EMPOWER INDIA LIMITED,MUMBAI vs. ITO, WARD-1(1)(3), MUMBAI, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “E” BENCH,
MUMBAI

BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER
&
SMT.RENU JAUHRI, ACCOUNTANT MEMBER
7

(A.Y.2011-12)

Empower India Limited
25/25A, 2nd Floor, Nawab
Building, Opp Thomas
Cook, D N Road, Fort,
Mumbai-400001. Vs.
ITO, Ward-1(1)(3)
Aayakar Bhawan, M K Road,
Mumbai-400001.
थायी लेखा सं./जीआइआर सं./PAN/GIR No:AAACH3967N
Appellant
..
Respondent

Appellant by :
Shri Neeraj Mangla, CA
Respondent by :
Shri Ritesh Misra- CIT DR

Date of Hearing
06.11.2025
Date of Pronouncement
21.11.2025

आदेश / O R D E R

PER RENU JAUHRI [A.M.] :-

This appeal is filed by the assessee against the order of the National
Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”]
dated 15.07.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2011-12. 2. The grounds of appeal are as follows:
“1. That the penalty order passed by Ld. AO as well as the appellate order passed by Ld.CIT(A) are bad in law and have been passed in contravention of prevailing law as well as facts of the case therefore liable to be annulled.

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ITA NO. 4904/mum/2025. 2. That the notice issued u/s 271(1)(c) of the Act on dual grounds of concealment of income and furnishing of inaccurate particulars of income is illegal and not tenable under the law
3. That the Id AO as well as Ld. CIT(A) grossly erred in law and in facts of the case in not adjudicating the issues of merits holding that additions made to income of assessee are already confirmed by appellate authorities.
4. That the assessee company seeks leave to add, alter, modify or delete any ground of appeal during the course of appellate proceedings.”

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ITA NO. 4904/mum/2025. 4. Before us ld. AR has submitted that notice for penalty issued on 30.03.2014 is vague and does not specify the charge and both limbs i.e
‘concealment of income’ and ‘furnishing inaccurate particulars of income’
have been mentioned therein.
In this regard, ld. AR has placed reliance on several decisions of the Hon’ble Supreme court as well as the Hon’ble Juri ictional High
Court in support of the proposition that such a notice is bad in law.
Specifically, ld. AR cited the decision in Mohd. Farhan A. Shaikh
V. DGIT [2021] 125 taxmann.com 253 (Bombay) where it has been held that non striking of a limb in the penalty notice vitiates the penalty proceedings and the relevant portion of the order is reproduced below:
“Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalty proceedings?
181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.”
It has further been argued by ld. AR that the trading loss was disallowed relying solely on the statement of a director of the assessee company, ignoring the documentary evidences furnished to establish the genuineness of trading activities. On this aspect, ld. AR placed reliance on the judgment of the Hon’ble Apex court in CIT V Reliance

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ITA NO. 4904/mum/2025. Petroproducts Pvt. Ltd. [2010] 322 ITR 158 to argue that mere disallowance of an incorrect claim does not amount to furnishing of inaccurate particulars of income.
5. On the other hand, ld. DR sought to distinguish the case of the assessee on facts from the Reliance Petroproducts pvt. Ltd. (supra) on the ground that the decision of the Hon’ble Apex Court applies where the claim is incorrect but bonafide. However, in this case the claim of loss is fabricated and the same has been admitted to be bogus by the assessee’s own director Shri Dewang Master, in his statement recorded on oath. As such the claim is not genuine and bonafide in this case.
Further, with regard to the legal issue of not striking off of irrelevant limb in the notice, ld. DR has relied on the order of ld. CIT(A) wherein this issue has been decided as under:
“9.2. Ground No. 3:
This ground challenges the validity of the penalty proceedings on the basis that the notice issued under section 274 r.w.s. 271(1)(c) was ambiguous as it did not strike off the irrelevant limb.
The appellant has argued that the notice did not specify the exact charge, rendering it invalid.
I have perused the notice issued by the AO. While it is true that the notice is a standard form where both limbs ('concealed the particulars of your income' or 'furnished inaccurate particulars of such income') are mentioned, the basis for the penalty was made amply clear to the appellant through the assessment order and the subsequent appellate order of the Ld. CIT(A). The penalty was initiated specifically for the disallowance of a bogus trading loss, which squarely falls under the limb of "furnishing inaccurate particulars of income."
The appellant participated in the penalty proceedings, filed detailed submissions, and was never under any doubt as to the charge it had to meet:
No prejudice has been demonstrated to AO or CIT(A) to have been caused to the appellant due to the format of the notice.
The Hon'ble Madras High Court in the case of Sundaram Finance Ltd. vs. CIT
(2018) 403 ITR 407, the SLP against which was dismissed by the Hon'ble
Supreme Court, has held that non-striking off of the irrelevant limb in the notice would not by itself, vitiate the penalty proceedings, especially, when the assessee has understood the charge and has been given adequate opportunity to respond. The AO in the penalty order has correctly pointed out that the P a g e | 5
ITA NO. 4904/mum/2025. assessee understood the purport of the notice. The objective of a notice is to inform the assessee of the charges against them so they can prepare a defense.
In this case, that objective was fully met. The reliance on the SSA's Emerald
Meadows case is misplaced as the jurisprudence on this issue has evolved, and courts have taken a pragmatic view based on whether any prejudice was caused to the assessee. In the given facts, no such prejudice is evident.
Therefore, this technical ground raised by the appellant is hereby dismissed.”
6. We have heard the rival submissions and perused the material available before us. On the legal issue, relating to non striking of the irrelevant limb, we note that the notice u/s. 274 r.w.s 271(1)(c) dated 30.03.2024 does not state whether the same was issued for concealment of particulars of income or for furnishing inaccurate particulars of income. Although, in the penalty order, ld. AO has held that by filing inaccurate particulars of income, the assessee had concealed the income and has mentioned that both the limbs of section 271(1)(c) are attracted in this case, however, in the notice the specific limb or that both the limbs are invoked is not clearly mentioned. The relevant portion of the notice is as under:
Where as in the course of proceedings before me for the assessment year 2011-12 it appears to me that you:

have concealed the particulars of your income or ______furnished inaccurate particulars of such income.
Clearly, the notice does not specify whether one or both the limbs are invoked in this case. Further, it is seen that another notice on 1303.2019 was issued to the assessee after the assessee was allowed partial relief vide ld. CIT(A) order dated 30.06.2017. The notice is reproduced below:

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ITA NO. 4904/mum/2025. “The Ld. CIT(A)-48 has partly allowed your appeal vide order dated 30.6.2017. In the event of change of the incumbent, you are afforded an opportunity in the matter to submit your written submission, if any, in connection with the above penalty proceedings. The date of hearing has been fixed on 15.03.2019 at 11.00 am. Please note that if your written submission is not received on or before the stipulated date, it will be presumed that you have no submissions to make and penalty order will be passed.
In this regard, you are requested to show why penalty as prescribed u/s 271(1)(c) of the Income Tax Act should not be levied against you. You may file your submission on mail id also.”
From the above it is clear that the assessee has not been conveyed the ground/limb under which the penalty is proposed to be levied.
6.2 In the light of above facts, respectfully following the decision of the Hon’ble Juri ictional High Court in Mohd. Farhan A. Shaikh V. DCIT
(supra), we hereby set aside the order of penalty u/s. 271(1)(c) of the Act.
7. In the result, the assessee’s appeal is allowed.
Order Pronounced in Open Court on 21.11.2025 (KAVITHA RAJAGOPAL)
(RENU JAUHRI)
(JUDICIAL MEMBER)
(ACCOUNTANT MEMBER)

Place: Mumbai
Date 21.11.2025
Anandi.Nambi/STENO

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ITA NO. 4904/mum/2025. आदेश की ितिलिप अेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. आयकर आयु / CIT
4. िवभागीय
ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT,
Mumbai
5. गाड फाईल / Guard file.

स ािपत
ित ////
आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.