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Facts
Three appeals were filed against the penalty orders levied under Section 271(1)(c) of the Income Tax Act. The core issue revolved around the validity of the penalty notices issued by the Assessing Officer (AO), which were alleged to be ambiguous and defective.
Held
The Tribunal held that the penalty notices were defective because they failed to specify the exact charge (concealment of income or furnishing inaccurate particulars) for which the penalty was being levied, and also because the AO initiated penalty for one charge but levied it for another. The defect was considered incurable.
Key Issues
Whether penalty proceedings initiated under Section 271(1)(c) are sustainable if the notice issued is ambiguous, defective, and specifies charges inconsistently with the penalty order.
Sections Cited
271(1)(c), 274, 143(3), 142(1)
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Income Tax Appellate Tribunal, DELHI BENCH “F”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI MANISH AGARWAL
आदेश/ORDER PER VIKAS AWASTHY, JM: These three appeals by the three different assessees from the same group involve identical issues, therefore, these appeals are taken up together for adjudication and are decided by this common order.
AY 2013-14 2. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-28, New Delhi [in short ‘the CIT(A)] dated 25.01.2019, confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). 3. Shri D.C Garg, appearing on behalf of the assessee submitted that the assessee has raised multiple grounds of appeal challenging levy of penalty u/s. 271(1)(c) of the Act. However, at this stage the assessee is only pressing ground no. 5 of appeal assailing penalty on the ground of defective notice.
4. The ld. AR of the assessee placed on record copy of notice dated 31.10.2017 issued u/s. 274 r.w.s. 271 of the Act for AY 2013-14. The ld. AR pointed that in notice, the Assessing Officer (AO) has not clearly specified the charge u/s. 271(1)(c) of the Act for which penalty has been levied. The notice has been issued in an omnibus performa without striking off irrelevant clause of section 271(1)(c) of the Act. This makes the notice ambiguous and defective. No penalty can be levied on the basis of defective notice. The ld. AR of assessee furnished copy of said notice. In support of his submissions he placed reliance on the decision of the Full Bench of Hon'ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT reported as 125 taxmann.com 253.
5. Per contra, Ms. Monika Singh representing the department vehemently defended the penalty order and prayed for dismissing appeal of the assessee.
6. Both sides heard. The short issue in present appeal is with respect to validity of notice dated 31.10.2017 issued u/s. 274 r.w.s 271 of the Act for levy of penalty. The said notice is reproduced here in below:
A bare perusal of the notice shows that the same has been issued by the AO in preprinted performa, wherein both charges u/s. 271(1)(c) of the Act i.e. “concealed the particulars of income” and “furnish inaccurate particulars of income” have been mentioned with conjunction “or”. The ambiguity in the mind of AO qua the charge to be invoked u/s. 271(1)(c) of the Act is evident from contents of the notice. This notice issued without mentioning specific charge or striking off irrelevant clause in the preprinted notice, makes the notice ambiguous and defective.
Further, a perusal of the assessment order dated 31.10.2017 passed u/s. 144C r.w.s. 143(3) of the Act would show that the penalty proceedings u/s. 271(1)(c) of the Act were initiated for concealment of income. Whereas, the penalty has been levied by the AO vide order dated 26.04.2018 for furnishing inaccurate particulars.
The manner in which the Assessing Officer initiated penalty, issued notice u/s. 274 r.w.s 271 of the Act and finally pass the penalty order shows ambiguity and vagueness in the mind of Assessing Officer with regard to the charge for which penalty is to be levied u/s. 271(1)(c) of the Act. The Hon’ble Supreme Court of India in the case of T. Ashok Pai vs CIT, 161 Taxman 340 has held that the expression ‘concealment of income’ and ‘furnishing inaccurate particulars’ carry different connotations. The Hon’ble Bombay High Court in the case of CIT vs. Samson Perinchery, 392 ITR 4 has held that penalty initiated on one limb and levied on the other limb of section 271(1)(c) of the Act is unsustainable. The Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT(supra) has held that non striking of irrelevant matter in the notice issued u/s. 274 r.w.s.
271 of the Act would make the notice defective and thus would vitiate penalty proceedings. The defect in notice is incurable. Thus, penalty u/s. 271(1)(c) of the Act in the instance case is liable to be quashed on more than one count.
Thus, in light of facts of the case and decision discussed above, we find merit in ground no. 5 of appeal. Hence, penalty proceedings are quashed on account of defective notice, as well as, on the ground of levying penalty on the charge u/s. 271 (1)(c) of the Act other than the one for which penalty u/s. 271(1)(c) of the Act was initiated.
The other grounds raised in appeal have become academic, hence, not deliberate upon at this stage. In the result, impugned order is set aside and appeal of the assessee is allowed.
AY 2013-14 11. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-28, New Delhi [in short ‘the CIT(A)] dated 21.01.2019, for AY 2013-14 confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’).
The assessee in appeal has assailed levy of penalty inter alia on the ground of defective/ambiguous notice issued u/s. 271(1)(c) of the Act.
The ld. AR of the assessee placed on record copy of notice dated 27.10.2017 issued u/s. 274 r.w.s. 271 of the Act, the same is extracted herein below:
The ld. AR of the assessee pointed that the AO in notice has not specified the charge section 271(1)(c) of the Act for which penalty has been levied. Since, the notice is ambiguous no penalty u/s. 271(1)(c) of the Act can be levied on ambiguous and defective notice.
Per contra, Ms. Monika Singh representing the department vehemently defended the penalty order and prayed for dismissing appeal of the assessee.
Both sides heard. The assessee in appeal has assailed levy of penalty u/s. 271(1)(c) of the Act on the ground of defective notice.
A perusal of the assessment order dated 27.10.2017 passed u/s.144C(vi) r.w.s. 143(3) of the Act shows that the AO has recorded satisfaction for initiating penalty proceedings u/s. 271(1)(c) of the Act by observing as under:- “8.……..Penalty proceedings u/s. 271(1)(c) are being initiated separately for furnishing inaccurate particulars of income and/or for concealment of income by the assessee company.” The AO vide order dated 26.04.2018 levied penalty u/s. 271(1)(c) of the Act for furnishing inaccurate particulars.
The manner in which, the AO has initiated penalty u/s. 271(1)(c) of the Act itself shows ambiguity in the mind of Assessing Officer with regard to charge u/s. 271(1)(c) of the Act for which penalty is to be levied. The Hon’ble Apex Court in the case of T. Ashok Pai vs CIT (supra) has held that ‘concealment of income’ and ‘furnishing inaccurate particulars’ carry different connotations. The penalty cannot be levied on ambiguous charge, the AO has to be specific in mentioning the charge on which penalty has to be levied. This ambiguity continues even while issuing notice, the AO has mentioned both charges u/s. 271(1)(c) of the Act i.e concealment of income/furnishing inaccurate particulars of income with conjunction “or”. This makes the notice ambiguous and defective. It is no more res integra that penalty proceedings u/s. 271(1)(c) of the Act on defective notice are unsustainable.
In light of facts of the case and the settled legal preposition, we find merit in ground no. 5 of appeal, the penalty levied by the AO is directed to be deleted and appeal of the assessee is allowed. AY 2011-12 19. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-28, New Delhi [in short ‘the CIT(A)] dated 25.01.2019, for AY 2011-12 confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’).
The assessee has assailed levy of penalty inter alia on the ground of defective notice.
Per contra, Ms. Monika Singh representing the department vehemently defended the penalty order and prayed for dismissing appeal of the assessee.
Both sides are unanimous in stating that the facts in this appeal are similar to the facts in for AY 2013-14 decided herein above.
We find that the AO while passing the assessment order dated 20.03.2014 u/s. 143(3) of the Act has recorded satisfaction for initiating penalty u/s. 271(1)(c) of the Act by observing as under:- “5……..Here, it is apparent that assessee has attempted to conceal income by furnishing inaccurate particulars with regard to the above points of disallowance/additions and also excess capitalization of Service Charge & External Development Expenses, for which penalty proceedings u/s. 271(1)(c) read with its Explanations, is separately initiated.” Thereafter, the AO has passed penalty order dated 28.03.2018 u/s. 271(1)(c) of the Act levying penalty on the charge of inaccurate particulars. The manner in which penalty u/s. 271(1)(c) of the Act has been levied in the present case is similar to the one decided by us in appeal of the group company of the present assessee. For parity of reasons the penalty levied u/s. 271(1)(c) of the Act is deleted.
In the result, appeal of the assessee is allowed. 25. To sum up, ITA Nos. 2912 & 2913/Del/2019 of the assessees are allowed. Order pronounced in the open court on Wednesday the 30th day of July, 2025. Sd/- Sd/- (MANISH AGARWAL) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 30/07/2025 NV/- �ितिलिप अ�ेिषतCopy of the Order forwarded to : अपीलाथ�/The Appellant , 1. �ितवादी/ The Respondent. 2.