2025 (5) TMI 1314 - AT - Income Tax

Income Tax Penalty Overturned: Tribunal Grants Relief Despite Delayed Appeal, Emphasizing Procedural Fairness in Tax Dispute

ITAT Ahmedabad allowed an appeal against a penalty under Section 271(1)(c) of Income Tax Act. Despite being time-barred by 5 days, the appeal was ... Penalty 271(1)(c) - assessee had failed to prove the capacity of the alleged loan creditors - CIT(A) dismissing the appeal as non-est without adjudication on merits - HELD THAT:- As observed that there was delay of 614 days in filing of appeal before CIT(A) against the penalty order passed by the Assessing Officer u/s 271(1)(c). Assessee also did not provide any explanation for such delay before Ld. CIT(A). However, it is a well settled law that if the quantum additions are themselves deleted on merits, then in respect of such quantum additions, there is no question of levy of penalty u/s 271(1)(c)for concealment of income. Accordingly, in the interest of justice, the levy of penalty is set-aside to the file of Ld. CIT(A), to be taken up along with appeal filed by the assessee against quantum proceedings. Appeal of the assessee is allowed for statistical purposes. The Appellate Tribunal (ITAT Ahmedabad) addressed an appeal by the assessee against the penalty under Section 271(1)(c) of the Income Tax Act for A.Y. 2016-17, confirmed by the Ld. CIT(A), NFAC, Delhi. Although the appeal was time-barred by 5 days, the delay was condoned due to its brevity and lack of prejudice.The key issue was that the penalty related to additions of Rs. 33,45,099/- made by the Assessing Officer, based on the assessee's failure to prove the capacity of alleged loan creditors. The assessee's appeal against the quantum additions before the Ld. CIT(A) remained pending, yet the penalty was confirmed independently.The Tribunal noted a 614-day delay in filing the appeal against the penalty before the Ld. CIT(A), with no explanation given. Importantly, it reaffirmed the settled principle that 'if the quantum additions are themselves deleted on merits, then in respect of such quantum additions, there is no question of levy of penalty under Section 271(1)(c) of the Act for concealment of income.'Accordingly, the Tribunal set aside the penalty levy and remanded the matter to the Ld. CIT(A) to be heard along with the pending quantum appeal, allowing the assessee an opportunity to contest the additions and penalty together. The appeal was allowed for statistical purposes.