ITAT Quashes Penalty for Breaching Principles of Natural Justice; Remands Case for Fresh Adjudication
The ITAT in a recent case has held that every taxpayer must be given a proper opportunity of being heard. The CIT(A) cannot ignore written submissions filed by the assessee. In conclusion, the tribunal set aside the impugned CIT(A)’s order and remanded the case for fresh consideration.
MMC and H Pharmacies have filed the said appeal against the Income Tax Department in the ITAT Delhi, challenging an order dated September 13, 2024, by the CIT(A)/NFAC Delhi under section 250 of the Income Tax Act, 1961. The impugned order had originated from a penalty order passed by the Assessing Officer (AO) against the assessee.
The assessee had not filed any income tax return (ITR) for the Assessment Year 2017-18. However, the tax department noticed that the assessee had made cash deposits of Rs. 1.08 crore in its bank account with Bank of Baroda during the year in consideration, on which he had also earned interest of Rs. 15,510.
As a result, the AO reopened the case of the assessee under Section 147 of the Act. Several notices were issued addressing the assessee. In response to the notice, the assessee filed its tax return for AY 2017-18, declaring a total loss of Rs. 4,159. The AO completed the assessment proceedings, making an addition of Rs. 868,439 on the grounds of business income. Additionally, an imposed penalty of Rs. 25,000 was vide an order dated September 22, 2022, passed under 271A of the Act on the ground that the assessee has not maintained the books of accounts and documents as required under Section 44AA of the Act.
When appealed before the lower authorities, the CIT(A) confirmed the impugned order and addition. Thereafter, the assessee challenged the penalty before the ITAT, arguing that the CIT(A) ignored the written submissions filed and passed the order without properly considering them.
When the tribunal analysed the facts of the case, it noted that the assessee was not given a proper opportunity of hearing. Also, the lower authority’s order did not mention consideration of the written arguments. Considering the same, the tribunal held that since the principles of natural justice were violated, the impugned order and addition cannot be sustained.
Accordingly, the tribunal quashed the impugned CIT(A)’s order and sent the case back for fresh adjudication of the matter after giving the assessee a proper chance of hearing and considering the written submissions. The assessee has been directed to appear before the CIT(A) within 60 days. The appeal was allowed for statistical purposes.
Citation: MMC and H Pharmacies Vs AO (ITAT Delhi); ITA No.5482/Del/2024; 04/02/2026; 2017-18
