VARDHAMAN FABRICS,SURAT vs. ITO, WARD 1(2)(5), SURAT

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ITA 474/SRT/2025Status: DisposedITAT Surat01 January 2026AY 2011-12Bench: SHRI SANJAY GARG (Judicial Member), SHRI BIJAYANANDA PRUSETH (Accountant Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order dated 29.03.2017 was not legally sustainable because it was based on an assessment order that had been set aside. The Tribunal noted that fresh penalty proceedings were initiated in the subsequent assessment order.

What were the facts?

The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) based on an addition made in the assessment order dated 28.03.2014. However, this assessment order was later set aside by the Tribunal. Subsequently, a fresh assessment order was passed with a similar addition and new penalty proceedings were initiated.

What were the issues?

The primary issue was the validity of a penalty order passed on the basis of an assessment order that was subsequently set aside by the appellate tribunal.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri P M Jagasheth, CA
For Respondent: Shri Ajay Uke, Sr. DR
Hearing: 16.10.2025Pronounced: 01.01.2026

Per Sanjay Garg, Judicial Member:

1.

The present appeal has been preferred by the Assessee against the order of the Ld. Commissioner of Income Tax(Appeals), [hereinafter referred to as ‘CIT(A)’], Lucknow dated 21/02/2025 for Assessment Year (AY) 2011- 12.

2.

The Assessee has raised the following grounds of appeal:

1) On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in initiating penalty of Rs. 5,91,720/- proceeding 271(1)(c) of the I.T Act 1961. 2) On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear, hence, the case may please be set aside and restored back to the CIT(A) of AO for sake of the interest of natural justice.

3) It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 4) Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.

3.

The Assesse in this appeal, has contested the levy of penalty u/s 271(1)(c) of the Income Tax Act[hereinafter referred to as ‘Act’]. At the outset, Ld. Counsel for the assessee have invited our attention to the original assessment order passed in the case of the assessee dated 28.03.2014. In the said assessment order for the year under consideration, the Assessing Officer had made the addition of Rs. 19,14,948/- and penalty proceedings u/s 271(1)(c) of the Act, were also initiated.

4.

Thereafter the Assessing Officer (AO) passed the impugned penalty order dated 29.03.2017 in respect of the aforesaid addition of Rs. 19,14,948/- and levied the penalty at the rate of 100% of the tax sought to be evaded at Rs. 5,91,716/-.

5.

The Ld. Counsel has further invited our attention to the order of Surat Bench of this Tribunal dated 18.02.2019 passed in the second appeal preferred by the assessee against the quantum assessment order dated 28.03.2014, whereby, the issue relating to the aforesaid addition of Rs. 19,14,948/- was set aside by the Tribunal for assessment afresh to the file of the Assessing Officer.

6.

Thereafter, a fresh assessment order dated 27.12.2019 was passed by the Assessing Officer making again the addition of Rs. 19,14,948/- into the income of the assessee and also initiating the fresh penalty proceedings u/s 271(1)(c) of the Act.

7.

In view of the above stated facts and circumstances of the case, the penalty order dated 29.03.2017 is legally not sustainable as the assessment order dated 28.03.2014 on the basis of which the impugned penalty was levied by the AO, was set aside by the Tribunal vide order dated 18.02.2019. Therefore, the impugned penalty order dated 29.03.2017 has no legs to stand.

8.

It is further noted that, as mentioned above, in the subsequent assessment order dated 27.12.2019, the A.O. has already initiated penalty proceedings u/s 271(1)(c) of the Act. This order will not having any bearing on the said penalty proceedings.

9.

In view of this, the impugned penalty order dated 29.03.2017 is not sustainable and the same is hereby quashed.

10.

In the result, the appeal of the assessee stands allowed. Order pronounced under proviso to Rule 34 of ITAT Rules, 1963 on 01/01/2026

Sd/- Sd/- (BIJAYANANDA PRUSETH) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 01/01/2026 Neelesh, Sr. PS Vardhaman Fabrics Vs. ITO Asst. Year – 2011-12 - 4– UE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. आयकर आयु�(अपील) / The CIT(A)- 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, सूरत / DR, ITAT, Surat 5. गाड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,

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