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Facts
The assessee, a proprietor of M/s. Moonage Films, is appealing a penalty order. A survey was conducted on related entities where information pertaining to the assessee was found. This led to reassessment proceedings under Section 147 and subsequent penalty proceedings.
Held
The Tribunal noted that the assessee's quantum appeal was pending before the Delhi High Court, which had admitted a substantial question of law. Due to this pendency and the admitted substantial question of law, the Tribunal found the penalty imposition debatable.
Key Issues
Whether the penalty order passed under Section 271AAC(1) is sustainable when a substantial question of law on the quantum appeal is pending before the High Court.
Sections Cited
271AAC(1), 147, 143(3), 68, 274, 143(2), 142(1), 148, 250, 133A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 13.06.2025 of Learned Commissioner of Income Tax (Appeals)- 24, New Delhi [hereinafter referred to as ‘Ld. CIT(A)] under Section 250 of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of penalty order dated 29.11.2023 of Learned Assessing Officer/Deputy Commissioner of Income Tax, Central Circle-8, New Delhi (hereinafter referred to as “Ld. AO") passed under section 271AAC(1) of the Act in pursuance to assessment order dated 08.02.2022 under Section 143(3) of the Act for assessment year 2017-18.
Brief facts of the case are that the assessee is a sole proprietor of M/s. Moonage Films. Survey under Section 133A of the Act was conducted on 11.09.2020 by the Investigation Wing in the case of M/s. SLG Commodities Pvt. Ltd., Kirti India Hospitality Pvt. Ltd. and Maan Promoters Pvt. Ltd. through Principal Officer Shri Kirtiman Singh, Professor Colony Karam Toli, Ranchi, Jharkhand. During the course of survey and post survey investigations in the above-noted three cases, transactions/information pertaining to Ms. Ruby Singh, proprietor of M/s Moonage Films, were found in the impounded documents/books of accounts of the said three entities. The case of the assessee was centralized with this office on basis of information received and further inquiries, the reasons to believe were recorded and the approval of the same was obtained. The proceeding under Sections 148/147 of Act in this case and further notice under Section 148 has been issued to the assessee on 01.01.2021. Consequently, the return of Income was e-field against notice under Section 148 on 08.02.2021 declaring total income of Rs.8,01,060/-. As per information, assessee had deposited cash in Bank A/c Subsequent to this, notice under Section 143(2) along with questionnaire contained in the notice under Section 142(1) were issued on 06/03/2021. The assessee filed her reply and submissions. On completion of proceedings, Ld. AO vide order dated 08.02.2022 under Section 147 read with section 143(3) of the Act assessed income Rs.14,47,060/- with addition of Rs. 6,46,000/- by making additions under section 68 of the Act. In pursuance to assessment order, penalty proceedings were initiated. Penalty show-cause-notice under Section 274 r.w.s. 271AAC(1) of the Act was issued on 05.10.2023. Assessee submitted reply dated 22.11.2023. On completion of penalty proceedings, Ld. AO vide order dated 29.11.2023 imposed penalty of Rs.38,760/- under Section 271AAC(1) of the Act.
Against order dated 29.11.2023 of Ld. AO, the appellant/assessee filed appeal before Ld. CIT(A) which was dismissed vide order dated 13.06.2025.
Being aggrieved, the appellant/assessee preferred present appeal on following grounds:
“1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and in facts in upholding the levy of penalty of Rs. 38,760/- imposed under section 271AAC(1) r.w.s. 274 of the Act which is unsustainable and untenable in law.
That the learned Commissioner of Income Tax (Appeals) failed to appreciate that there was neither misreporting of income nor its misrepresentation or suppression of facts of the case so as to uphold the levy of penalty deserves to be quashed and relief be granted to assessee. 2.1 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that no penalty is leviable unless it is established that assessee/appellant has acted with a malafide intention which has neither been proved and nor is otherwise alleged in the order of assessment.
That the learned Commissioner of Income Tax (Appeals) has erred in not appreciating that the penalty proceedings and quantum proceedings are independent and that the findings in the quantum proceedings, though relevant are not conclusive or determinative of the penalty proceedings.
The learned Commissioner of Income Tax (Appeals) has also failed to appreciate that the appellant's quantum appeal is pending disposal before the Hon'ble Delhi High Court and the court vide order dated 27.03.2025 has admitted substantial question of law, thus, when a substantial question of law has been admitted in the high court the levy of penalty is not maintainable.
The learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in upholding the penalty order passed by the AO and in failing to understand that the AO initiated penalty proceedings without recording a valid satisfaction which is a prerequisite for initiation of penalty under section 271AAC(1) r.w.s. 274 of the Act. Thus, the penalty order passed by learned AO is bad in law and is liable to be deleted, as such.
The assessee craves to leave add, alter, and modify any other ground of appeal at the time of hearing.”
5. Learned Authorised Representative for the appellant/assessee submitted that Ld. CIT(A) failed to appreciate that the appellant’s quantum appeal is pending disposal before Hon'ble High Court of Delhi. Hon’ble High Court of Delhi vide order dated 27.03.2025 has admitted substantial question of law. So, there was a substantial question of law admitted in the Hon’ble High Court, the levy of penalty was not permissible.
6. Learned Departmental Representative submitted that the appeal may be kept pending till the decision of appellant’s quantum appeal by the Hon'ble High Court of Delhi
7. From examination of record in light of above stated rival contentions, it is crystal clear that Hon'ble High Court of Delhi vide order dated 27.03.2025 pertaining to assessment years 2013-14 to 2019-20 has admitted the question of law. Copy of order dated 27.03.2025 is at page no. 1 of papers books. Therefore, imposition of penalty by the Ld. AO under Section 271AAC(1) read with section 274 of the Act is debateable.
8. In view of above material facts especially pendency of appellant’s quantum appeal before the Hon'ble High Court of Delhi on substantial question of law. The orders of Ld. CIT(A) dated 13.06.2025 and penalty order dated 29.11.2023 are set aside. Ld. AO will be at liberty to initiate penalty proceedings after decision of substantial question of law by the Hon'ble Delhi High Court.
In the result, the appeal of filed by the assessee is allowed.
Order pronounced in the open court on 23rd January, 2026. Sd/- Sd/- (S RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23/01/2026 Mohan Lal