NETIZEN ENGINEERING PVT LTD,MUMBAI vs. INCOME TAX OFFICER WARD 1(2)(3), MUMBAI

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ITA 8279/MUM/2025Status: DisposedITAT Mumbai31 August 2026AY 2017-187 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found the CIT(A)'s order to be self-contradictory and a breach of natural justice. The matter was restored to the CIT(A) for fresh adjudication after considering the assessee's submissions and providing a proper hearing.

What were the facts?

The assessee's appeal against a penalty order under Section 270A was decided ex-parte by the CIT(A) despite the assessee having filed submissions. The CIT(A)'s order was contradictory, stating submissions were considered while also claiming none were filed.

What were the issues?

Whether the CIT(A) erred in deciding the appeal ex-parte and contradicting its own findings regarding the assessee's submissions. The validity of penalty proceedings under Section 270A was also a key issue.

Which sections of the Income-tax Act were involved?

Section 270A,Section 36(1)(iii),Section 143(3),Section 263,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B”,

Before: SHRI SANDEEP GOSAIN & SHRI JAGADISH

For Appellant: Shri Niraj Sheth & Shri
For Respondent: Shri Leyaqat Ali Aafaqui, CIT
Hearing: 15/07/2026Pronounced: 31/08/2026

आदेश / O R D E R PER SANDEEP GOSAIN (JM): The present appeal has been filed by the assessee against the order dated 15.10.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi ["Ld. CIT(A)"], Appeal No. NFAC/2016-17/10479698, arising out of the penalty order dated 27.03.2025 passed u/s 270A of the Income-tax Act, 1961 ("the Act") by the Assessing Officer, whereby penalty of

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Rs. 2,88,95,60,352/- was levied for alleged under-reporting of income in consequence of mis-reporting, for Assessment Year 2017-18. 2. Brief facts of the case are that the assessee-company had filed its return of income for A.Y. 2017-18 declaring total income of Rs. 1,79,04,860/-. The case was selected for scrutiny and assessment was completed u/s 143(3) of the Act vide order dated 30.12.2019, wherein the Assessing Officer made a part disallowance of interest expenditure of Rs. 75,99,62,354/- u/s 36(1)(iii) of the Act. Thereafter, the Ld. Pr. CIT, exercising jurisdiction u/s 263 of the Act, set aside the said assessment order vide order dated 26.03.2021 on the ground that the Assessing Officer had failed to make necessary enquiry with regard to the entire interest expenditure of Rs. 496.57 crore. Pursuant thereto, a fresh assessment order was passed u/s 144 r.w.s. 263 of the Act on 23.03.2022, disallowing the entire interest expenditure of Rs. 4,96,57,84,051/- and initiating penalty proceedings u/s 270A of the Act. 3. Against the said assessment order, the assessee preferred an appeal before the Ld. CIT(A), who vide order dated 28.08.2023 granted part relief of Rs. 79,10,16,536/- and sustained the balance disallowance of Rs. 4,17,47,67,515/-. The Revenue carried the matter in appeal before this Tribunal, and vide order dated 30.09.2024, the Tribunal set aside the matter to the file of the Assessing Officer with certain directions. Even before the order giving

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effect to the Tribunal's order was passed, the Assessing Officer proceeded to pass the impugned penalty order dated 27.03.2025 u/s 270A of the Act, levying penalty of Rs. 2,88,95,60,352/- being 200% of the tax sought to be evaded on the addition of Rs. 4,17,47,00,000/- sustained by the Ld. CIT(A). 4. Aggrieved by the levy of penalty, the assessee preferred an appeal before the Ld. CIT(A), NFAC, raising, inter-alia, the grounds that (i) the penalty proceedings were initiated without specifying the particular limb of section 270A(9) of the Act under which penalty was proposed to be levied; (ii) that the disallowance in question arose out of a bona fide claim made on full disclosure of facts and constituted, at best, a debatable legal issue not amounting to "misrepresentation or suppression of facts" within the meaning of section 270A(9)(a) of the Act; and (iii) that in any event, the quantum of penalty required re-computation. 5. The grievance of the assessee before us that the Ld. CIT(A) has disposed of the appeal in a manner which is contrary to the record and in violation of the principles of natural justice. We find that the Ld. CIT(A), in para 4 of the impugned order, has himself recorded that in response to the hearing notices dated 01.05.2025 and 12.06.2025, the assessee filed its submission on 08.07.2025, and that "the appeal is being decided after considering the submissions filed by the appellant." However, in the very same order, at

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para 5.3, the Ld. CIT(A) has proceeded to record a contrary and irreconcilable finding, observing that "no relevant submission/response has been filed by the appellant in support of his contention" and that the appellant has "not even bothered to pursue this appeal in any productive manner", and has, on this basis, disposed off the appeal ex- parte, "primarily based on documentation available on record." 6. Having heard both the parties and having perused the material available on record, we find considerable force in the submission of the Ld. A.R. that the impugned order of the Ld. CIT(A) is self-contradictory on the face of the record. On the one hand, the Ld. CIT(A) records receipt of the assessee's written submission dated 08.07.2025 and states that the appeal is being decided after considering the same; and on the other hand, in the operative findings, the Ld. CIT(A) proceeds on the premise of total non-compliance/non- prosecution and disposes of the appeal ex-parte without any discussion whatsoever on the merits of the grounds raised by the assessee, including the ground relating to non- specification of the limb of section 270A(9) of the Act and the ground relating to absence of misrepresentation or suppression of facts. Such a disposal, in our considered view, is in clear breach of the principles of natural justice and cannot be sustained, more particularly where the tax effect involved is substantial.

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7.

We are conscious of the fact that the disallowance u/s 36(1)(iii) of the Act, out of which the impugned penalty arises, has travelled through multiple rounds of proceedings, namely, original assessment u/s 143(3), revision u/s 263, fresh assessment u/s 144 r.w.s. 263, first appeal, and further round before this Tribunal. Having regard to the quantum involved and the fact that the assessee's written submissions filed before the Ld. CIT(A) on 08.07.2025 have admittedly not been considered/discussed on merits despite the Ld. CIT(A)'s own recital to the contrary, we are of the considered view that it would be in the interest of justice to restore the matter back to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, after affording proper and effective opportunity of hearing to the assessee. 8. We, therefore, set aside the impugned order dated 15.10.2025 passed by the Ld. CIT(A) and restore the matter back to the file of the Ld. CIT(A) for deciding the appeal afresh, on merits, in accordance with law, after taking into consideration the written submissions already filed by the assessee as well as such further submissions/material as the assessee may place on record, and after affording adequate and effective opportunity of hearing to the assessee, subject to cost of Rs. 10,000/- (Rupees Ten Thousand only) imposed upon the assessee, as the assessee was ex-parte before ld. CIT(A) and also there was lack of compliance by the assessee. The cost shall be deposited by the assessee in the Prime Minister's National Relief Fund within a period of 30 days from the date of receipt of this order, and a copy of the receipt

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evidencing such deposit shall be placed on record before the Ld. CIT(A). The assessee is directed to remain vigilant and co- operative in the set-aside proceedings and shall not seek adjournment on frivolous grounds; in default whereof, the Ld. CIT(A) shall be at liberty to decide the appeal on the basis of material available on record, in accordance with law. 9. Before parting, we make it clear that our decision to restore the matter back to the file of the Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, including the merits of the levy of penalty u/s 270A of the Act, which shall be adjudicated by the Ld. CIT(A) independently and in accordance with law, uninfluenced by any observations made hereinabove, which have been made only for the limited purpose of disposal of this appeal. 10. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on this 31/08/2026 Sd/- Sd/- (JAGADISH) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated 31/08/2026 Karuna Sr.PS

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Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER,

(Asstt. Registrar) ITAT, Mumbai

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