Court Holds Penalty Proceedings Must Be Kept in Abeyance During Appeal Under Section 253 as Mandated by Section 275(1)(a) of Income Tax Act, 1961
In a significant judgment delivered on October 13, 2026, the Delhi High Court (Division Bench comprising Justices Dinesh Mehta and Dr. Aditi Choudhary) quashed a penalty order imposed under Section 270A of the Income Tax Act, 1961, holding that such penalty cannot be imposed while an appeal against the assessment order is pending before the Income Tax Appellate Tribunal (ITAT) under Section 253 of the Act.
The petitioner, BT Global Communications India Private Ltd, challenged the penalty order dated March 24, 2023, passed by the Assessing Officer of the National Faceless Penalty Centre, Income Tax Department, New Delhi. The penalty was imposed in connection with the assessment order for the assessment year 2018-19, which was passed on July 28, 2022.
Key facts revealed that the petitioner had filed an appeal against the assessment order before the ITAT on August 29, 2022, and had duly informed the Assessing Officer about the filing of the appeal. Despite the pendency of this appeal, the Assessing Officer proceeded to impose the penalty under Section 270A.
The Court, relying on the clear statutory mandate of Section 275(1)(a) of the Income Tax Act, observed that no order imposing penalty can be passed during the pendency of an appeal under Section 253. The provision explicitly requires penalty proceedings to be kept in abeyance until the disposal of the appeal. The Court further noted that whether or not the Assessing Officer received specific intimation of the appeal was immaterial to the application of Section 275(1)(a).
The judgment emphasized that the penalty order passed during the pendency of appeal was therefore in violation of the statute and liable to be quashed. However, the Court clarified that the Assessing Officer is not precluded from initiating fresh penalty proceedings after the disposal of the appeal by the Tribunal, subject to the provisions of law.
This ruling reinforces the procedural safeguards available to taxpayers under the Income Tax Act, ensuring that penalty proceedings do not proceed prematurely before final adjudication of the related assessment order on appeal.
Bottom Line:
Income Tax - Penalty under Section 270A of the Income Tax Act, 1961 cannot be imposed during pendency of appeal before the Appellate Tribunal under Section 253, Section 275(1)(a) mandates that penalty proceedings be kept in abeyance till appeal is decided.
Statutory provision(s):
Income Tax Act, 1961 - Sections 270A, 253, 275(1)(a)
