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Facts
The assessee's appeal is against the order of the CIT(A)/NFAC for AY 2015-16. A coordinate bench had previously remitted the quantum appeal to the AO for fresh consideration. The assessee argued that since the assessment order was set aside, the penalty order based on it is void.
Held
The Tribunal noted that the previous order had set aside the quantum assessment. Therefore, penalty proceedings based on an assessment order that is no longer valid cannot be sustained. The penalty proceedings were also set aside for fresh consideration.
Key Issues
Whether the penalty order can sustain when the underlying assessment order has been set aside by a higher authority.
Sections Cited
250, 271(1)(c), 147, 148
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: MS. PADMAVATHY S. & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 15/05/2005 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1076217140(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the AY 2015-16.
The assessee has raised the following grounds of appeal:-
The brief facts of the case are that the coordinate bench of this Tribunal while adjudicating the quantum appeal of the assessee for the Assessment year 2015-16 in vide order dated 26.8.2025 had remitted the entire issue to the file of the jurisdictional AO for fresh consideration and decide the issue as per law with a cost of Rs.5,000/- to the assesse with a direction to the JAO to give three effective opportunities to the assesse and also directed the assesse to produce necessary documents for substantiating his case.
Before us, at the outset the ld. A.R. of the assesse drew our attention to a memo dated 22.9.2025 filed by the AR of the assessee and submitted that since the assessment order based on which the penalty proceeding was initiated and concluded had been set aside, the penalty order is rendered null and void in the eyes of law and the AO would have to conclude the assessment afresh pursuant to the order of this Tribunal (supra) and decide on invoking penalty on completion of assessment, if at all an adverse order is issued. Since the penalty order does not have a legal basis in view of the order of this ITAT and accordingly prayed to allow this appeal in the interest of justice.
Ld. D.R. on the other hand supported the order of the authorities below.
We have heard the rival submissions and perused the materials available on record. On going through the Tribunal’s order dated 26.8.2025 passed in case of the assessee in quantum appeal for the assessment year 2015-16, we find that in paragraph 6 the order, the Tribunal had clearly noted that the assesse did not file his return of income, however, the assesse has sold the capital asset for Jairam Kethamaranahalli Ramachandra, Bengaluru Page 4 of 5 Rs.53 lakhs and accordingly the case was reopened u/s 147/148 of the Act. During the reassessment proceedings, as well as appellate proceedings, the assessee neither submitted any documents nor any proof to substantiate the cost of acquisition of the property and accordingly, the AO had treated the entire sales consideration as income of the assesse. The Tribunal, in the interest of justice remitted the entire issue to the file of jurisdictional AO for fresh consideration and decide the issue as per law. Since this Tribunal had already remitted the entire issue to the file of JAO to decide the issue as per law, therefore, we also set aside the entire penalty proceedings for the assessment year 2015-16 to the file of the AO for fresh consideration in accordance with law. Since in our opinion, if a quantum appeal is set aside by the ITAT, the penalty proceedings based on the same quantum assessment cannot sustain. We are of the considered opinion that if an order of assessment or reassessment which forms the very basis for the penalty is set aside, then the penalty cannot stand by itself and is liable to be set aside. Accordingly, the penalty proceedings is also set aside to the file of AO for fresh consideration in accordance with law.
In the result, appeal filed by the assesse is partly allowed for statistical purposes. Order pronounced in the open court on 30th Jan, 2026