WONDER PEN TIPS P.LTD,MUMBAI vs. ITO WD 8(3)(4), MUMBAI

The present appeal filed by assessee against the order of CIT(A)-18, Mumbai dated 26.11.2014 for Assessment Year (AY)-2006-07 confirming the penalty order dated 25.03.2013.

Brief facts of the case are that the assessee filed return of income for relevant AY on 28.11.2006 declaring Nil income . The assessment was completed u/s 144 of the Act on 01.12.2006 and the income of assessee was assessed at Rs. 27,21,399/- wherein the following disallowance was made which is as under: (i) Rent …… Rs. 1,74,500/- (ii) Sales return …… Rs. 2,29,890/- (iii) Labour Charges …… Rs. 7,54,834/- (iv) Custom duty …… Rs. 1,09,409/- (v) Unexplained Cash credit …… Rs. 5,70,000/- (vi) Estimated Expenditure …… Rs. 3,38,788/- The assessee filed appeal before the CIT(A) wherein the addition on account of Rent, Custom Duty and unexplained cash credit was deleted and rest of the additions were sustained. After receipt of order from First Appellate Authority (FAA), the AO initiated the penalty proceeding by issuing notice u/s 274 r.w.s. 271(1)(c) of the Act on 01.12.2008. The show cause notice was contested by assessee. The assessee contented that he has not concealed the particular of income and requested to drop the proceedings. The contention of assessee was not accepted and the AO levied penalty of Rs. 5,66,670/- being 100% on the amount of tax sought to be evaded. Aggrieved by the order of AO, the assessee filed

None has appeared on behalf of the assessee. We have heard Departmental Representative (DR) for Revenue. Ld. DR for Revenue argued that the assessee concealed the income and furnished inaccurate particulars with the intention to reduce the tax liability. The assessee has not offered any explanation for the claims which were otherwise not allowable as deduction of the case of the assessee is covered in accordance with Clause-A of Explanation 1 of section 271(1)(c) of the Act and penalty was levied for furnishing inaccurate particular of income and the same is liable to be upheld. We have considered the contention of Ld. DR for revenue and perused the material available on record.

We have seen that the AO passed ex-parte order wherein disallowance of Rent, Sales Return, Labour Charges, Custom Duty, Unexplained Cash Credit and estimated expenditure was disallowed. In appeal, the assessee was given partial relief by ld. CIT(A) in quantum appeal while hearing the appeal against the levy of penalty, the FAA observed that addition on account of Sales Return, Labour Charges, Custom Duty, Unexplained Cash Credit and estimated expenditure was not substantially explained with documentary evidence, thus the penalty was levied. We have further observed that ld. CIT(A) passed the impugned order ex- party. Ld. CIT(A) has not referred in its order if notice of hearing and served upon the assessee or not. Serving of proper notice for hearing of case is an essential element of ‘audi alteram partem’. Thus the Principal of Natural Justice was not followed by CIT(A). Hence, we deem it appropriate to restore the present appeal to the file of CIT(A) to decide the case afresh after giving proper and adequate opportunity to the assessee. With these observations, the present appeal filed by assessee is allowed for statistical purpose. 5. In the result, appeal of the assessee is allowed for statistical purpose.