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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the Revenue is directed against the order dated 27.03.2026 of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the order dated 27.03.2016 passed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the national Faceless Assessment Unit, Income Tax Department (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2012-13.
The assessee has raised the following grounds of appeal:-
“1.On facts and in law, the Ld. Commissioner of Income Tax Appeals NFAC has erred in quashing the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961 amounting to Rs. 42,13,17,279 which is bad in law and liable to be set aside.
2.The Ld. CIT(A) has erred in recording incorrect facts by holding that the assessment matter had been restored to the file of the Assessing Officer and was pending for fresh adjudication whereas the Honble ITAT vide order dated 23.04.2025 in ITA No. 384/Del/2023 had restored the matter only to the file of the Ld. CIT(A) NFAC for de novo adjudication.
3.The Ld. CIT(A) has erred in law in holding that the penalty proceedings under section 271(1)(c) of the Act have become infructuous merely because the quantum proceedings were restored for fresh adjudication without appreciating that no consequential order has been passed and the additions forming the basis of penalty continue to subsist.
4.The Ld. CIT(A) has failed to appreciate that penalty proceedings are dependent upon the final outcome of quantum proceedings and do not automatically abate OR become infructuous when the assessment is set aside OR remanded rather such proceedings remain alive and are to be decided in accordance with the outcome of the fresh adjudication.
5.The Ld. CIT(A) has erred in granting premature relief by quashing the penalty order without there being any final 5 adjudication on the quantum addition and without any operative order setting aside the assessment in consequence of the ITAT directions.
6.The impugned order is erroneous and prejudicial to the interest of Revenue as the Ld. CIT(A) has failed to follow the settled legal position and has wrongly held the penalty proceedings to be infructuous.
7.The appellant craves leave to add alter amend OR withdraw any of the above grounds of appeal at OR before the time of hearing.”
The brief facts of the case are that the assessee filed the present appeal against the penalty order passed under section 271(1)(c) of the Act, dated 27.03.2024 for A.Y. 2012-13, whereby penalty of Rs. 42,13,17,279/- was imposed. The penalty was levied in respect of the additions made in the assessment order passed under section 143(3) read with section 147 of the Act dated 27.12.2019, wherein addition of Rs. 1,29,84,35,972/- was made on account of unexplained cash credit and interest income under section 68 of the Act.
Against the penalty order, the assessee preferred appeal before the Ld. CIT(A), who has allowed the appeal of the assessee.
Aggrieved, the Revenue is in appeal before us.
Before us, Ld. DR has contended that the Ld. CIT(A) has wrongly deleted the penalty and granted premature relief to the assessee on the ground that the assessee has been restored to the file of the AO for fresh consideration. It has been submitted that vide order dated 23.04.2025, the coordinate bench had restored the appeal of the file of CIT(A) for fresh adjudication. Even if the CIT(A) has, in term, restored the matter to the AO, the penalty proceedings do not become infructuous. Rather these remain alive and are to be decided based on the final outcome of fresh adjudication which remains pending.
Accordingly, it is the case of the revenue that the order of CIT(A) quashing the penalty proceedings is bad in law and is liable to be set aside.
On the other hand, the Ld. AR submitted that the assessment order dated 27.12.2019, has already been set aside by the Tribunal vide order dated 23.04.2025 in ITA No. 384/Del/2023 for A.Y. 2012-13. Accordingly, it was contended that the impugned penalty order has become infructuous and deserves to be quashed, and therefore, the order of the CIT(A) is justified.
We have heard the rival submissions and perused the material available on record. Considering the totality of the facts and circumstances of the case, in the interest of justice, we deem it appropriate to set aside the impugned penalty order dated 27.03.2024 and restore the matter to the file of the CIT(A) for deciding the issue afresh after the finalization of remand back quantum proceedings, in accordance with law.
In the result, the appeal of the Revenue is allowed for statistical purposes.