Mukesh Roshanlal Shah Vs The DCIT (ITAT Ahmedabad)
Assessment Reset, One Penalty Erased, Another Survives: ₹2.15-Crore Addition u/s 69A Restored, Penalty u/s 271AAC Deleted but ₹20,000 Penalty u/s 272A(1)(d) Confirmed—Ahmedabad ITAT
Summary:
The Ahmedabad ITAT restored an ex parte reassessment involving an addition of ₹2.15 crore u/s 69A to the Jurisdictional AO after finding that the assessee’s online submissions & supporting evidence had not been properly examined. Consequently, the penalty of ₹16.58 lakh u/s 271AAC(1) was deleted. However, the separate ₹20,000 u/s 272A(1)(d) penalty for non-compliance with statutory notices was confirmed because the assessee failed to demonstrate any reasonable cause for the defaults.
Entire Cash Deposits Treated as Unexplained Money u/s 69A
The assessee’s assessment for AY 2020-21 was reopened & completed u/s 147 r.w.s. 144 & 144B. According to the AO, several opportunities were granted through notices issued u/ss 148 & 142(1) as well as show-cause notices. However, the assessee did not respond to those notices.
Consequently, the AO proceeded to complete the assessment ex parte. Cash deposits aggregating to ₹2,14,57,800, appearing in the assessee’s bank account, were treated in their entirety as unexplained money u/s 69A. The addition was subjected to the special rate of tax prescribed u/s 115BBE.
Apart from completing the assessment on a best-judgment basis, the AO recorded satisfaction for initiating two independent penalty proceedings. A penalty of ₹16,57,615 was imposed u/s 271AAC(1) in connection with the income assessed u/s 69A & taxed u/s 115BBE. A further penalty of ₹20,000 was imposed u/s 272A(1)(d) for failure to comply with the statutory notices issued during assessment proceedings.
CIT(A) Confirmed Both Addition & Penalties
The assessee challenged the assessment order as well as both penalty orders before the NFAC. The CIT(A), however, confirmed the addition made u/s 69A & also upheld the penalties imposed u/ss 271AAC(1) & 272A(1)(d).
Thus, three separate appeals reached the Tribunal—one challenging the assessment, the second challenging the consequential penalty u/s 271AAC(1) & the third challenging the penalty for non-compliance u/s 272A(1)(d).
Evidence Filed Online but Not Properly Examined
Before the Tribunal, the assessee’s counsel produced acknowledgements evidencing the filing of various written submissions & supporting documents on the income-tax portal. It was contended that although the material had been uploaded, it had not been properly examined or considered by the CIT(A).
The assessee requested one more opportunity to present all relevant details before the AO & explain the nature as well as the source of the cash deposits appearing in the bank account.
The Tribunal found merit in this request. It observed that the assessee should not suffer a gross addition of the entire amount deposited in the bank account without being afforded an effective opportunity to explain the entries with reference to supporting evidence. Significantly, the Departmental Representative also fairly raised no objection to restoration of the matter to the AO.
Accordingly, the Tribunal set aside the assessment & restored the matter to the Jurisdictional AO for fresh adjudication. The AO was directed to grant an opportunity of hearing, examine the evidence & explanation furnished by the assessee & decide the issue afresh in accordance with law.
At the same time, the Tribunal specifically directed the assessee to cooperate diligently, comply with the AO’s directions & furnish all submissions & evidence without further default. The assessment appeal was thus allowed for statistical purposes.
Penalty u/s 271AAC(1) Could Not Outlive the Assessment
The penalty of ₹16,57,615 u/s 271AAC(1) arose directly from the addition made u/s 69A & the application of s.115BBE. Once the underlying assessment was set aside for fresh adjudication, the very foundation supporting this penalty ceased to exist at that stage.
The Tribunal accordingly held that the penalty was consequential to the assessment & could not survive after the assessment itself had been restored. The penalty was therefore deleted, resulting in the corresponding appeal being allowed.
The deletion, however, does not amount to a finding that the cash deposits stood satisfactorily explained. The AO must first determine the issue afresh. Any consequences flowing from the eventual assessment would have to be considered independently in accordance with law.
Penalty u/s 272A(1)(d) Stands on Its Own Feet
The Tribunal reached a different conclusion regarding the penalty of ₹20,000 u/s 272A(1)(d). The provision authorises a penalty of ₹10,000 for each default where a person fails to comply with a notice u/s 142(1) or 143(2), or with a direction issued u/s 142(2A).
The Tribunal explained that this penalty is not directly dependent upon the assessed income or tax ultimately payable. Its object is to deter deliberate & unreasonable non-compliance with statutory notices. Therefore, restoration of the assessment does not automatically erase past failures to comply.
The assessee challenged the penalty only by contending that it had been imposed in haste while the assessment appeal was pending. However, it did not furnish any reasonable cause explaining the underlying non-compliance. Pendency of an appeal against the assessment neither excuses an earlier default nor renders the penalty premature.
Accordingly, the Tribunal found no reason to interfere & confirmed the penalty u/s 272A(1)(d). The third appeal was dismissed.
Author’s Comments
The ruling neatly distinguishes between a penalty that depends upon the assessed income & one that punishes procedural indiscipline. The penalty u/s 271AAC(1) fell when its assessment foundation was removed; the penalty u/s 272A(1)(d) survived because non-compliance is an independent default.
The remand gives the assessee another opportunity, but certainly not a clean chit. The practical message is simple: a disputed addition may be reopened with evidence, but ignored notices leave their own footprints.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, AHMEDABAD
These three appeals, all pertaining to Assessment Year 2020-21 have been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 07.04.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) against order under section 147 r.w.s. 144, Penalty order under section 271AAC(1) and Penalty order under section 272A(1)(d) of the Act.
2. The assessment in this case was made u/s 147 r.w.s. 144 and Section 144B of the Income Tax Act, 1961(“the Act”). The A.O. has stated that the assessee was provided several opportunities of hearing by issue of notices u/s. 148 Section 142(1) and show cause notices, but no response was received from the assessee. The A.O. accordingly made an addition of Rs.2,14,57,800/- being the amount of money deposited in cash in the assessee’s bank account as unexplained cash u/s 69A of the Act and taxed the same u/s. 115BBE of the Act.
3. Due to the apparent non-compliance by the assessee, the A.O. also recorded satisfaction that proceedings for levy of penalty u/s. 271AAC(1) and penalty u/s. 272A(1)(d) ought to be initiated. Subsequently, vide order u/s. 271AAC(1), penalty of Rs.16,57,615/- was levied and vide order u/s. 272A(1)(d), penalty of Rs.20,000/- was levied.
4. In the impugned order, the Ld. CIT(A), NFAC confirmed the additions in the assessment order and also confirmed the penalties levied u/s. 271AAC(1) and section 272A(1)(d).
5. Before us ld. Counsel for the assessee submitted an acknowledgement of various written submissions and supporting evidences filed online on the portal. Ld. Counsel submitted that these details having not been properly examined and considered by the Ld. CIT(A) in the impugned order and requested that the assessee be given an opportunity to submit all the relevant details before the assessing officer. Under the circumstances of the case, we feel it is fair that the assessee should not suffer gross addition by the entire amount appearing in its bank account as unexplained cash deposit and one opportunity should be given to the assessee to appear before the assessing officer and explain its position with reference to the evidences.
6. The Ld. Sr. D.R. fairly raised no objection to the file being set-aside to the assessing officer. We therefore set-aside this assessment order to the Jurisdictional Assessing Officer to provide an opportunity of hearing to the assessee and decide the issue afresh having regard to the evidence and explanation furnished by the assessee and in accordance with law. The assessee is directed to comply with the directions of the Assessing Officer and submit all submissions and evidences diligently.
7. In the result, the appeal of the assessee in ITA No. 2240/Ahd/2026 is allowed for statistical purposes.
8. The penalty u/s 271AAC(1) is consequential to the assessment and therefore the original assessment having been set-aside at this stage, this penalty cannot survive and is deleted.
9. In the result, the appeal of the assessee in ITA No. 2241/Ahd/2026 is allowed.
10. Section 272A(1)(d) provides that if any person fails to comply with a notice under sub-section (1) of Section 142 or sub-section (2) of Section 143 or fails to comply with a direction issued under sub-section (2)(a) of Section 142, he shall pay by way of penalty, a sum of Rs.10,000/- for each such default or failure. This penalty is not directly connected to the consequence of an assessment and the determination of income and tax payable thereon. This provision is introduced in the Act as a deterrent against deliberate and unreasonable non-compliance by an assessee to the notices issued by the assessing officer.
11. In the present case, the assessee has challenged the levy of penalty only on the ground that the penalty was levied in haste while an appeal against the assessment was pending, but the assessee has not offered any reasonable cause for the failure in compliance for which the penalty was levied. We therefore find no reason to interfere with the decision of the lower authorities in this regard and confirm the levy of penalty u/s. 272A(1)(d) of the Act.
12. In the result, the appeal of the assessee in ITA No. 2242/Ahd/2026 is dismissed.
This Order is pronounced on 31/08/2026
