Ex-Parte Assessment Remanded to Provide Assessee Fresh Opportunity of Hearing Under Principles of Natural Justice

By | August 13, 2026
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Ex-Parte Assessment Remanded to Provide Assessee Fresh Opportunity of Hearing Under Principles of Natural Justice

Ex-Parte Assessment Remanded to Provide Assessee Fresh Opportunity of Hearing Under Principles of Natural Justice

Issue

Whether an ex-parte assessment order under Section 144 and penalty under Section 271(1)(c) should be set aside and remanded for fresh adjudication when the assessee failed to comply with notices due to circumstances beyond its control.

Facts

  • The assessee did not file a return of income for Assessment Year 2015-16.
  • The Assessing Officer (AO) received information regarding substantial cash deposits made by the assessee in a cooperative bank.
  • The AO issued notices under Section 148 and Section 142(1), but the assessee failed to comply with these notices.
  • Proceeding ex parte under Section 144, the AO treated the cash deposits of approximately Rs. 72.07 lakhs as unexplained money under Section 69A, assessed the total income accordingly, and initiated penalty proceedings under Section 271(1)(c).
  • The CIT(A) confirmed the AO’s order ex parte under Section 250 and dismissed the assessee’s appeals.
  • Before the Tribunal, the assessee requested one additional opportunity of hearing, citing circumstances beyond its control for the prior non-compliances.

Decision

  • The Tribunal held that there could be various valid reasons for non-compliance that cannot be completely overruled.
  • Considering the principles of natural justice and the overall facts and circumstances, the Tribunal decided that the assessee deserved one more opportunity to substantiate its case with proper evidence.
  • The order of the CIT(A) was set aside, and the matter was remanded back to the file of the CIT(A) for de novo adjudication after granting an adequate opportunity of hearing to the assessee.

Key Takeaways

  • Adherence to Natural Justice: Ex-parte orders passed without hearing the assessee are subject to being set aside if the assessee demonstrates genuine reasons for non-appearance.
  • Opportunity to Present Evidence: Courts and tribunals lean toward deciding tax matters on merit rather than default, granting taxpayers a fair chance to produce documentation for unexplained bank deposits.
  • Duty of Assessee on Remand: Remand directions require the assessee to actively participate and submit all relevant records before the appellate authority without further delay.
IN THE ITAT PUNE BENCH ‘A’
Digambhar Ananda Thoke
v.
ACIT
Pavan Kumar Gadale, Judicial Member
and Dr. Manish Borad, Accountant Member
IT Appeal Nos. 1683 & 1684 (Pune) of 2026
[Assessment year 2015-16]
JULY  31, 2026
Akshay Mitishkumar Modi, AR for the Appellant. Rajesh Haladkar, Sr. DR for the Respondent.
ORDER
Pavan Kumar Gadale, Judicial Member. – These two appeals are filed by the assessee against the separate orders of NFAC/(CIT(A) (i) ITA No. 1683/PUN/2026 for A.Y. 2015-16passed order u/sec 147 and u/sec 144 of the Act and u/sec250 of the Act (ii) ITA No. 1684/PUN/2026 for the A.Y. 2015-16 passed order u/sec 271(1)(c) and u/sec 250 of the Income Tax Act. The assessee has raised the grounds of appeal in these two appeals challenging the ex parte order of the CIT(A)/NFAC sustaining the addition/penalty levied by the Assessing Officer.
2. Since the issues involved in these appeals are common, identical and interlinked and for the sake of convenience, we shall take up ITA.No.1683/PUN/2026 as a lead case and facts narrated.
3. The brief facts of the case are that, the Assessing officer has received information that the assessee has made substantial cash deposits in the cooperative bank in the F.Y2014-15 and the assessee has not filed the return of income for the A.Y. 2015-16. The Assessing Officer (A.O) has reason to believe that income as escaped assessment and issued notice u/sec 148 of the Act dated 31.03.2022 and there was no compliance to the notice. Subsequently, the AO has issued notice u/sec 142(1) of the Act to explain the sources of cash deposits in the bank account with evidences and but there was no response from the assessee. The A.O find that the assessee has not made submissions on the disputed issue in spite of providing adequate opportunities of hearing and finally the A.O considering the information available on record has invoked the provisions of section 144 of the Act and made addition of unexplained cash deposits u/sec69A of the Act and assessed the total income of Rs.72,07,000/- and passed the order u/sec 147 rws144 r.w.s144B of the Act dated 22.02.2023.
4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered grounds of appeal, statements of facts, finding of the Ld.AO and has issued notice of hearing and since there was no compliance, CIT(A) considering the information available on record has confirmed the action of the Assessing Officer and dismissed the assessee’s appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon’ble Tribunal.
5. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the AO overlooking the information of the assessment proceedings and the Ld.AR mentioned that non-compliance of notices before the CIT(A) is not a wanton act but circumstances beyond the control of the assessee and the assessee has a good case on merits and shall substantiate with material evidences and prayed for an opportunity before the Lower authorities. Per contra, the Ld. DR supported the order of CIT(A).
6. We heard the rival submissions and perused the material on record. Prima facie CIT(A) has passed the order considering the facts that there is no compliance in spite of providing adequate opportunity of hearing and notices were issued. Therefore, CIT(A) was of the opinion that the assessee is not interested in prosecuting the appeal and dismiss the appeal ex-parte confirming the action of the Assessing Officer. Whereas the CIT(A) has issued notices referred at Para4 of the order but there was no response. Whereas the assesse has raised grounds of appeal challenging the addition u/sec69A of the Act made by the A.O and there could be various reasons for non-appearance/ non-compliance which cannot be overruled. Therefore, considering the facts, circumstances, submissions and principles of natural justice, we shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the disputed issue to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal. And the grounds of appeal of the assesse are allowed for statistical purposes.
7. In the result, the appeal filed by the assessee is allowed for statistical purposes.
ITA.No.1684/PUN/2026 for A.Y. 2015-16.
8. As the facts and circumstances in the penalty appeal is identical to ITA No. 1684/PUN/2026 for the A.Y 201516 and the decision rendered in above paragraphs 6&7 would apply mutatis mutandis for this appeal also. Accordingly, the grounds of appeal of the assessee is allowed for statistical purpose.
9. In the result, the two appeals filed by the assessee are allowed for statistical purposes.