the penalty proceedings under Section 271AAC(1) of the Income-tax Act, 1961, were completed without complying with the legal requirements, rendering the penalty void ab initio? The assessee argued that the penalty proceedings were invalid and without jurisdiction due to non-compliance with legal requirements. The revenue contended that the NFAC passed a reasoned order. 2. Whether the authorities below erred in upholding the imposition of penalty without correctly appreciating the facts of the case? The assessee argued that the facts were not correctly appreciated. The revenue did not record any specific arguments on this point, other than stating that the NFAC passed a reasoned order. 3. Whether the CIT(A) erred in not allowing sufficient opportunity to the appellant to represent its case? The assessee argued that it was not given adequate opportunity. The revenue did not record any specific arguments on this point.

Which sections of the Income-tax Act were involved?

Section 271AAC(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “B”, DELHI

Before: AND

For Respondent: Ms. Kanchan Garg, Sr. DR
Hearing: 10/02/2026Pronounced: 13/02/2026

Date of hearing: 10/02/2026 Date of Pronouncement: 13/02/2026 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as “Ld. NFAC)”] vide order dated 28-05-2025 pertaining to A.Y. 2018-19 arising out the penalty order dated 10-09-2021 u/s 271AAC(1) of the Income-tax Act, 1961, (in short ‘the Act’).

2.

The assessee has raised the following grounds in appeal as under:

1. On the facts and circumstances of the case, the authorities below have erred in upholding imposition of penalty of Rs.9,41,635/- and the penalty order both are invalid and without jurisdiction as the said penalty proceedings is completed without complying with legal requirements of the provisions of section 271AAC of the Income Tax Act therefore such penalty is void ab initio and liable to be quashed.

2. On the facts and circumstances of the case, the authorities below have erred in upholding imposition of penalty of Rs.9,41,635/- without correctly appreciating the facts of the case.

3. The Ld. CIT(A) has erred both in law and in facts of the casein not allowing sufficient opportunity to the appellant to represent its case before himself to adjudicate on all grounds of appeal.

4. The appellant craves leave to add delete modify/amend the above grounds of appeal with the permission of the Hon’ble appellate authority.

3. The brief facts of the case are that the assessee is engaged in the activity of consultancy services and execution of turnkey projects. The assessee filed its return of income on 30-10-2018 declaring loss of Rs.68,61,070/- and on the same day filed revised return of income declaring total income of Rs.68,61,070/-. The assessee further filed rectification request on 25-04-2019. The return was processed by CPC on 01-06-2019. During the assessment proceedings additions were made on several issues and penalty proceedings was also initiated. After considering the reply filed by the assessee the AO levied the penalty of Rs.9,41,635/- for the A.Y.2018-19.

4. Aggrieved the order of the ld. AO the assessee preferred the appeal before the Ld. NFAC who considering the factual and legal position, vide his order dated 28-05-2025 dismissed the appeal of the assessee.

5.

Being aggrieved the order of the Ld. NFAC the assessee is in appeal before the Tribunal.

6. Ld. AR of the assessee submitted that the appeal of the assessee against the quantum has already been allowed by the Hon’ble ITAT and sent back to Ld. CIT(A) to decide the merit. He further submitted that penalty appeal, was also dismissed being consequential. Learned authorized representative for Department of Revenue submitted that Ld. NFAC has passed the reasoned order. She fairly accepted the position that the quantum appeal has already been restored to the NFAC.

6.

We have heard the parties and perused the material available on record. Since, the quantum appeal filed by assessee has already been restored to the NFAC, therefore we find it fit to restore this matter accordingly. The appeal of the assessee is allowed and appeal is restored to the file of the NFAC to decide afresh after giving the opportunity of being heard to the assessee. 8. In the result, the appeal of the assessee is allowed.

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