Facts of the Case

The assessee, Rana Ravi Singh & Sons (HUF), filed two appeals against separate orders dated 14.02.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi for Assessment Year 2017-18, confirming penalties levied under Sections 271AA and 270A of the Income-tax Act. In the quantum proceedings relating to the same assessment year, the CIT(A), NFAC, by order dated 21.01.2025, restored the issues to the file of the Assessing Officer for fresh adjudication.

Issues Involved

Whether penalties levied under Sections 271AA and 270A can survive when the underlying quantum assessment has been restored for readjudication, and whether such penalties are liable to be quashed as premature.

Petitioner’s Arguments

The assessee contended that since the quantum assessment itself had been restored to the file of the Assessing Officer for fresh adjudication, the very foundation for levy of penalties no longer existed. It was submitted that penalties under Sections 271AA and 270A are consequential in nature and cannot be sustained when the quantum proceedings have not attained finality.

Respondent’s Arguments

The Revenue supported the orders passed by the lower authorities and contended that the penalties were rightly levied and confirmed.

Court Order / Findings

The ITAT Ranchi observed that the quantum assessment in the case of the assessee had already been restored to the file of the Assessing Officer by the CIT(A) for readjudication. The Tribunal held that once the quantum assessment itself is set aside, the very basis for levy of penalty does not survive. Accordingly, the Tribunal held that the penalties levied under Sections 271AA and 270A of the Act were unsustainable and liable to be quashed. However, liberty was granted to the Assessing Officer to initiate fresh penalty proceedings, if so warranted, after completion of the quantum assessment.

Important Clarification

The Tribunal clarified that penalties are consequential to assessment proceedings and cannot independently survive when the assessment itself is restored or set aside. At the same time, the Assessing Officer is not precluded from initiating fresh penalty proceedings in accordance with law after finalization of the quantum assessment.

Final Outcome

Both appeals filed by the assessee were allowed. The penalties levied under Sections 271AA and 270A of the Income-tax Act for Assessment Year 2017-18 were quashed, with liberty granted to the Assessing Officer to initiate fresh penalty proceedings, if warranted, after completion of the quantum assessment.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769080383_RANARAVISINGHSONSHUFDHANBADVS.ITOWARD21DHANBAD.pdf

 

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