Natural justice in penalty proceedings: ex parte order set aside and matter remitted for a fresh hearing.

An ex parte penalty order under section 271D of the Income-tax Act may be set aside where the assessee was denied a meaningful opportunity of hearing, as such denial breaches natural justice. The record showed confusion over whether a hearing had been sought through the faceless penalty portal, and the matter had not been examined on merits. On these facts, the High Court quashed the order and remitted the matter for fresh adjudication after granting a proper hearing and passing a fresh order in accordance with law.

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Issues: Whether an ex parte penalty order passed under section 271D of the Income-tax Act, 1961, could be set aside for violation of natural justice and a fresh opportunity of hearing directed.

Analysis: The order under challenge was found to be ex parte. There was confusion regarding whether the assessee had sought a hearing through the faceless penalty portal, and the matter was not examined on merits. In the circumstances, the absence of a proper opportunity of hearing amounted to a breach of natural justice warranting interference.

Conclusion: The ex parte order was quashed and set aside, and the authorities were directed to grant an opportunity of hearing and pass a fresh order in accordance with law.

Ratio Decidendi: Where a penalty order is passed ex parte in circumstances indicating denial of a meaningful opportunity of hearing, the order may be set aside and the matter remitted for fresh adjudication after compliance with natural justice.

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