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Facts
The assessee's appeal is against an order of the CIT(A)-NFAC imposing penalty under section 271(1)(c) of the Income Tax Act, 1961, for Assessment Year 2015-16. The penalty arose from a quantum assessment that had been set aside by the Tribunal.
Held
The Tribunal held that since the quantum assessment order was set aside because the notice under section 148 was issued by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer, the penalty order stemming from it also lacked foundational basis and was consequently set aside.
Key Issues
Whether a penalty order under section 271(1)(c) is sustainable when the underlying quantum assessment has been set aside due to a procedural defect in the notice issued under section 148.
Sections Cited
271(1)(c), 148, 250
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE KAND MS PADMAVATHY S
Shri Raju Chandrasekar, The Income Tax Officer, No.96, Oduvanpatti, Vs. Ward 1, Melapatti (Post), Karaikudi Tiruppattur (Taluk), Sivagangai District, Tirupathur – 630 502. PAN: AGPPC 1616D (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri T. Vasudevan, Advocate ��यथ� क� ओर से/Respondent by : Ms. R. Kavitha, Addl.CIT सुनवाई क� तारीख/Date of Hearing : 20.01.2026 घोषणा क� तारीख/Date of Pronouncement : 22.01.2026 आदेश/ O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 08.07.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The order of the CIT(A)-NFAC arises out of the order of the AO imposing penalty u/s.271(1)(c) of the Act. The relevant Assessment Year is 2015-16.
The Ld.AR submitted that as against the quantum assessment, the Tribunal in had set aside the reassessment order for the reason that the notice u/s.148 of the Act was issued by the Jurisdictional Assessing Officer [JAO] instead of Faceless Assessing Officer [FAO]. The Tribunal followed the judgment of the Hon’ble Jurisdictional High Court in the case of TVS Credit Service Ltd., vs. DCIT in WP No.22402 of 2024 (judgment dated 24.06.2025). The copy of the Tribunal order in dated 17.12.2025 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.271(1)(c) of the Act which arise out of the quantum assessment needs to be quashed.
The Ld.DR supported the order of the AO and the First Appellate Authority.
We have heard rival submissions and perused the material on record. The present appeal emanates from an order imposing penalty u/s.271(1)(c) of the Act. It is an admitted fact that quantum assessment has been set aside by the Tribunal since notice u/s.148 of the Act was issued by the JAO instead of FAO. Therefore, the penalty order arising from the quantum assessment does not have foundational basis and hence, the same is set aside. However, in the quantum assessment, the Tribunal had kept open the rights of the contention of the Revenue to revive the quantum assessment if the Revenue succeeds before the Hon’ble Apex Court. The relevant portion of the order of the Tribunal in the quantum assessment which gives liberty to the Revenue to revive the appeal reads as follows:- “8. In light of the above, we set aside the impugned notice issued under section 148 of the Act and consequential order passed pursuant thereto. However, in the light of the Para No.8 of the decision of the jurisdictional High Court in the case of TVS Credit Services Ltd., supra, we also keep open of rights and contentions of parties including liberty to approach this bench, in case, the Revenue succeeds before the Apex Court for revival of this appeal.”
In the event, the Hon’ble Supreme Court reverses the judgment of the Hon’ble Jurisdictional High Court in the case of Hexaware Technologies Ltd., vs. ACIT, (supra) the quantum assessment gets revived. Therefore, the penalty imposed u/s.271(1)(c) of the Act (the appeal filed by the assessee before the ITAT) also needs to be revived for adjudication on merits.
With these observations, the appeal of the assessee is disposed of.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 22nd January, 2026 at Chennai.