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Facts
The assessee filed a return for AY 2010-11, which was processed. Subsequently, the case was reopened based on information that the assessee was involved in bogus bills. Notices were issued but were not served properly, and the assessee did not respond. An ex-parte assessment order was passed, followed by a penalty order. The CIT(A) confirmed the penalty.
Held
The Tribunal held that the penalty order was passed ex-parte without proper opportunity of being heard and without ensuring that the assessee received the assessment order. The failure to supply the assessment order incapacitated the assessee from challenging it, leading to a miscarriage of justice.
Key Issues
Whether the penalty was validly imposed when the assessment order was not served on the assessee, and if the proceedings violated the principles of natural justice.
Sections Cited
143(1), 148, 142(1), 144, 271(1)(c), 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI. RAJ KUMAR CHAUHANShrisharimal
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 24.03.2025 of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y.
The brief facts as culled out from the proceedings of authorities below are that the assessee filed the return of income for the concerned assessment year on 04.10.2010 declaring total income at Rs.3,17,790/- which was processed u/s 143(1) of the Act. However, on the basis of information received from the DGIT (lnv.) Wing, Mumbai that assessee was one of the beneficiaries of such bogus bills /accommodation entries as revealed by Sales Tax Department of Maharashtra, the case was re- opened by issue of notice u/s 148 dated 14.01.2015 requiring the assessee to file its return of income for the A.Y. 2010-11. The said notice was served through affixture by the Ward Inspector at the last known address of the assessee for the same could not be served by post. However, the assessee did not respond to the notice issued. Consequently notice issued u/s 142(1) of the Act on 08.07.2015 and 03.09.2015 and the same were returned by postal authorities as not known. Accordingly, the assessment was completed on the information available as no response came from assessee and order was passed u/s 144 on 15.2.2016 and penalty proceeding u/s 271(1)(c) of the Act was Uttam Ghewarchand Shrisharimal initiated by issuing show cause notice alongwith the assessment order. But the assessee has failed to file any reply. Again a show cause notice was issued at the last known address of the assessee, but the same could not be served and returned by post. Accordingly, the AO imposed the penalty u/s 271(1)(c) of the Act i.e. the minimum penalty being 100% of the tax sought to be evaded which came to Rs. 17,54,001/-.
3. Aggrieved by the order of AO, assessee preferred the appeal before Ld. CIT(A) and the Ld. CIT(A) confirmed the penalty order while observing as under:-
5.3 Considering the facts of the case and the ratio of decision in the case of Manjunatha Cotton & Ginning Factory [2013] reported in 35 taxmann.com 250 (Karnataka) has held that the phrase 'conceal the particulars of his income' would include false deduction or exemptions claimed by the assessee in his return. The word 'conceal' involves knowledge on the part of the assessee of the real income when giving the particulars. Concealment of income may arise in various ways. It may take various forms of manipulation of entries in accounts, non-disclosure of item of source that existed and income that has clearly been earned by the assessee in the previous year, claim of false deductions or losses discussed. In the case of the assessee here, it is a case of Explanation 1 under section 271(1)(c) where the assessee is not offering an explanation. Without a valid proper explanation as to why - they transacted with a party which was black listed by the Maharashtra Sales Tax Department, where is the purchases made? What happened to the purchases made? Whether sales is effected on that? What is the evidence for purchases made and consequent sales made? Without valid and satisfactory explanation before the assessing officer the claims of the assessee stands exposed 5.4. In the result the appeal is dismissed.
Aggrieved by the said impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:-
“1. On the facts and circumstances of the case and in law the Ld. CIT (A) has erred in passing an ex-parte order u/s 250 without giving a proper opportunity of being heard and dismissing the appeal.
2. A. On the facts and circumstances of the case and in law the Ld. CIT (A) has erred in sustaining the penalty levied by the AO u/s 271(1)(c).
B. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in sustaining the penalty even though the assessment order has not been served to the appellant.
The appellant reserves its right to add, amend, alter or delete any of the grounds of appeal.”
We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR submitted that assessment order on the basis of which the penalty proceedings were initiated was never served upon the assessee as a result, the assessee could not challenge the quantum assessment order before the competent authority. It is further submitted that even the impugned order confirming the penalty imposed by the AO is also ex-parte as no notice was served upon the assessee as it is evident from Uttam Ghewarchand Shrisharimal the order itself. It is further submitted that the revenue has even failed to supply the assessment order despite the direction of the Tribunal dated 30th July 2025. It is therefore argued that the impugned order as well as penalty order which has been passed ex-parte without supply of the quantum assessment order to the assessee has resulted into miscarriage of justice because the same has been passed in violation of principle of natural justice and as such the entire proceedings are liable to be quashed.
Ld. DR on the other hand submitted that despite several notices served through postal authority, the assessee did not reply and further submitted that the original assessment proceedings were not traceable and they are unable to find out the original record. It was further submitted that there is no proof with regard to the fact that assessee has ever intimated to the department regarding change of address. Hence, Ld. DR relied on the penalty order as well as appellate order passed by Ld. CIT(A).
We have considered the rival submissions and examined the record. On the first date of hearing of the present appeal i.e. 30.07.2025, the following order was passed by the Coordinate Bench:-
Uttam Ghewarchand Shrisharimal “In the present appeal assessee has contested imposition of penalty u/s 271(1)(c). When a query was made by the bench regarding the status of quantum proceeding, Ld. counsel for assessee submitted that till date assessee has not received the Assessment order hence, could not challenge the addition made therein. In this context Ld. counsel furnished before the bench reply received in pursuance to application made under RTI Act. On perusal of appeal order dated 23.05.2025 under RTI Act it is observed that the appellate authority has mentioned that assessment order was supposedly served on assessee on 25.02.2016. However, in the appellate order the appellate authority has further stated that no trace of physical record was found by the department. Ld. DR is directed to furnish factual report of the Assessing officer regarding the status of service of the assessment order on the assessee. Adjourned to 10.09.2025. Both parties informed.”
On the next date of hearing i.e. 10th September 2025, Ld. DR sought time for complying the above direction and on 18th September 2025, the case was finally heard and Ld. DR has failed to submit the report that no trace of physical record was found and also the actual report of AO regarding status of assessment order if served upon the assessee. Thus, we notice that in this case, the revenue has failed to show that the assessment order was ever served to the assessee and we find force in the arguments submitted by the Ld. AR that no order was supplied by the department and passing of the penalty order ex-parte has resulted into miscarriage of justice. Before passing the penalty order, it was incumbent upon Ld. AO to ensure that assessee has got the assessment order and also the assessee has a right to file appeal, if so desired by the Uttam Ghewarchand Shrisharimal assessee against the quantum assessment order. Failure of non-supply of assessment order to the assessee has incapacitated the assessee to challenge the assessment order. Further, the penalty order has been passed without giving any opportunity of being heard as there is no evidence to show that the show cause notice was served upon the assessee before passing the penalty order. Even on perusal of the impugned order, there is nothing to show that the assessee was given opportunity of being heard regarding the penalty order. All these facts show that this is a peculiar case of violation of principle of natural justice by the quasi judicial revenue authorities which has resulted into miscarriage of justice. For these reasons, the impugned order is not sustainable in the eyes of law and accordingly set aside. The Assessing officer is directed to delete the penalty. Resultantly, the grounds raised
by the assessee are allowed.