ABHISHEK TAK,GUJARAT vs. CIT(A) 47, MUMBAI, MUMBAI

Since both appeals arise out of the same reassessment proceedings for A.Y. 2010-11 and the issues are connected, we are disposing both the appeals by way of this consolidated order. ITA No. 5863/Mum/2026 relates to the quantum addition, whereas ITA No. 5854/Mum/2026 relates to the penalty levied under section 271(1)(c) of the Act.

The brief facts of the case are that the assessee, Shri Abhishek Tak, is engaged in the business of import, export and trading of cut and polished and rough diamonds. For A.Y. 2010-11, the assessee had not filed the return of income under section 139(1) of the Act. Subsequently, in response to notice under section 153A, the assessee filed the return declaring income of ₹1,05,000/-, which was accepted in the assessment completed under section 153A read with section 143(3) on 28.03.2016.

Thereafter, the Assessing Officer received information from the DDIT (Investigation), Unit, Mumbai regarding substantial transactions in the bank account of the assessee’s proprietary concern, M/s Nakoda Trading. On the basis of this information, the Assessing Officer reopened the assessment and issued notice under section 148 on 30.03.2017.

During the reassessment proceedings, the Assessing Officer asked the assessee to explain the nature and source of the transactions appearing in the bank account. However, the assessee did not comply with the notices. The Assessing Officer also levied penalty under section 271(1)(b) of the Act for non- compliance. On the basis of information collected from the bank under section 133(6) of the Act, the Assessing Officer noticed substantial movement of funds through different concerns and found that credits aggregating to ₹20,80,87,422/- were not explained by the assessee. Since no explanation or supporting material was furnished by the assessee, the Assessing Officer completed the assessment ex parte under section 144 read with section 147 vide order dated 28.12.2017 and added ₹20,80,87,422/- under section 68 of the Act. The total income was accordingly computed at ₹20,81,92,422/-.

The assessee carried the matter in appeal before the learned CIT(Appeals). During the appellate proceedings, the learned CIT(Appeals) granted several opportunities to the assessee to present its case. Notices under section 250 were issued on 24.04.2019 fixing the hearing on 30.04.2019, 29.05.2019 fixing the hearing on 03.06.2019, 30.01.2020 fixing the hearing on 03.02.2020, 06.02.2020 fixing the hearing on 21.02.2020, 23.04.2021 fixing the hearing on 03.05.2021 and 06.12.2021 fixing the hearing on 14.12.2021. The assessee did not appear on any of these dates. Only on one occasion, in response to the notice dated 06.02.2020, an adjournment request was received. Apart from this, the assessee neither attended the proceedings nor furnished any further explanation or documentary evidence in support of its case.

In these circumstances, the learned CIT(Appeals) proceeded to decide the appeal on the basis of the material available on record. On the addition under section 68 of the Act, he observed that the assessee had failed to explain the nature and source of the credits appearing in the bank account or to establish the identity and creditworthiness of the parties and the genuineness of the transactions. He therefore upheld the addition of ₹20,80,87,422/-. The learned CIT(Appeals) also rejected the assessee’s challenge to the reopening under sections 147/148 of the Act, holding that the Assessing Officer had acted on tangible material received from the Investigation Wing and had followed the prescribed procedure. The appeal was accordingly dismissed.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record. It is clear that the reassessment was completed ex parte because of the assessee’s repeated non-compliance. Even before the learned CIT(Appeals), the assessee did not effectively pursue the appeal. At the same time, the addition involved is substantial and the merits of the transactions have not been examined after considering the assessee’s explanation and supporting evidence.

We are also conscious that the assessee was granted sufficient opportunities by the Tax Authorities and that present situation has largely arisen due to the assessee’s own conduct. Even so, considering the magnitude of the addition and in the interest of justice, we are of the view that one final opportunity should be granted to the assessee to present its case on merits.

Accordingly, we set aside the impugned order of the learned CIT(Appeals) and restore the entire matter in ITA No. 5863/Mum/2026 to the file of the Assessing Officer for de novo adjudication, subject to payment of costs of ₹11,000/- by the assessee to be deposited in the Prime Minister’s Relief Fund. The assessee shall furnish proof of payment of the said costs before the Assessing Officer. The Assessing Officer shall give reasonable opportunity to the assessee to furnish its explanation and supporting evidence and thereafter decide the matter afresh in accordance with law by passing a speaking order. All factual and legal contentions of the assessee are kept open. The assessee is also directed to cooperate with the proceedings and not seek unnecessary adjournments. In case of further non-compliance, the Assessing Officer shall be at liberty to proceed in accordance with law on the basis of material available on record.

This appeal arises from the penalty levied in respect of the same addition of ₹20,80,87,422/- made under section 68 of the Act. While completing the reassessment, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act. During the penalty proceedings also, the assessee did not appear or furnish any explanation despite notices issued by the Assessing Officer. The Assessing Officer, therefore, proceeded ex parte and levied penalty of ₹6,42,99,020/- under section 271(1)(c) of the Act.

The assessee filed an appeal before the learned CIT(Appeals). Though there was a delay of 160 days in filing the appeal, the learned CIT(Appeals) condoned the delay in the interest of substantial justice. Thereafter, several notices were issued to the assessee during the appellate proceedings, but the assessee again failed to appear or furnish any supporting material. The learned CIT(Appeals), therefore, decided the appeal ex parte and upheld the penalty on the ground that the assessee had failed to offer any explanation either before the Assessing Officer or during the appellate proceedings.

We find that the penalty is based on the addition made in the quantum proceedings. While deciding ITA No. 5863/Mum/2026, we have already restored the quantum matter to the file of the Assessing Officer for fresh adjudication. Once the very addition on which the penalty is based is being examined afresh, the penalty proceedings also require fresh consideration.

At the same time, the record shows repeated non-compliance on the part of the assessee even in the penalty proceedings. Therefore, while granting another opportunity, we consider it appropriate to impose separate costs.

Accordingly, we set aside the impugned order of the learned CIT(Appeals) as well as the penalty order passed under section 271(1)(c) of the Act and restore the matter in ITA No. 5854/Mum/2026 to the file of the Assessing Officer for de novo adjudication, subject to payment of separate costs of ₹11,000/- by the assessee to be deposited in the Prime Minister’s Relief Fund. The assessee shall furnish proof of payment of the said costs before the Assessing Officer. The Assessing Officer shall decide the penalty proceedings afresh, after deciding the quantum proceedings, and after giving reasonable opportunity of hearing to the assessee. All contentions of the assessee relating to the penalty are kept open. The assessee is directed to cooperate with the proceedings.

In the result, both the appeals of the assessee are allowed for statistical purposes in the terms indicated above.