ITAT Chennai: Penalty Proceedings Cannot Subsist When Underlying Reassessment is Annulled

The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has delivered a significant ruling regarding the sustainability of penalty proceedings when the foundational assessment order is declared void ab initio. In the case of Raju Chandrasekar Vs ITO, the Tribunal held that a penalty levied under Section 271(1)(c) of the Income Tax Act 1961 must be deleted if the quantum reassessment order has been quashed due to jurisdictional defects—specifically, the issuance of a notice under Section 148 by a Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO).

Case Background and Factual Matrix

The appeal filed by the assessee challenged the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 08.07.2025. This order had confirmed the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act 1961 for the Assessment Year (AY) 2015-16.

The core of the dispute arose from a reassessment proceeding. The Revenue had initiated reassessment against the assessee, which subsequently led to the imposition of a penalty for concealment of income or furnishing inaccurate particulars. However, the assessee contested the validity of the reassessment itself in a separate quantum appeal.