BALARAM VENGADESSAN,PUDUCHERRY vs. ITO, WARD-3,, PUDUCHERRY

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ITA 2470/CHNY/2025Status: DisposedITAT Chennai04 December 2025AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that in the interest of natural justice, the assessee should be granted one more opportunity to substantiate his case before the Assessing Officer. The Tribunal observed that the assessment order was passed ex-parte under Section 144 and the CIT(A) had not examined the cash book or bank statement. Consequently, the impugned order for ITA No. 2470/Chny/2025 was set aside, and the matter was remitted back to the A.O. for denovo assessment. The assessee was directed to comply with all notices and furnish relevant details. Regarding ITA No. 2471/Chny/2025, the Tribunal held that the penalty under Section 271(1)(c) was based on the assessment order, which had been set aside. Therefore, the penalty order had no legal basis and was cancelled. The Tribunal clarified that the A.O. was free to initiate fresh penalty proceedings during the denovo assessment. The ratio is that procedural fairness and natural justice require an opportunity to be heard, and a penalty based on a set-aside assessment order cannot survive.

What were the facts?

The assessee, Balaram Vengadessan, filed appeals against the orders of the Commissioner of Income Tax (NFAC), Delhi, for Assessment Year 2012-13. In one appeal (ITA No. 2470/Chny/2025), the Assessing Officer (A.O.) reopened the assessment due to cash deposits of Rs. 17,61,350/-. The assessee filed a return declaring Rs. 40,400/- but did not respond to subsequent notices. The A.O. passed an ex-parte order under Section 144, adding Rs. 21,66,450/-. The CIT(A) dismissed the assessee's appeal. In the second appeal (ITA No. 2471/Chny/2025), the A.O. levied a penalty of Rs. 5,17,117/- under Section 271(1)(c) for concealment, which was confirmed by the CIT(A) as the quantum addition was confirmed.

What were the issues?

1. Whether the Tribunal should grant the assessee one more opportunity to substantiate his case before the Assessing Officer, considering the assessment order was passed ex-parte and the CIT(A) allegedly did not provide sufficient opportunity. (Question of mixed law and fact, turning on principles of natural justice and procedural fairness). Assessee's Contention: The assessment order was passed ex-parte, and the CIT(A) did not provide sufficient opportunity. Therefore, the assessee prayed for another opportunity to present his case. Revenue's Contention: The Departmental Representative relied on the orders of the lower authorities. 2. Whether the penalty levied under Section 271(1)(c) is sustainable when the underlying assessment order has been set aside. Assessee's Contention: Not explicitly recorded, but implied by the appeal against the penalty confirmation. Revenue's Contention: Not explicitly recorded, but implied by the reliance on lower authorities' orders.

Which sections of the Income-tax Act were involved?

Section 144,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH

Pronounced: 04.12.2025

आदेश / O R D E R

PER JAGADISH, A.M : Aforesaid two appeals filed by the assessee for Assessment Years (AYs) 2012-13 arises out of the orders of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 25.08.2025 & 26.08.2025.

1.

& 2471/Chny/2023 Balaram Vengadesan :- 2 -: assessee had made cash deposits amounting to Rs. 17,61,350/- in his bank account maintained with IndusInd Bank but has not filed return of income. In response to the notice, the assessee filed his return declaring a total income of Rs.40,400/-. However, the assessee did not respond to the subsequent notices issued. Therefore, the A.O., in the ex-parte order passed u/s. 144 of the Act, made an addition of Rs.21,66,450/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal observing that the assessee had neither filed the cash book nor provided any trail of withdrawals and re-deposits to support the peak theory.

3.

The Ld. Authorized Representative (A.R.) submitted that the assessment order was passed ex-parte and that the Ld. CIT(A) also did not provide sufficient opportunity before dismissing the appeal.

Therefore, it was prayed that one more opportunity may be granted to the assessee to substantiate his case.

4.

On the other hand, the Ld. Departmental Representative (D.R.) relied on the orders of the lower authorities.

& 2471/Chny/2023 Balaram Vengadesan :- 3 -:

5.

We have heard the rival submissions and perused the material available on record. The assessment order in this case has been passed u/s. 144 of the Act. The Ld. CIT(A) has also not examined the cash book or bank statement before confirming the addition. Keeping in view the principles of natural justice, we are of the considered opinion that one more opportunity should be granted to the assessee to substantiate his case before the A.O. Accordingly, we set aside the impugned order and remit the matter back to the file of the A.O. for denovo assessment in accordance with law, after affording reasonable opportunity of being heard to the assessee. The assessee is also directed to comply with all notices issued by the A.O. and to furnish all relevant details for fresh consideration. In view of the above, the appeal filed by the assessee is allowed for statistical purposes.

: 6. In this case, the A.O. has levied penalty u/s. 271(1)(c) of the Act amounting to Rs.5,17,117/- for concealment of particulars of income.

The Ld. CIT(A) has confirmed the penalty order as quantum addition has been confirmed .

7.

We note that the penalty u/s 271(1)(c) has been initiated during assessment proceeding and levied on the basis of addition made in & 2471/Chny/2023 Balaram Vengadesan :- 4 -: the assessment order. We have already set aside the assessment order, therefore penalty order based on the same assessment order has no leg to stand and does not survive. We further clarify that, since we have restored the quantum appeal to the file of the A.O. for denovo assessment, the A.O will be free to initiate fresh penalty proceeding during the set aside proceeding. Accordingly the penalty levied is cancelled and appeal is allowed.

8.

In the result, both the appeals filed by the assessee are allowed.

Order pronounced on 04th day of December, 2025 at Chennai.

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