Facts of the Case

  • The petitioner challenged a penalty order dated 29.03.2023 passed under Section 41 of the Black Money Act.
  • A show cause notice dated 02.03.2023 was issued granting opportunity of hearing.
  • The petitioner filed a reply on 09.03.2023 via email.
  • However, the authority recorded that no reply was filed and proceeded to impose penalty.
  • The petitioner had already filed an appeal against the quantum assessment before CIT(A) which was pending.

Issues Involved

  1. Whether the penalty order passed without considering the assessee’s reply is legally sustainable.
  2. Whether penalty proceedings should be deferred when quantum appeal is pending before CIT(A).
  3. Whether the penalty order suffered from jurisdictional defect under Section 46(4)(b) of the Act.

 Petitioner’s Arguments

  • The petitioner contended that:
    • A reply was duly filed in response to the show cause notice, but was ignored by the authority.
    • Penalty proceedings should be kept in abeyance due to pendency of quantum appeal before CIT(A).
    • The penalty order was jurisdictionally defective, as it was not passed in accordance with Section 46(4)(b) of the Act.

 Respondent’s Arguments

  • The Revenue argued the matter based on available records and:
    • Maintained that no submissions were furnished by the assessee.
    • Proceeded with penalty based on findings of the assessment order.

 Court’s Findings / Order

  • The Court observed:
    • The assessee’s reply was on record but not considered by the authority.
    • This amounted to a violation of principles of natural justice.
  • Held:
    • The penalty order is liable to be set aside solely on this ground.
  • Order:
    • The impugned penalty order was set aside.
    • Matter remanded for fresh (de novo) consideration.

 Important Clarification by Court

  • The Court clarified:
    • It did not examine merits of the penalty.
    • The assessee is free to raise jurisdictional objections under Section 46(4)(b) before the authority.
    • The authority must decide the matter independently without being influenced by prior observations.

 Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS12042023CW45102023_223407.pdf

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