Bombay HC Quashes Section 271-D Penalty as Quantum Appeal Was Pending

Yamaji Ramchandra Rithe Vs Union of India (Bombay High Court)

The Bombay High Court allowed the writ petition challenging the penalty order dated 20.02.2026 passed under Section 271-D and the corresponding notice of demand under Section 156. The petitioner relied on an earlier decision of the Coordinate Bench in Writ Petition (L) No. 42864 of 2025 dated 03.02.2026, contending that the issue was already covered. The Income Tax Department opposed the petition on the ground that an alternate efficacious remedy was available, while the Union of India supported the impugned order.

The Court observed that the earlier Coordinate Bench decision had followed the rulings in B. Shreeram Durgaprasad Vs. Commissioner of Income Tax, Nagpur, Kellogg India Private Limited Vs. National Faceless Assessment Centre, Delhi & Ors., and Maharashtra State Electricity Transmission Company Limited Vs. Assessment Unit, Income Tax Department, National Faceless Assessment Centre & Ors. Finding that the present issue was squarely covered by those decisions, the Court quashed and set aside the penalty order.

The Court directed that the penalty proceedings remain in abeyance until the appeal before the CIT(A) against the assessment order under Section 147 is decided. Continuation of penalty proceedings would depend on the outcome of that appeal.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Rule. Rule made returnable forthwith. Heard finally by the consent of the parties.

2. By this petition, the Petitioner is challenging the order dated 20.02.2026 under Section 271-D and notice of demand under Section 156 dated 20.02.2026. The learned advocate for the Petitioner has placed reliance on the decision rendered by the Coordinate Bench of this Court at Principal Seat in Writ Petition (L) No. 42864 of 2025 dated 03.02.2026, which according to him squarely covers the issue raised in this petition.

3. Learned advocate for the Respondents / Income Tax Department has strenuously opposed the petition stating that the Petitioner has alternate efficacious remedy and therefore the petition may not be entertained on that ground. The learned advocate for the Union of India has supported the impugned order.

4. This Court while allowing Writ Petition (L) No. 42864 of 2025 has followed the decisions in B. Shreeram Durgaprasad Vs. Commissioner of Income Tax, Nagpur [2016] 65 taxmann.com 293 (Bombay)] and Kellogg India Private Limited Vs. National Faceless Assessment Centre, Delhi & Ors. and Maharashtra State Electricity Transmission Company Limited V/s. Assessment Unit, Income Tax Department, National Faceless Assessment Centre & Ors. We find that the issue raised in the present petition is squarely covered by the same decision. Hence, the petition deserves to be allowed.

5. In the result, Writ Petition succeeds. The impugned penalty order dated 20.02.2026 (Exhibit-C) is hereby quashed and set aside.

We direct that the penalty proceedings shall be kept in abeyance till a decision is rendered in the Appeal filed by the Petitioner before the CIT(A). Only once those proceedings are concluded, and are in favour of the Revenue, the Revenue can then continue with the penalty proceedings, and take it to its logical conclusion. If the Petitioner succeeds before the CIT(A), the question of continuing with the penalty proceedings will not arise. In other words, the continuation of the penalty proceedings will entirely depend on the outcome of the Appeal filed by the Petitioner before the CIT(A)against the Assessment Order passed under Section 147 of the IT Act.

6. Rule is made absolute in the above terms.