Sachin Mahasukhlal Shah Vs DCIT (ITAT Ahmedabad)
Penalty u/s 271(1)(c) Cannot Survive When Quantum Itself Is Remanded—Penalty Proceedings Restored to AO for Fresh Decision
Both appeals relate to penalty imposed u/s 271(1)(c) arising from the same quantum addition in AY 2015-16. In each case, the assessee had claimed deduction of ₹38,15,160 as interest expenditure, which the AO disallowed for lack of nexus with plot-rent income. The AO thereafter levied penalty of ₹32,02,179 in the case of Sachin Mahasukhlal Shah and ₹13,13,232 in the case of Rupa Sachin Shah.
Before the Tribunal, it was pointed out that the quantum addition had already been set aside by ITAT vide order dated 19-08-2020 in ITA Nos.2418 & 2419/Ahd/2018, restoring the matter to CIT(A) for fresh adjudication. As the penalty was based exclusively on this disputed quantum, the assessees submitted that the penalty proceedings should also be kept in abeyance or remanded.
The Tribunal noted that Section 275(1A) specifically provides that where an assessment is modified as a result of appellate directions, the penalty must be reconsidered in light of the revised quantum outcome. Since the original quantum had been set aside, the penalty could not be sustained at this stage. Both the AR and the DR agreed that remand would be the correct course.
Accordingly, the Tribunal set aside the penalty orders in both cases and restored the matters to the AO to re-adjudicate the penalty after the CIT(A) passes an order in the remanded quantum proceedings, and strictly in accordance with the final findings on the quantum.
Result
Both appeals allowed for statistical purposes; penalty u/s 271(1)(c) remanded to AO for fresh adjudication linked to the outcome of the quantum proceedings.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These two appeals are filed by two different assessees against the orders of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 20.03.2024 and 11.02.2025 respectively, both for the Assessment Year (A.Y.) 2015-16, in the proceeding under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). As the facts involved in these two cases are identical, both the matters were heard together and are being disposed of vide this common order for the sake of convenience. We will first take the appeal no. 759/Ahd/2025 filed by Sh. Sachin Mahasukhlal Shah for consideration.
