Jaihind Welding and Boiler Work Vs ITO (ITAT, Pune Bench)
Penalty Cannot Run Ahead of Quantum Appeal: Pune ITAT Restores Section 271(1)(c) Disputes for Decision After Additions Attain Finality
Summary: The assessee, M/s Jaihind Welding & Boiler Work, was a partnership firm. It filed two appeals challenging separate orders of the NFAC/CIT(A), both dated 30 January 2026, confirming penalties levied u/s 271(1)(c) for AYs 2009-10 & 2011-12.
Both appeals before the Tribunal were delayed by 30 days. The assessee filed separate applications for condonation supported by affidavits explaining the delay. After considering the applications & hearing the Revenue, the Tribunal condoned the delay & admitted both appeals for adjudication.
For AY 2009-10, the assessee filed its return on 30 September 2009 declaring total income of ₹7,50,110. The assessment was subsequently completed u/s 143(3) r.w.s. 147 after making an addition of ₹87,259, with total income stated to have been determined at ₹10,97,800.
Based on the reassessment addition, the AO initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income. By an order dated 21 March 2024, the AO levied penalty of ₹78,365. The CIT(A) confirmed the penalty.
For AY 2011-12, penalty was similarly levied u/s 271(1)(c) & confirmed by the CIT(A). The order records that the material facts were identical to those concerning AY 2009-10, though the amount of addition & penalty for AY 2011-12 was not separately reproduced.
Issue before the Tribunal
The principal issue was whether the CIT(A) should decide the penalty appeals while the corresponding quantum appeals remained pending before the same appellate authority.
The connected issue was whether the penalty orders could be independently sustained before the factual & legal validity of the additions forming their foundation had been finally adjudicated.
The Tribunal was not called upon to decide whether the assessee had actually furnished inaccurate particulars. It confined its ruling to the proper sequencing of quantum & penalty proceedings.
Assessee’s submissions
The assessee’s counsel submitted at the outset that the quantum appeal for AY 2009-10 was still pending before the CIT(A). Therefore, the very addition on which penalty of ₹78,365 was based had not attained finality.
It was argued that determination of penalty necessarily depended upon the outcome of the quantum appeal. If the addition was deleted or modified, the basis & amount of penalty would correspondingly disappear or change.
The assessee therefore requested that the penalty issue be restored to the CIT(A) with a direction to adjudicate it only after completion of the quantum proceedings.
For AY 2011-12, both parties agreed that the facts were the same. The assessee sought identical restoration for that year as well.
Revenue’s contentions
The Revenue supported the penalty orders passed by the AO & the appellate orders of the CIT(A). Since additions had been made in the assessments & the assessee was held to have furnished inaccurate particulars, the penalties were sought to be sustained.
However, for AY 2011-12, the parties unanimously accepted that the same course as adopted for AY 2009-10 could be followed because the factual position was identical.
Tribunal’s findings & legal reasoning
The Tribunal noted that the penalty of ₹78,365 for AY 2009-10 arose directly from the addition made in the reassessment u/s 143(3) r.w.s. 147. The quantum appeal challenging that addition was admittedly pending before the CIT(A).
The outcome of the quantum proceedings would have a direct bearing on the penalty. If the addition was deleted, penalty based exclusively upon it might not survive. If the addition was reduced, the penalty computation might require modification. If sustained, the CIT(A) would still have to independently examine whether the statutory conditions for penalty were established.
Considering this dependency, the Tribunal held that the penalty issue should not be finally decided in isolation while the quantum dispute remained unresolved.
It therefore restored the penalty appeal for AY 2009-10 to the CIT(A), with a direction to decide it after completion of the quantum proceedings, in accordance with facts & law. The CIT(A) was also directed to provide the assessee due opportunity of hearing.
For AY 2011-12, the Tribunal followed the same reasoning & restored the penalty matter with identical directions.
Both appeals were accordingly allowed for statistical purposes.
Practical implications
The ruling reinforces the principle that penalty proceedings are separate from quantum proceedings but remain factually dependent upon the underlying addition. An addition does not automatically justify penalty, yet its deletion or modification directly affects whether penalty can survive.
Where a quantum appeal is pending, the assessee should bring this fact to the attention of the authority deciding penalty. Depending upon the stage of proceedings, the penalty appeal may be kept pending or restored for adjudication after the quantum dispute is resolved.
The decision does not delete the penalties on merits. It merely postpones their final adjudication until the additions attain appellate clarity. The CIT(A) must later examine not only the outcome of the quantum appeals but also whether the conduct amounts to concealment or furnishing of inaccurate particulars.
The ruling also demonstrates that a short appellate delay can be condoned when supported by a proper application & affidavit.
The central principle is that penalty should follow the final factual position emerging from quantum proceedings-it should not be conclusively decided while its very foundation remains under challenge.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PUNE
1. The above two appeals filed by the assessee are directed against the separate orders both dated 30.01.2026 of the Ld. Commissioner of Income Tax- Appeals, NFAC (“CIT(A) / NFAC”), Delhi relating to assessment years 2009-10 and 2011-12 respectively. For the sake of convenience, both these appeals were heard together and are being disposed of by this common order.
2. There is a delay of 30 days in filing of both the appeals by the assessee before the Tribunal for which the assessee has filed separate condonation applications along with the affidavits explaining the reasons for such delay. After considering the contents of the condonation applications filed along with the affidavits and after hearing the Ld. DR, the delay in filing of both the appeals is condoned and the appeals are admitted for adjudication.
ITA No.2186/PUN/2026 (A.Y. 2009-10)
3. Briefly stated, the facts of the case are that the assessee is a partnership firm and filed its return of income u/s 139 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 30.09.2009 declaring total income of Rs.7,50,110/-. The assessment was completed u/s 143(3) r.w.s. 147 by making addition of Rs.87,259/- at a total income of Rs.10,97,800/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and accordingly levied penalty of Rs.78,365/- vide his order dated 21.03.2024.
4. On appeal the Ld. CIT(A) / NFAC dismissed the appeal filed by the assessee.
5. Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal.
6. The Ld. Counsel for the assessee at the outset submitted that the quantum appeal is pending for adjudication before the Ld. CIT(A) / NFAC. He accordingly submitted that the matter may be restored to the file of the Ld. CIT(A) / NFAC.
7. The Ld. DR on the other hand supported the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
8. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed by the Ld. AR on behalf of the assessee. We find in the instant case the assessment was completed u/s 143(3) r.w.s. 147 by making addition of Rs.87,259/- at a total income of Rs.10,97,800/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act and accordingly levied penalty of Rs.78,365/-. The Ld. CIT(A) / NFAC upheld the action of the Assessing Officer. It is the submission of the Ld. Counsel for the assessee that the quantum appeal is pending before the Ld. CIT(A) / NFAC. It is also his submission that the matter may be restored to the file of the Ld. CIT(A) / NFAC. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue of penalty to the file of the Ld. CIT(A) / NFAC with a direction to decide the issue of penalty after completion of the quantum proceedings as per fact and law and after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
ITA No.2187/PUN/2026 (A.Y. 2011-12)
9. Both the parties have unanimously consented and submitted that the facts of the case are same as narrated in the above ITA No.2186/PUN/2026 for assessment year 2009-10. In this the case also, the assessee has challenged the penalty levied u/s 271(1)(c) of the Act. We have already decided the issue and restored the matter to the file of the Ld. CIT(A) / NFAC with a direction to decide the issue of penalty after completion of quantum proceedings. Following similar reasonings, we restore the issue to the file of the Ld. CIT(A) / NFAC with similar directions. The grounds raised by the assessee are accordingly allowed for statistical purposes.
10. In the result, both appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 27th August, 2026.
