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Facts
The assessee's ex-parte assessment under Section 144 for AY 2014-15 resulted in significant additions/disallowances, including unexplained credit under Section 68 and unsubstantiated expenses, totaling Rs. 4.70 Crores. This led to a penalty of Rs. 1.45 Crores under Section 271(1)(c), which was confirmed by the CIT(A). The assessee contended that the quantum appeal against the original assessment order was still pending adjudication.
Held
The Tribunal held that since the quantum appeal, which is the foundational basis for the penalty order, is still pending before the CIT(A), the impugned penalty order should be set aside. The matter was restored to the CIT(A)/NFAC for fresh adjudication after the quantum appeal is decided, ensuring proper opportunity of hearing.
Key Issues
Validity of a penalty order under Section 271(1)(c) when the foundational quantum appeal against the ex-parte assessment order under Section 144 is pending adjudication before the CIT(A).
Sections Cited
Section 271(1)(c), Section 144, Section 250, Section 68
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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: MS. ASTHA CHANDRA & SHREE DR. DIPAK P. RIPOTE
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 24.05.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] wherein he has confirmed the penalty of Rs.1,45,33,399/- levied by the Ld. Assessing Officer (“AO”) u/s 271(1)(c) of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment Year (“AY”) 2014-15.
The assessee has raised the following grounds of appeal :-
1. That, on facts and in the circumstances of the case, the order of CIT(A). NFAC in dismissing the appeal filed by the appellant is arbitrary. erroneous, contrary to law and is opposed to the principles of natural justice, equity & fair play.
2. That, on facts and in the circumstances of the case, the Ld. CIT(A) has passed the order u/s 250 without giving sufficient opportunity of being heard and thus violating the principles of 'audi alteram partem.
3. That, on facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming the penalty u/s 271(1)(c) of the IT Act, imposed by the Ld. AO to the tune of Rs. 1,45,33,399/- for FY 2013-14 relevant to AY 2014-15.
4. That, on facts and in the circumstances of the case, the Ld. CIT(A) has erred in not appreciating the submission made by the appellant on 30.04.2024 wherein the appellant had requested to keep the matter in abeyance as the original assessment order being contested before the CIT(A) was being heard.
5. That, on facts and in the circumstances of the case, the Ld. CIT(A) has erred in passing the impugned order u/s 250 which is in respect of order u/s 271(1)(c), without considering the fact thatthe decision in respect of the assessment order passed u/s 144 on 17.10.2016 was still pending before the Ld. CIT(A) which is the very foundation of this penalty order.
6. That, on facts and in the circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that the assessment order passed u/s 144 which is the very foundation of this penalty order being contested is an Ex parte order wherein sufficient opportunity of being heard was not granted to the appellant.
7. That, on the facts and in the circumstance of the case, the Ld. CIT(A) has passed the order u/s 250 without bringing any cogent material to substantiate the findings so recorded in the appellate order.
8. That, on facts and in the circumstances of the case, the Ld. CIT(A) has passed the order u/s 250 in a mechanical way, without application of mind and without appreciating the overall facts of the case.
The appellant may kindly be allowed to add, alter or modify any other modify any other points to the grounds of appeal
at any time before or at the time of hearing.
10. Any other order in the interest of justice may kindly be passed.”
3. At the outset, the Ld. AR submitted that the quantum appeal of the assessee for AY 2014-15 is pending for adjudication before the Ld. CIT(A)/NFAC and the assessee has filed the requisite submissions along with the relevant documentary evidences in support of its claim before the Ld. CIT(A)/NFAC. He further submitted that the observation of the Ld. AO in the impugned assessment order that the assessee has not filed an appeal against the quantum assessment before the Ld. CIT(A)/NFAC is incorrect. He, therefore, urged that the matter may be sent back to the file of the Ld. CIT(A)/NFAC for adjudication once the quantum appeal of the assessee is decided by him.
The Ld. DR had no objection to the above request of the Ld. AR.
We have heard the Ld. Representatives of the parties and perused the material available on record. The assessee filed its return of income for AY 2014-15 on 29.11.2014 declaring loss at Rs.6,94,29,461/-. The case of the assessee was selected for scrutiny through CASS. The Ld. AO completed the assessment ex-parte u/s 144 of the Act on 17.10.2016 on total assessed loss of Rs.2,23,95,803/- thereby making total additions/disallowances of Rs.4,70,33,658/- comprising of-(i) unexplained credit of Rs.3,36,13,000/- u/s 68 of the Act; (ii) expenses of Rs.1,30,90,658/- being unsubstantiated by the supporting documents and (iii) Rs.3,30,000/- towards payments made to related parties being unsubstantiated by evidence. Thereafter, penalty proceedings were initiated by the Ld. AO u/s 271(1)(c) of the Act for concealment of particulars of income as well as furnishing inaccurate particulars of income to the extent of Rs.4,70,33,658/- without any reasonable cause. During the penalty proceedings the various notices as well as the final show cause notice issued by the Ld. AO remained un-complied with by the assessee which resulted in levy of penalty on the assessee of Rs.1,45,33,399/- being minimum penalty leviable u/s 271(1)(c) of the Act. During the appellate proceedings before the Ld. CIT(A)/NFAC, there was non-compliance to some of the notices issued by his office. The Ld. CIT(A)/NFAC dismissed the appeal of the assessee observing that despite ample opportunity provided to the assessee both during the assessment and penalty proceedings, the assessee could not offer any logical or genuine explanation for the discrepancies between the assessed income and the returned income by relying on the decision of the Hon’ble Supreme Court in the case of Union of India and others Vs. Dharmendra Textile Processors and others and in the case of CIT Vs. Altron Electronics India Ltd. Before us, the Ld. Counsel for the assessee has submitted that the quantum appeal filed by the assessee for the relevant AY 2014-15 is still pending before the Ld. CIT(A)/NFAC and has therefore requested that the matter may be restored to the file of the Ld. CIT(A)/NFAC to decide the issue afresh once the quantum appeal of the assessee is adjudicated by him. In this view of the matter, we deem it fit, in the interest of justice and fair play, to set aside the impugned penalty order and restore the matter back to the file of the Ld. CIT(A)/NFAC for adjudication afresh as per fact and law once the quantum appeal is decided by him, after affording reasonable opportunity of hearing to the assessee. We hold and direct accordingly. The effective grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 09th February, 2026.
Sd/- Sd/- (Dr. Dipak P. Ripote) (Astha Chandra) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 09th February, 2026. रदि