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Facts
A survey operation on the assessee, a partnership firm involved in automobile financing, revealed unaccounted cash of Rs.1,73,40,790/-. The assessee admitted this amount as additional income. However, the Assessing Officer treated it as unexplained money under Section 69A and initiated penalty proceedings under Section 271AAB, which the CIT(A) sustained.
Held
The Tribunal held that the CIT(A) failed to provide the assessee a reasonable opportunity of hearing during the penalty proceedings, a violation of natural justice, as the assessee claimed non-receipt of notices. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the issue back to the CIT(A) for fresh consideration after providing the assessee due opportunity.
Key Issues
Whether the CIT(A) violated principles of natural justice by sustaining a penalty without providing the assessee a reasonable opportunity of hearing to present its case.
Sections Cited
133A, 143(2), 142(1), 143(3), 69A, 115BBE, 68, 69, 271AAB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
ORDER PER MANJUNATHA G. : This appeal has been filed by the assessee against the order dated 27.11.2024 of the learned CIT(A), Hyderabad-11, Hyderabad, relating to the assessment year 2019-2020.
Brief facts of the case are that, the assessee is a partnership firm carrying business of automobile financing. A survey operation u/sec.133A of the Income Tax Act, 1961
2 ITA.No.86/Hyd./2025 [in short “the Act”] was conducted on 29.01.2019 in the case of the assessee. During the course of survey operation, on physical verification of office premises at G-7, 6-3-650, Maheshwari Chambers, Somajiguda, Hyderabad, total cash of Rs.95,23,000/- was found in the Godrej safe in the office room of Sri Sajjan Raj Jain. Further, during the search operation, in the premises of branch office of the assessee at Plot No.9/A, MIGH, JSRV Plaza, SR Nagar, Hyderabad, cash of Rs.78,17,790/- was found, resulting into total cash of Rs.1,73,40,790/-. A sworn statement of Sri Sajjan Raj Jain was also recorded, in which, it was confirmed that, the cash of Rs.95,23,000/- found in the Godrej safe in his office and cash of Rs.78,17,790/- found in the branch office premises are unaccounted cash and the same is not recorded in the books of accounts. Since the books are not updated, the assessee admitted the total cash of Rs.1,73,40,790/- found during the survey operation as additional income, over and above the regular income of the firm viz., M/s. Nanesh Finance Corporation for the financial year 2018-2019
3 ITA.No.86/Hyd./2025 relevant to the assessment year under consideration and agreed to pay tax on the same.
The assessee has also filed return of income admitting total income of Rs.3,54,07,140/- on 21.10.2019. The Assessing Officer issued notices u/sec.143(2) of the Act dated 30.09.2020 and notice u/sec.142(1) of the Act dated 05.02.2021 and 12.02.2021 calling the assessee to furnish it’s explanation. In response, the assessee has submitted balance-sheet and profit and loss account for the F.Y. 2018- 2019 relevant to A.Y. 2019-2020 under consideration. The assessee submitted that, the source of the cash found was out of repayment of principle as well interest from the customers. Further, as on 31.03.2019, total cash balance in the books of accounts of the assessee-firm was appearing at Rs.1,73,40,790/- and the same amount has been seized by the Income Tax Department during the course of search and seizure proceedings. Therefore, the assessee has reduced it’s cash balance to the extent of amount seized by the Department and offered to tax the balance amount. It was the claim of the assessee that, cash seized by the 4 ITA.No.86/Hyd./2025 Department was out of it’s regular course of business activities, the same amount was offered as income, credited to it’s profit and loss account and paid taxes accordingly. During the course of assessment proceedings, the Assessing Officer has verified the cash book for the period 01.04.2018 to 31.03.2019 and for the period 01.04.2018 to 31.04.2019 submitted by the assessee. The Assessing Officer noted that the assessee has shown cash balance of Rs.1,75,15,646/- on the day before the survey and the same amount was continued after the survey in it’s books of accounts. The Assessing Officer noted that, the assessee has introduced physical cash in the cash book to the extent seized by the Department and therefore, noted that, the cash introduced in the books of accounts represents unexplained money u/sec.69A of the Act. The Assessing Officer accordingly being not satisfied with the explanation and documents submitted by the assessee, made addition of Rs.1,73,40,790/- as unexplained money u/sec.69A r.w.s.115BBE of the Act by treating the amount under the Head ‘Income from other sources” instead of ‘Business
5 ITA.No.86/Hyd./2025 Income’ offered by the assessee. The Assessing Officer accordingly, determined the total income of the assessee at Rs.1,80,60,350/- by making addition of Rs.1,73,40,790/- under the Head ‘Income from other sources’ and also initiated penalty proceedings u/sec.271AAB of the Income Tax Act, 1961 vide order dated 21.04.2021 passed u/sec.143(3) of the Income Tax Act, 1961. On being aggrieved by the assessment order passed by the Assessing Officer, the assessee preferred an appeal before the learned CIT(A) and the learned CIT(A)-11, Hyderabad, vide order dated 06.09.2021 dismissed the appeal filed by the assessee. Aggrieved by the order of the learned CIT(A), the assessee preferred an appeal before the Tribunal and the Tribunal vide order dated 26.10.2022 dismissed the appeal filed by the assessee.
Thereafter, the Assessing Officer levied penalty in the case of the assessee at Rs.1,04,04,474/- being 60% of undisclosed income of Rs.1,73,40,790/- made u/sec.68/69 of the Income Tax Act, 1961 vide order dated 10.05.2023 u/sec.271AAB of the Income Tax Act, 1961.
6 ITA.No.86/Hyd./2025 5. Aggrieved by the penalty order passed u/sec.271AAB of the Act by the Assessing Officer, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee did not appear nor filed any submissions and in absence of any documentary evidences filed by the assessee, the learned CIT(A) sustained the penalty levied by the Assessing Officer u/sec.271AAB of the Act Rs.1,04,04,474/- being 60% of undisclosed income of Rs.1,73,40,790/-.
Aggrieved by the order of the learned CIT(A) in sustaining the penalty levied by the Assessing Officer at Rs.1,04,04,474/-, the assessee is now in appeal before the Tribunal.
CA, Maheswar Reddy, Learned Counsel for the Assessee submitted that, the assessee has not appeared before the learned CIT(A) due to non-service of notice. The learned CIT(A) has simply sustained the penalty levied by the Assessing Officer u/sec.271AAB of the Act, without providing reasonable opportunity of hearing to the assessee to substantiate it’s case and thereby, the learned CIT(A) has 7 ITA.No.86/Hyd./2025 violated the principles of natural justice. He, therefore, pleaded that the issue may be set-aside to the file of learned CIT(A) with a direction to provide adequate opportunity of hearing to the assessee to substantiate it’s case in the interest of substantial justice.
Shri Gurpreet Singh, Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, despite several opportunities provided to the assessee, the assessee did not chose to file any submissions along with relevant documentary evidences to substantiate it’s case. In absence of any submissions with relevant documentary evidences, the learned CIT(A) has rightly sustained the penalty levied by the Assessing Officer @ 60% i.e., Rs.1,04,04,474/- on Rs.1,73,40,790/-. He, therefore, submitted that, the order of the learned CIT(A) should be up-held. However, fairly agreed for remanding the issue back to the file of learned CIT(A) to examine the case.
We have heard both the parties, perused the material on record and the orders of the authorities below. Admittedly, we find force in the submissions of the assessee
8 ITA.No.86/Hyd./2025 for the reason that, since the assessee has not received the notices issued by the learned CIT(A), the assessee could not file it’s reply along with relevant documentary evidences to substantiate it’s case. Further, although, the learned CIT(A) claims that, several opportunities are provided to the assessee, but, there is no specific reference of any notice issued by the learned CIT(A) before disposing of the appeal filed by the assessee. Therefore, from the above, it is undisputed clear that, the learned CIT(A) has not provided reasonable opportunity of hearing to the assessee to explain it’s case and disposed off the appeal in gross violation of principles of natural justice. Thus, we set-aside the order of the learned CIT(A) and restore the issue back to the file of learned CIT(A) with a direction to re-consider the issue, after providing reasonable opportunity of hearing to the assessee to explain it’s case to meet the ends of justice.
In the result, appeal of the assessee is allowed for statistical purposes.
9 ITA.No.86/Hyd./2025 Order pronounced in the open Court on 25.07.2025.