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Facts
The assessee, a Non-Resident Indian, was unaware of tax notices due to residing abroad and faced assessment and penalty proceedings. An addition of ₹62,00,000/- was made for unexplained investment in property, and penalties were levied under Sections 271(1)(b) and 271(1)(c) for non-compliance.
Held
The Tribunal found that the assessee had a reasonable cause for not appearing before the authorities due to being a non-resident and unaware of the notices. The quantum assessment was restored for fresh adjudication, and the penalties were deleted as their foundation was set aside.
Key Issues
Whether the assessee had a reasonable cause for non-compliance with notices, and if the penalties are sustainable when the underlying assessment is set aside.
Sections Cited
147, 144, 271(1)(c), 271(1)(b)
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Income Tax Appellate Tribunal, ‘D’ BENCH
Before: SHRI AMIT SHUKLA & SMT RENU JAUHRI
आदेश / O R D E R PER AMIT SHUKLA (J.M): These three appeals, being to 5809/Mum/2025, have been preferred by the assessee against the order dated 27/08/2025 passed for A.Y. 2016-17- one arising from the quantum assessment framed under Section 147 r.w.s. 144 of the Income-tax Act, 1961, and the remaining two emanating from the penalty orders passed separately under Sections 271(1)(c) and 271(1)(b) of the Act. Since all the matters are interconnected and arise from the
The primary dispute relates to the addition of ₹ 62,00,000/- made by the Assessing Officer towards the alleged unexplained investment in the purchase of immovable property. The learned counsel submitted that the assessee has been a Non-Resident Indian for several decades, permanently employed abroad and earning income outside India. Being a non-resident, he was not filing his return of income in India and therefore was not aware that any statutory notices would be issued to him in India by the tax department. Owing to his continued stay outside India, he did not receive the notices issued by the Assessing Officer during reassessment or those issued by the learned CIT(A), and therefore could not attend or make representations before either authority. For the same reason, two separate penalties eventually came to be levied - one under Section 271(1)(b) for non-compliance with notices and another under Section 271(1)(c) consequent to the confirmation of the addition. It has been emphasised that the investment in the property was made through legitimate banking channels from foreign earnings and not from any undisclosed source.
On a close examination of the facts and circumstances, we find considerable force in the explanation furnished. The assessee, being a long-standing non-resident, was not filing a return in India and therefore had no occasion or expectation to monitor communications from the Income-tax Department Manoj Arjun Nasta or e-filing portal, resulting in his not receiving any of the notices. It has been pointed out that he first became aware of the assessment orders only upon his visit to India after the sad demise of his father. These facts clearly establish a reasonable cause behind the assessee’s inability to appear before the Assessing Officer as well as the learned CIT(A). In the larger interest of justice and so that no assessee is prejudiced without being heard, we consider it appropriate to restore the entire matter to the file of the Assessing Officer, who shall adjudicate the issues afresh strictly in accordance with law after granting due and effective opportunity of hearing to the assessee. The assessee shall in turn cooperate fully and ensure that notices are duly complied with.
Coming to the penalty proceedings under Sections 271(1)(c) and 271(1)(b), once the quantum assessment has been set aside for a denovo adjudication, and coupled with the fact that reasonable cause behind non-compliance has been accepted, the very basis for the levy of penalties does not survive. It is a well-recognised legal principle that penalty cannot stand when the foundation assessment is restored for fresh determination, and especially so where non-appearance is attributable to a reasonable cause. Accordingly, the penalties levied under Sections 271(1)(c) and 271(1)(b) are hereby deleted.
In the result, the appeal of the assessee in (quantum) stands allowed for statistical purposes, whereas the appeals in ITA Nos.
Order pronounced on 27th November, 2025.