Facts of the Case

The assessee, Shervani Sugar Syndicate Limited, was subjected to reassessment proceedings for Assessment Year 2012-13. The Assessing Officer passed an ex-parte reassessment order dated 16.12.2019 under sections 147 read with section 144 of the Income Tax Act, 1961, assessing income at ₹60,90,164 by treating alleged accrued interest as income from other sources.The assessee’s appeal before the Commissioner of Income Tax (Appeals) was also dismissed ex-parte vide order dated 14.02.2025. Separate penalty proceedings under section 271(1)(c) were initiated and penalty of ₹18,81,859 was levied, which was also confirmed ex-parte by the appellate authority.

Issues Involved

  1. Whether ex-parte reassessment framed under sections 147/144 without effective opportunity is sustainable in law.
  2. Whether dismissal of appeal by the CIT(A) without granting proper opportunity violates principles of natural justice.
  3. Whether penalty under section 271(1)(c) can survive when the quantum issue itself requires fresh adjudication.
  4. Whether the matters deserve restoration for de novo consideration.

Petitioner’s Arguments

The assessee contended that no effective and reasonable opportunity was granted by either the Assessing Officer or the CIT(A). It was submitted that notices of hearing were not properly served, resulting in non-representation. The assessee further contended that it had a strong case on merits both in respect of the alleged accrued interest income and the consequential penalty.

It was prayed that the matters be restored for fresh adjudication so that the assessee could place all relevant evidence and explanations on record.

Respondent’s Arguments

The learned Departmental Representative opposed the appeals and submitted that the assessee failed to comply with statutory notices and did not furnish explanations at the appropriate stage. However, the Revenue left the matter to the discretion of the Tribunal.

Court Order / Findings

The Tribunal observed that both the reassessment order as well as the appellate orders were passed ex-parte. It further noted that the assessee had claimed non-receipt of effective notices and had not been provided adequate opportunity to present its case.

Considering the facts and circumstances, and to sub-serve the principles of natural justice, the Tribunal held that the assessee deserved one effective opportunity of hearing. Accordingly, the Tribunal set aside the impugned orders relating to both the quantum addition and the penalty proceedings.

The matters were restored to the file of the Assessing Officer with a direction to decide the issues afresh in accordance with law after granting reasonable opportunity to the assessee. Both appeals were allowed for statistical purposes.

Important Clarification

The Tribunal clarified that where assessment and penalty proceedings are concluded ex-parte without affording adequate opportunity, such orders cannot be sustained. Principles of natural justice mandate that matters involving substantial additions and penal consequences must be adjudicated on merits after granting effective opportunity of hearing.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770632755_SHERVANISUGARSYNDICATELIMITEDGHAZIABADVS.DCACIT2ALLAHABADALLAHABAD.pdf

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