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Facts
The assessee filed an appeal against a penalty order of Rs. 80,000/- imposed under section 271(1)(c) of the Income Tax Act. The CIT(A) dismissed the assessee's appeal, confirming the penalty.
Held
The Tribunal held that the impugned order of the CIT(A) was passed in violation of the principles of natural justice because the assessee was not provided with the AO's report which was relied upon for passing the order.
Key Issues
Whether the penalty order was passed in violation of principles of natural justice due to non-disclosure of AO's report to the assessee; and validity of the approval obtained under section 274(2).
Sections Cited
253, 250, 271(1)(c), 246A, 69B, 139, 153A, 274(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
a second appeal. The Assessee is aggrieved by the order bearing No:- CIT (A)-3, Bhopal/IT-10039/2009-10 dated 22.07.2025 passed by the Ld. CIT (A) u/s 250 of the Act, which is hereinafter referred to as the “Impugned order”.
The Relevant Assessment year is 2010-11 and the Page 1 of 8 corresponding previous year period is from 01.04.2009 to 31.03.2010.
Factual Matrix 2.1 That as and by way of an penalty order made u/s 271(1)
(c) of the Act, a penalty of Rs. 80,000/- only was imposed on the assessee. That the “penalty order” bears no: - ITBA/PNL/F/271(1) (C)/2020-21/1029878125(1) and that the same is dated 18.01.2021 which is hereinafter referred to as the “impugned penalty order”.
2.2 That the assessee being aggrieved by the aforesaid “impugned penalty order” prefers the first appeal u/s 246A of the act before the Ld. CIT (A) who by the “impugned order” has dismissed the first appeal of the assessee on the grounds and reasons stated therein. The core ground and reasons for the dismissal of the first appeal was as under:-
“3.1.2 I have perused the grounds of appeal, the issues in the penalty order and the reply furnished by the appellant on the various grounds. I clearly find from the penalty order that the appellant had admitted this as his capital contribution in cash and the same had not been recorded in his books of account. He further added that the same is out of his undisclosed income in AY 2010-11. The AO had made addition of Rs 2,50,000/-u/s 698 of the Act. The CIT appeals had confirmed this addition made by the AD. At para 8 of Page 2 of 8 the penalty order the AO has clearly mentioned that the appellant has concealed his income and had not disclosed income in his ITR of the relevant year both as per section 139 of the Act and in response to notice u/s 153A of the Act. I do not agree with the contention of the appellant that he had enough sources from agriculture income for explaining the cash investment and it was admitted to buy peace as the same could have been explained before the AO at the time of assessment proceedings. Similarly, I do not agree with the claim that it is mere act of negligence The cases citations relied upon by the appellant are not applicable in this case as the facts of this case are distinguishable from the facts and circumstances of the relied upon cases.
I also find that the appellant has also claimed that the AO has levied penalty for furnishing inaccurate particulars of income which is not applicable in this case and unsustainable as per law. The AO in the order has mentioned at para 8 that the appellant has knowingly and intentionally tried not to disclose his correct income and failed to fumish correct particulars of his total income. Inaccurate particulars of income refer to a situation where a taxpayer reports income but furnishes inaccurate details related to income, such as incorrect amounts or incorrect descriptions of the source of income. Here I find the case gets covered under incorrect descriptions of the source of income. Therefore the claim of the appellant is not correct. Further, the claim of the appellant that no prior approval has been taken of the Joint commissioner is also incorrect as the AO vide reply dated 23.6.2025 has provided the details that the approval of Range head was taken vide DIN-ITBA/PNL/S/992/2020- 21/1029815773(1) dated 15.1.2021 u/s 274(2) of the Income tax Act. Accordingly, this claim of appellant is found to be Incorrect. In view of the above, the grounds of appeal are dismissed”
2.3 The assessee being aggrieved by the “impugned order” has preferred the instant second appeal before this tribunal and has raised the following grounds of appeal in the form no. 36 against the “impugned order” which are as under:-
“1. That the levy of penalty under Sec. 271(1)(c) of Rs. 80,000/- is bad in law.
Page 3 of 8
That the Ld. CIT(A) erred in confirming penalty under Sec. 271(1)(c) of Rs. 80,000/-.
That the DIN of approval order of JCIT is unauthenticated and unverifiable on ITBA portal.”
Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 07.04.2026 when the Ld. AR for & on behalf of the Assessee appeared before us & interalia contended that the “Impugned Order” is bad in law, illegal & not Proper. It therefore deserves to be set aside. The Ld. AR read out the grounds of appeal
as per the form no.
36. Our attention was then straight away brought to the internal page 5 of the Impugned Order wherein following was read out:-
“Further the claim of the appellant that no prior approval has been taken of the joint commissioner is also incorrect as the Assessing Officer vide reply dated 23.06.2025 has provided the details that the approval of range head was taken Vide DIN:- ITBA/PNL/S/992/2020- 21/1029815773(1) dated 15.01.2021 u/s 274(2) of the Income Tax Act. Accordingly this claim of the appellant is found to be incorrect.”
Page 4 of 8 The sheet anchor of the argument of Ld. AR was that there is no approval of joint CIT by the DCIT before passing the “Impugned Penalty Order”. In any event it is clear that Ld.
CIT (A) had sought a report from the Ld. AO who vide reply dated 23.06.2025 provided the necessary details as sought by the Ld. CIT (A) which is even recorded as above (supra) however the same was not disclosed to the assessee and therefore the “Impugned Order” is illegal, bad in law and not proper. It is passed in the violation of the principles of natural justice. The Ld. AR has placed on the record of this tribunal a paper book containing pages 1 to 11. Our attention was invited to the page no. 6 and 7 to demonstrate that no internal communication is visible for DIN- ITBA/PNL/S/992/2020-21/1029815773(1). Per contra the Ld. DR appearing for and on behalf of the Revenue contended that Dept. of Income Tax has no objection to the grievance made by the Ld. AR for non-disclosure of report of Ld. AO to CIT (A). The Ld. AR in the rejoinder pointed out that in so far as “Quantum Assessment Order” is Page 5 of 8 concerned no appeal was filed. The hearing was then concluded.
Observations Findings & conclusions 4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case & the rival submission canvassed before us.
4.2 We have carefully perused the records of the case and have heard the submissions.
4.3 We basis records of the case & after hearing & upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us are of the considered opinion that the “impugned order” is passed in the violation of the principles of natural justice in as much as before passing the Impugned Order dated 23.06.2025 the Ld. CIT (A) ought to have disclosed to the assessee the report of the Ld. AO dated 23.06.2025 for which a grievance was made in the first appeal. It is well settled law that the Quasi-Judicial Authority should comply with principles of natural justice and should pass on to the assessee all the material
Page 6 of 8 information basis which a quasi-judicial order is passed so that assessee could use that information in his defence.
4.4 In view of above, the “impugned order” is set aside as and by way remand back to the file of Ld. CIT (A) with a direction him to provide report of Ld. AO communicated to him vide letter dated 23.06.2025. The Ld. CIT (A) is directed to pass a fresh order on De novo basis after giving full and complete opportunity to the assessee.
5 Order 5.1 In the result the “Impugned order” is set aside as and by way of remand back to the file of the Ld. CIT (A) with direction as aforesaid.
5.2 The appeal is allowed for statistical purpose. Pronounced in open court on 10.04.2026.
Sd/- Sd/- (BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER
Indore Dated : 10/04/2026 Patel/Sr. PS
Page 7 of 8 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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