Amar Nath Gupta & Son vs DCIT, Central Circle 15

PER S. RIFAUR RAHMAN, AM :

This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals), Delhi – 26 [for short ‘ld. CIT (A)] dated 22.12.2025 for the Assessment Year 2019-20.

At the time of hearing, ld. AR of the assessee brought to our notice relevant facts of the case and submitted his submissions. He submitted that the appeal filed by the assessee against the order passed by ld. CIT(A) dated 22.12.2025, confirming the penalty levied by the AO under section 271D of the Income-tax Act, 1961 (for short ‘the Act’).

He submitted that in the case of the assessee, under the quantum proceedings wherein additions were made u/s 69A of the Act, the AO had alleged cash receipts to the tune of Rs.60,00,000 by the assessee, against the sale of share in an immovable property, from Ms. Kusum Jain. He submitted that the assessee's appeal has already been allowed by the Bench ‘A’ of ITAT Delhi vide order dated 27.02.2026 in ITA No.6425/DEL2025, deleting the above alleged addition in the assessee's case.

He further submitted that in the order, it was observed that the AO's assumption of jurisdiction u/s 153C was itself vitiated, placing reliance on the decision of Hon'ble Supreme Court in the case of CIT-I Vs. M/s Calcutta Knitwears Ludhiana (2014) 362 ITR 673 (SC) dated 12.03.2014, read with CBDT Circular No. 242015 dated 31.12.2025, and therefore the appeal was allowed and reassessment order was quashed.

He submitted that penalty proceedings u/s 271D of the Act are liable to be quashed in cases where the appeals against Quantum Additions, on the basis of which such penalty is imposed, are allowed. He submitted that the AO while alleging the above transaction by the assessee, also proceeded to levy penalty from the assessee u/s 271D of the Act citing violation of provisions of the section 269SS of the Act. He further submitted that the penalty levied under section 271D is unsustainable in law once the assessment order stands annulled. This legal position is squarely covered by the judgement of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Panchkula Versus M/s Jai Laxmi Rice Mills, dated 20.11.2025, 2015 (11) TMI 1453. Further, he placed reliance on the recent judgement of ITAT Delhi in the case of Rudra Buildwell Projects P. Ltd. Versus DCIT, Central Circle, Noida, dated 15.01.2025, 2025 (1) TMI 1232.

He submitted that the same principle has been consistently followed by various judicial forums and relied on various decisions. He submitted that thus, the consistent judicial view is that penalty is only a consequence of a valid assessment, and cannot stand independently when the very assessment order is held to be invalid or void ab initio. In view of the above settled legal position, he submitted that the penalty levied u/s 271D deserves to be quashed for AY 2019-20.

On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.

Considered the rival submissions and material placed on record. We have gone through the detailed submissions of the ld. AR of the assessee. We observed that the quantum proceedings wherein additions were made u/s 69A of the Act has already been allowed by the Bench ‘A’ of ITAT Delhi vide order dated 27.02.2026. We further observed that various decisions have held that proceedings u/s 271D of the Act are liable to be quashed in cases where the appeals against Quantum Additions, on the basis of which such penalty is imposed, are allowed. Accordingly, we are of the considered opinion that the penalty levied under section 271D is unsustainable in law once the assessment order stands annulled and this legal position is squarely covered by the judgement of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Panchkula Versus M/s Jai Laxmi Rice Mills (supra). Accordingly, we allow the appeal filed by the assessee.

In the result, the appeal filed by the assessee is allowed.