Case Law Details
Shiv Arora Vs ITO (ITAT Delhi)
Penalty Dies with Quantum – ITAT Delhi Deletes 271AAC Levy – When Assessment Goes, Penalty Goes Too – ITAT Delhi Follows Settled Law
Assessee’s assessment was completed ex-parte u/s 144 on 23.04.2024, & a penalty of ₹18.01 lakh was later imposed u/s 271AAC(1). The appeal before CIT(A) was delayed by about ten months & was dismissed on grounds of limitation.
Tribunal held that CIT(A) erred in refusing to condone the delay, since sufficient cause was shown, & more importantly, the quantum order was already annulled by CIT(A) on 19.02.2025 with directions for de-novo assessment. Once the foundation (assessment) is removed, the penalty automatically falls, being consequential in nature.
Accordingly, Tribunal condoned the delay, quashed the penalty order, & clarified that the AO may initiate fresh proceedings, if warranted, after the new assessment. The appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 21/03/2025 for the Assessment Year 2018-19.
2. Brief facts of the case are that, an ex-parte assessment order came to be passed on 23/04/2024 u/s 144 of the Income Tax Act, 1961 (‘Act’ for short). Consequent to the additions made thereon, a penalty proceedings has been initiated against the Assessee and an order of penalty came to be passed on 18/01/2022 under Section 271AAC (1) of the Act. Aggrieved by the order of penalty dated 18/01/2022, the Assessee preferred an Appeal before the Ld. CIT(A) with a delay of nearly 10 months in filing the First Appeal. The Ld. CIT(A) vide order dated 21/03/2025, dismissed the Appeal of the Assessee for delay in latches. As against the order of the Ld. CIT(A) dated 21/03/2025, the Assessee preferred the present Appeal.
3. The Ld. Counsel for the Assessee submitted that the Ld. CIT(A) committed error in not condoning the delay in filing the Appeal and also submitted that, the very assessment order dated 23/04/2024 has been set aside by the Ld. CIT(A) in the quantum Appeal, therefore, the order of the penalty thereupon cannot survive. Thus, sought for allowing the Appeal.
4. Per contra, the Ld. Department’s Representative relying on the order of the Lower Authorities sought for dismissal of the Appeal.
5. We have heard both the parties and perused the material available on record. The Ld. CIT(A) while dismissing the Appeal has not condoned the delay in filing the Appeal. It was the case of the Assessee that the Assessee has sufficient cause to condone the delay. Apart from the same, it is a matter of record that the assessment order has been set aside by the Ld. CIT(A) vide order dated 19/02/2025 and the matter has been remanded to the file of the A.O. for framing de-novo assessment. Considering the above facts and circumstances, we condoned the delay in filing the Appeal before the Ld. CIT(A) and observe that as the order of assessment itself has been set aside, the consequential penalty order cannot survive. It is for the A.O. to initiate fresh penalty proceedings in accordance with law if A.O. frames assessment by making addition/s during the second round of assessment. Accordingly, the order of penalty dated 18/01/2022 which has been sustained by the Ld. CIT(A) vide order impugned is hereby quashed.
6. In the result, Appeal of the Assessee is allowed.
Order pronounced in the open court on 24thOctober, 2025
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