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Facts
The assessee filed an appeal against the order of the CIT(A)-NFAC, which arose from a penalty order passed by the AO under section 271AAC(1) of the Income Tax Act, 1961 for the assessment year 2018-19. The assessee's primary submission was that the quantum assessment order had already been set aside by a previous Tribunal order. Therefore, the penalty order, being consequential to the quantum assessment, should also be set aside.
Held
The Tribunal noted that it was an admitted fact that the quantum assessment had been set aside by the Tribunal in a prior appeal. Consequently, the penalty order, which arose from this quantum assessment, lacked a foundational basis. Therefore, the penalty order was set aside.
Key Issues
Whether a penalty order under Section 271AAC(1) is sustainable when the underlying quantum assessment has been set aside by the Tribunal?
Sections Cited
271AAC(1), 250
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
आदेश/ O R D E R PER GEORGE GEORGE K: This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 17.09.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The order of
The Ld.AR submitted that as against the quantum assessment, the Tribunal in had set aside the assessment order to the files of the First Appellate Authority (FAA) for de novo adjudication vide order dated 18.12.2025. The copy of the Tribunal order in dated 18.12.2025 has been placed on record. The Ld.AR submitted that in light of the quantum assessment order being set aside, the penalty order u/s.271AAC(1) of the Act which arise out of the quantum assessment needs to be set aside.
The Ld.DR supported the order of the AO and FAA.
We have heard rival submissions and perused the material on record. The present appeal emanates from an order imposing penalty u/s.271AAC(1) of the Act. It is an admitted fact that quantum assessment has been set aside by the Tribunal. Therefore, the penalty order arising from the quantum assessment does not have foundational basis and hence, the same is set aside.
Accordingly, we remit the matter back to the files of the FAA for fresh consideration along with the quantum appeal. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.