ITAT Remands Section 270A Penalty Appeal, Holds CIT(A) Must Decide Matter on Merits Instead of Dismissing for Non-Prosecution

The Income Tax Appellate Tribunal (ITAT) Chennai held that an appellate authority cannot dismiss an appeal merely on account of the assessee’s nonappearance without adjudicating the issues raised on merits.

Ceeyes Engineering Industries Private Limited had not filed its return of income for assessment year 2018-19 under Section 139(1) of the Income Tax Act, 1961. On the basis of information regarding financial transactions amounting to Rs 1.57 crore, the AO reopened the assessment under Section 147 and issued a notice under Section 148. In response to the notice, the assessee filed its return declaring total income of Rs 92.90 lakh. After examination of the records, the AO completed the assessment without making any addition and accepted the returned income.

However, under Section 270A, penalty proceedings were initiated because income had been disclosed only in response to a notice issued under Section 148 and a penalty of Rs 11.96 lakh was imposed for underreporting of income. Aggrieved by the penalty through an order dated 18 September 2024, the assessee preferred an appeal before the CIT(A).

The CIT(A) granted seven opportunities of hearing to the assessee but still no response was furnished so, the appeal was dismissed and the penalty imposed by the AO was confirmed. Before the Tribunal, the assessee contended that the appellate authority had dismissed the appeal merely for non-filing of detailed submissions and had not adjudicated the issues raised in the appeal.

The Tribunal observed that although the assessee had not participated in the appellate proceedings, the grounds of appeal and relevant details had already been placed before the CIT(A). The appellate authority had dismissed the appeal without examining the issues on their merits. Considering the principles of natural justice and in the interest of justice, the Bench set aside the orders of the lower authorities relating to penalty proceedings and remitted the matter back to the file of the CIT(A).

The Tribunal, while allowing the appeal for statistical purposes, directed the CIT(A) to consider the grounds raised by the assessee and give a reasonable opportunity to be heard before passing a reasoned order.