The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) reportedly deleted a Rs 17,18,658 penalty imposed on a man who had not filed an income-tax return for assessment year 2016–17. The Times of India reported on October 10, 2026, that the penalty failed because the assessment order referred to initiating proceedings under different provisions from the one later used to impose it. The decision concerned the penalty—not whether the alleged Rs 55.62 lakh cash deposits were taxable income.
What happened in the case?
The Times of India reported that the tax department reopened the man’s case for assessment year 2016–17 and, on February 15, 2024, completed a reassessment without his participation. It assessed total income at Rs 55.62 lakh, treating that amount as unexplained cash deposits in a bank account attributed to him. The man disputed the assessment and the account’s attribution.
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The newspaper said the assessment order referred to Sections 68 and 69 and directed tax to be charged under Section 115BBE. It also said the order recorded initiation of penalty proceedings under Sections 271AAC and 272A(1)(d). On August 21, 2024, the assessing officer imposed a Rs 17,18,658 penalty under Section 271(1)(c), described in the report as 100% of the tax sought to be evaded. The National Faceless Appeal Centre upheld the penalty on January 23, 2026, after which the taxpayer appealed to ITAT Mumbai.
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The dates, amounts and account of the tribunal’s reasoning in this article are as reported by The Times of India; they are not independently confirmed against the tribunal’s written order.
Why did ITAT reportedly delete the penalty?
The reported issue was a mismatch between the penalty proceedings recorded at the assessment stage and the provision used for the later penalty:
| Stage | Provision reported |
|---|---|
| Assessment order: penalty proceedings recorded as initiated | Sections 271AAC and 272A(1)(d) |
| Penalty imposed later | Section 271(1)(c) |
According to the newspaper, ITAT found that the assessment order did not record satisfaction or direct initiation of penalty proceedings under Section 271(1)(c). The later penalty order reportedly could not cure that omission merely by describing the Section 271(1)(c) proceedings as having been initiated during assessment.
This is a report of the reasoning in one appeal, not a general rule that a penalty under Section 271(1)(c) must fail whenever an assessment order mentions another penalty provision. The provisions recorded and the wording of the relevant orders matter.
What the penalty decision did—and did not—decide
The reported ruling removed the Rs 17,18,658 penalty. It did not determine whether the Rs 55.62 lakh addition was correct, whether the deposits were properly treated as income, or whether the bank account belonged to the taxpayer. The Times of India said his separate challenge to the underlying assessment remained pending.
The report also said the taxpayer argued that he was a non-resident and that the account was not his. Those contentions were not decided in this penalty appeal, according to the newspaper. Amit Gupta, a partner at Saraf and Partners, was quoted in the report explaining that penalty proceedings, although they may arise from an assessment, are independent proceedings. That distinction helps explain why relief from a penalty does not by itself cancel the underlying assessment.
Quick Recap
How to read the report
- Penalty outcome: ITAT Mumbai reportedly deleted the penalty because of the recorded-provision mismatch.
- Assessment outcome: The reported penalty ruling did not resolve the dispute over the alleged deposits or the taxpayer’s account-ownership and residency claims.
- Scope: The account describes one case. It does not establish that every penalty imposed under Section 271(1)(c) in similar circumstances will be deleted.
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