Surya Jyoti Software Pvt. Ltd. Vs ITO (ITAT Delhi)
Penalty Is Consequential:- When Quantum Falls, Penalty Can’t Stand: 271(1)(c) Penalty Automatically Collapses
Delhi ITAT ‘A’ Bench in Surya Jyoti Software Pvt Ltd vs ITO, Ward 24(1), Delhi (ITA No.2219/Del/2025, AY 2009-10, order dated 23-12-2025) deleted penalty levied u/s 271(1)(c), holding that once the quantum addition itself is deleted, the consequential penalty cannot survive.
Assessee-company had filed return declaring loss. Assessment was reopened and an addition was made in respect of loan transaction with M/s Shalini Holdings Ltd, followed by levy of penalty u/s 271(1)(c) vide order dated 14-01-2022. CIT(A), NFAC confirmed the penalty.
However, the very addition forming the basis of penalty was subsequently deleted by ITAT vide order dated 12-12-2024 in ITA No.4740/Del/2019. Relying on this binding quantum relief, assessee contended that there remained no concealment of income or furnishing of inaccurate particulars.
ITAT accepted the plea, observing that penalty u/s 271(1)(c) is purely consequential in nature. When the foundation—i.e., the quantum addition—has been knocked down, penalty proceedings lose their legal legs. Tribunal accordingly set aside both the penalty order and the CIT(A)’s order, and allowed the assessee’s appeal in full.
Penalty cannot have an independent existence—if the quantum addition is deleted, penalty u/s 271(1)(c) must automatically go, irrespective of earlier findings.
FULL TEXT OF THE ORDER OF ITAT DELHI
