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Facts
The assessee filed an appeal against an order that confirmed a penalty of Rs. 16,05,922/- levied under section 270A of the Income-tax Act, 1961. This penalty was based on an addition of Rs. 82,35,500/- made under section 56(2)(x) of the Act. The Tribunal had previously set aside this addition and restored the matter for fresh adjudication.
Held
The Tribunal held that penalty proceedings under section 270A are consequential to the quantum addition. Since the quantum addition, which was the sole basis for the penalty, has been set aside and remanded for fresh examination, the penalty cannot stand independently. The penalty was deemed unsustainable and ordered to be deleted.
Key Issues
Whether the penalty under section 270A can be sustained when the underlying quantum addition has been set aside and remanded for fresh adjudication.
Sections Cited
270A, 56(2)(x)
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Income Tax Appellate Tribunal, “A” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI MAKARAND VASANT MAHADEOKAR
आदेश / ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
The present appeal has been preferred by the assessee against the order dated 16.10.2025 passed by the National Faceless Appeal Centre, Delhi, whereby the penalty of Rs.16,05,922/- levied under section 270A of the Income-tax Act, 1961, for the assessment year 2018-19, has been confirmed.
The penalty in question has been levied in respect of an addition of Rs.82,35,500/- made under section 56(2)(x) of the Act.
Mr. Akil Abbas Rassai At the very outset, the learned counsel for the assessee brought to our notice that the very foundation of the penalty proceedings, namely, the quantum addition under section 56(2)(x), no longer survives in its present form. It was submitted that this Tribunal, vide its order dated 02.12.2025, has set aside the said quantum addition and restored the matter to the file of the Assessing Officer for fresh adjudication after examining the documentary evidences and in accordance with law.
We have considered the submissions and perused the material available on record. The factual position is undisputed. The addition which formed the sole basis for initiation and levy of penalty under section 270A has been set aside by the Tribunal, and the issue has been remanded to the Assessing Officer for de novo consideration. Thus, as on date, there is no subsisting or final determination of under-reporting or misreporting of income.
Penalty proceedings under section 270A, though distinct in form, are nonetheless dependent in substance upon the outcome of the quantum proceedings. The levy of penalty presupposes a crystallised finding of under-reported income as contemplated under the statute. Where the very addition giving rise to such alleged under-reporting has been unsettled and restored for fresh examination, the edifice on which the penalty rests cease to exist.
It is a well-settled principle of law that penalty proceedings are purely consequential and accessory in nature. When the quantum addition itself has been set aside and the issue has been restored for fresh adjudication, the penalty cannot be Mr. Akil Abbas Rassai allowed to stand independently on an uncertain and fluid foundation. To permit the penalty to survive in such circumstances would be premature and legally untenable, as it would amount to prejudging the outcome of the reassessment proceedings. In other words, where the superstructure of penalty is erected solely on an addition which has been vacated by the Tribunal, such superstructure cannot be permitted to remain standing. The Assessing Officer may, if so advised and permissible in law, examine the issue of penalty afresh only after the quantum proceedings attain finality; however, at this stage, the impugned penalty has no legs to stand.
In view of the aforesaid factual and legal position, we hold that the penalty levied under section 270A and confirmed by the learned CIT(A) is unsustainable and deserves to be deleted. Accordingly, the penalty of Rs.16,05,922/- is hereby deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27.01.2026.