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Facts
The assessee made cash deposits of Rs. 34 lakhs in AY 2015-16 but did not file an Income Tax Return, leading the AO to initiate reassessment proceedings under Section 147 and impose a penalty of Rs. 10,50,000/- under Section 271(1)(c) for unexplained money. The CIT(A) dismissed the assessee's appeal as infructuous, citing failure to pay advance tax under Section 249(4)(b) and without providing an adequate opportunity of hearing.
Held
The Tribunal found that the CIT(A) erred by dismissing the appeal prematurely before the expiry of the deadline given to the assessee for submissions, thus violating natural justice. Furthermore, since the underlying quantum assessment was already set aside by the Tribunal for de novo adjudication, the penalty proceedings were also set aside to the AO to be taken up after the completion of the fresh assessment.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without providing a proper opportunity of hearing; and whether penalty proceedings can sustain when the underlying quantum assessment is set aside for de novo adjudication.
Sections Cited
271(1)(c), 147, 148, 149, 144, 148A(d), 144B, 69A, 249(4)(b), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘SMC’ Bench, Hyderabad
करदाताका""त"न"ध"व/ : Sri Mohd. Afzal, Advocate Assessee Represented by राज"वका""त"न"ध"व/ : Sri V. Ravish Bhatt, Sr. AR Department Represented by सुनवाईसमा"तहोनेक""त"थ/ : 27/10/2025 Date of Conclusion of Hearing घोषणा क" तार"ख/ : 31/10/2025 Date of Pronouncement ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 07/08/2025, which in turn arises from the order passed by the Assessing Officer (for short, “A.O.”) under Section 271(1)(c) of the Income Tax Act, 2 Narsinga Rao Aleti vs. ITO 1961 (for short “the Act”) dated 23/06/2025 for A.Y. 2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. The appellant craves leave to add to, amend OR modify the above grounds of appeal either before OR at the time of hearing of the appeal, if it is considered necessary.
2. The learned Commissioner erred in assuming that the assessee is liable to pay advance tax, therefore, further erred in assuming that the appeal is not liable to be admitted.
3. The learned Commissioner ought to have appreciated that the notice u/s 148 is issued on 27.04.2022, beyond a period of three years in violation of provisions of section 149 of the IT Act, therefore, the order u/s 147 r.w.s 144 is an invalid order and consequently all the proceedings are also to be held as invalid including 271(1)(c) proceedings levying penalty of Rs.10,50,600/-.
4. The learned Commissioner ought to have appreciated that the Honorable ITAT in respect of quantum addition restored the matter back to the file of the Assessing Officer in their order in dt: 01.01.2025, therefore, the learned Commissioner erred in confirming the order of the Assessing Officer levying penalty of Rs. 10,50,600/- as there are no proceedings u/s 271(1)(c) are pending in view of the facts and circumstances of the case.
5. The order of the learned Commissioner of Income Tax 5 (Appeals) is against the law, weight of evidence and probabilities of case.
6. The learned Commissioner posted the case fixing the date of hearing on 12.08.2025, however, erred in dismissing the appeal on 07.08.2025, without giving an opportunity of hearing and also in violation of principles of natural justice.”
Succinctly stated, the AO based on the information that though the assessee during the subject year had made cash deposits of Rs.34,00,000/- in his bank account with Union Bank of India but had not filed his return of income for the year under consideration i.e., AY 2015-16, initiated proceedings under section 147 of the Act. Accordingly, order under section 148A(d) of the Act was passed and 3 Narsinga Rao Aleti vs. ITO notice under section 148 of the Act, dated 27/04/2022 was issued to the assessee.
Thereafter, the AO vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 15/02/2024 held the cash deposits of Rs.34,00,000/- made by the assessee in his bank account No.327502010012002 with Union Bank of India, Ghatkesar Branch, Ranga Reddy District as having been sourced out of the asessee’s unexplained money under section 69A of the Act. Also, the AO while culminating the assessment initiated the penalty proceedings under section 271(1)(c) of the Act for concealing particulars of income.
Thereafter, the AO vide his order under section 271(1)(c) of the Act, dated 23/06/2025 imposed a penalty of Rs. 10,50,000/- under section 271(1)(c) of the Act.
Aggrieved, the assessee assailed the order passed by the AO under section 271(1)(c) of the Act, dated 23/06/2025 before the CIT(A).
Ostensibly, the CIT(A) taking cognizance of the fact that as the assessee had failed to file his return of income for the subject year, therefore, he as per the provisions of section 249(4)(b) of the Act 4 Narsinga Rao Aleti vs. ITO was obligated to have paid an amount equivalent to the amount of advance tax that was payable by him failing which the appeal did not merit admission. Accordingly, the CIT(A) observing that the assessee had failed to comply with the statutory obligation that was cast upon him under section 249(4)(b) of the Act declined to admit the appeal and dismissed the same as infructuous.
The assessee being aggrieved by the order of the CIT(A) has carried the matter in appeal before us.
We have heard the Learned Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record.
Sri Mohd. Afzal, Advocate, the Learned Authorized Representative (for short “Ld. AR”) for the assessee at the threshold of the hearing of the appeal, submitted that the assessee had remained divested of a sufficient opportunity of being heard and defend his case before the CIT(A). Elaborating on his contention, the Ld. AR submitted that the CIT(A) on the last occasion vide his notice issued under section 250 of the Act, dated 05/08/2025 had called upon the assessee to furnish his submissions on or before 12/08/2025, Page 21 of APB. The Ld. AR submitted that the CIT(A)
5 Narsinga Rao Aleti vs. ITO in the meantime, even prior to lapse of the time period available to the assessee to furnish his written submissions i.e., on or before 12/08/2025 had disposed of the appeal vide his order, dated 07/08/2025. The Ld. AR to buttress his aforesaid claim had drawn our attention to the order of the CIT(A) and the letter dated 05/08/2025. The Ld. AR submitted that as the assessee had been divested of a sufficient opportunity to put forth an explanation regarding the admission of his appeal as per the “proviso” to section 249(4)(b) of the Act before the CIT(A) who had dismissed the appeal during the period that was made available to the assessee to furnish the requisite details/reply, therefore, the order of the first appellate authority cannot be sustained. Also, the Ld. AR submitted that as the ex-parte order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 15/02/2024 had been set aside by the Tribunal vide its order passed in dated 01/01/2025 to the file of the AO for re-adjudication, therefore, in all fairness and in the interest of justice the present matter may also on the same terms be set aside to the file of the AO.
Per contra, Sri V. Ravish Bhatt, the Learned Departmental Representative (for short “Ld. DR”) relied upon the orders of the authorities below.
6 Narsinga Rao Aleti vs. ITO 11. We have heard the Learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record.
At the threshold, we may herein observe that it is a matter of fact borne from the record that though the CIT(A) vide notice issued under section 250 of the Act, dated 05/08/2025 had called upon the assessee to furnish his written submissions on or before 12/08/2025, but in the meantime had for the reasons best known to him disposed of the appeal vide his order dated 07/08/2025. We are unable to comprehend that on one hand the CIT(A) had called upon the assessee to furnish his submissions up to 12/08/2025, but surprisingly before lapse of the said period had dismissed the appeal vide his order dated 07/08/2025. We are unable to persuade ourselves to concur with the manner in which the CIT(A) had disposed of the appeal despite the fact that the time period made available by him to the assessee had yet not expired.
As observed herein above, the quantum assessment order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 15/02/2024 had been set aside by the Tribunal vide its order passed in dated 01/01/2025 to the file of the AO for de novo adjudication after providing an opportunity of 7 Narsinga Rao Aleti vs. ITO being heard to the assessee. As the quantum assessment as on date is pending adjudication before the AO, therefore, we herein set aside the present matter to the file of the AO who shall take up the same after framing of the set aside assessment order.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.