Penalty Cannot Survive Without Quantum Addition – ITAT Upholds Deletion u/s 271(1)(c)

DCIT Vs Ravindar Shankar Sawant (ITAT Mumbai)

Mumbai ITAT upheld deletion of penalty u/s 271(1)(c), holding that once the underlying quantum additions are deleted, penalty automatically fails.

The Tribunal noted:

• Penalty of ₹61.06 lakh was levied based on additions u/s 68 and 69C
• The ITAT had already deleted the quantum additions in earlier proceedings
• Revenue also conceded this factual position

The ITAT held:

• Penalty is dependent on quantum addition
• Once the foundation (addition) is removed, penalty cannot stand
• Penalty becomes infructuous and non-est

Accordingly:

• Deletion of penalty by CIT(A) was upheld
• Revenue’s appeal was dismissed

The ruling reinforces the settled principle that penalty proceedings cannot survive independently when the underlying addition itself is knocked down.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal is filed by the Revenue against the order dated 24.10.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”].

2. The assessee is an individual. The return of income for A.Y. 2016–17 was filed on 31.03.2017 declaring total income of Rs. 2,95,35,030/-. The case was selected for scrutiny and assessment was completed under section 143(3) of the Income Tax Act, 1961 determining total income at Rs. 4,71,79,030/- after making additions of Rs. 1,59,50,000/- under section 68 and Rs. 16,94,000/- under section 69C of the Act. Subsequently, penalty proceedings were initiated and penalty order under section 271(1)(c) of the Act was passed on 06.03.2025 levying penalty of Rs. 61,06,236/-.

3. Aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) passed order under section 250 dated 24.10.2025 deleting the penalty. The CIT(A) noted that the additions made in the assessment order under sections 68 and 69C, forming the basis of penalty, had already been deleted by the Tribunal in quantum proceedings. It was observed that once the quantum addition does not survive, the penalty levied under section 271(1)(c) cannot be sustained.

4. The relevant finding of the CIT(A) reads as under:

“Since the quantum appeal filed by the appellant before the Hon’ble Income Tax Appellate Tribunal (ITAT), Mumbai has been decided in favour of the appellant, the very basis of the penalty imposed by the Assessing Officer does not survive. Consequently, the penalty order passed under section 271(1)(c) of the Income-tax Act, 1961 becomes infructuous and non-est.”

5. Aggrieved by the order of CIT(A),the Revenue is in appeal before us raising following grounds of appeal:

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the penalty of Rs. 61,06,236/- levied u/s 271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income.

2. The appellant craves leave to amend or alter or add a new ground which may be necessary.

6. At the time of hearing, none appeared on behalf of the assessee. However, the learned Departmental Representative fairly conceded that the quantum addition, on the basis of which penalty under section 271(1)(c) was levied, has already been deleted by the Co-ordinate Bench.

7. We have considered the material available on record and the submissions of the learned Departmental Representative.

8. It is an admitted position that the penalty under section 271(1)(c) was levied with reference to additions made under sections 68 and 69C of the Act in the assessment completed under section 143(3).

9. It is further an undisputed fact, as recorded by the CIT(A), that the Co-ordinate Bench in quantum proceedings has deleted the additions forming the very basis of penalty vide order dated 30.12.2024 in ITA No. 1849/Mum/2024.

10. In such circumstances, the settled legal position is that when the quantum addition itself is deleted, the penalty imposed under section 271(1)(c) cannot survive. The penalty being incidental to the quantum addition, its foundation having been removed, the superstructure must necessarily fall.

11. The learned Departmental Representative has also fairly conceded this factual position.

12. Accordingly, we find no infirmity in the order of the CIT(A) deleting the penalty.

13. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 21.04.2026.