AMRITABHAGWATI TRADEWING PVT. LTD.,MUMBAI vs. DCIT, CENTRAL CIRCLE - 2(2), MUMBAI, MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
Per Anikesh Banerjee (JM):
The instant appeal of the assessee filed against the order of the Commissioner of Income-tax (Appeals)-48, Mumbai [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in shot, ‘the Act) for the Assessment
Year 2012-13, date of order 03/07/2025. The impugned order emanated from the 2
Amritabhagwati Tradewing Pvt Ltd order of the Learned Assessment Unit, Income-tax Department (in short, ‘the Ld.AO’) passed u/s 271(1)(c) of the Act, dt of order 24/02/2024. 2. The brief facts of the case are that the assessee’s case was assessed u/s 143(3) of the Act, passed on 25/03/2015. The addition was confirmed related to carry forward of short-term capital loss amount to Rs.6,73,69,712/- incurred in share trading was treated as speculation loss and which was not allowed to set off with any other income and addition u/s 68 of the Act related to acceptance of share capital amount to Rs.9.27 crores. The assessee filed appeal before the 1st appellate authority and the assessment order was confirmed. The aggrieved assessee filed an appeal before the ITAT-Mumbai Bench. The ITAT upheld the addition u/s 68 of the Act amount to Rs.9.27 crores only and rest addition was deleted. The Ld.AO initiated the penalty proceedings u/s 271(1)(c) / 274 of the Act and income of which the tax sought to be evaded amount to Rs.9.27 crores on which the tax sought to be evaded amount to Rs.3,00,76,515/-. Accordingly minimum penalty was levied
@100% of tax which comes to Rs.3,00,76,515/- U/s 271(1)(c) of the Act. Being aggrieved, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) upheld the penalty. Being aggrieved, the assessee preferred appeal before us.
The Ld.AR argued and filed a written submission, containing pages 1 to 108, which is kept on record. The Ld.AR first argued the legal issue related to juri iction for issuance of notice by the Ld.AO u/s 274 without specifying the limb under which the penalty was being initiated. The relevant notice dated 25/03/2015 and 21/10/2023 are reproduced as below: -
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Amritabhagwati Tradewing Pvt Ltd
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Amritabhagwati Tradewing Pvt Ltd
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Amritabhagwati Tradewing Pvt Ltd
The Ld.AR stated that the Ld.AO in the assessment order noted that “Penalty
Proceedings u/s 271(1)(c) are initiated separately for concealing of income and/or furnishing of inaccurate particulars of income.”, but did not specify the limb for initiation of penalty proceedings neither in the assessment order nor in the notices issued u/s 274 r.w.s 271(1)(c) of the Act. He stated that the Act is very specific for concealment or for furnishing of inaccurate particulars of income. So, any one of the limbs should be specified. The Ld.AR respectfully relied on the order of juri ictional High Court in the case of Mohammad Farhan A Shaikh vs ACIT (2021)
125 taxmann.com 253 (Bom). The relevant paras 187 to 191 are reproduced below: -
“187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars
We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.
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Amritabhagwati Tradewing Pvt Ltd
In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest".
Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution.
As a result, we hold that Dilip N. Shroff Case (supro) treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice.” 4. He further respectfully relied on the order of Hon’ble Supreme Court in the case of CIT(LTU) vs State Bank of India [2024] 169 taxmann.com 305(SC). The relevant para 2 is reproduced below: - “2. Having regard to the peculiar facts of this case inasmuch as the High Court has followed CIT Manjunatha Cotton and Ginning Factory (2013) 35 taxmann.com 250/218 Taxman 423 359 ITR 565 (Karn). we are not inclined to interfere in the matter. The reason being that the aforesaid judgment in Manjunatha Cotton and Ginning Factory case (supra) has been relied upon by the High Court in CIT v. SSA'S Emerald Meadows [2016] 73 taxmann.com 241 (Karnataka) and the said judgment has been sustained by this Court in CIT v. SSA’S Emerald Meadows [2016] 73
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Amritabhagwati Tradewing Pvt Ltd taxmann.com 248 /242 Taxman 180 (SC) / [SLP (Civil)………. No. 11485/2016 vide order dated
05.08.2016] inasmuch as the said special leave petition was dismissed.”
The counsel laid down that in the absence of such specific notice, the notice would be invalid. As held in various judicial pronouncements including the decision of Hon’ble Karnataka High Court in CIT V/s SAS’s Emerald Meadows (73 Taxmann.com 241) against which Special Leave Petition (SLP) filed by the department stood dismissed by Hon’ble Supreme Court which is reported as 73 Taxmann.com 248. The notice u/s 274/271(1)(c) of the Act is not carrying the specific limb. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. 6. The Ld. AR submitted that the addition was confirmed by the Ld. AO and further upheld by the ITAT in respect of the share capital and share premium received by the assessee. It was noted that a sum of Rs. 3.63 crore was received during F.Y. 2011-12, while Rs. 5.64 crore pertained to F.Y. 2010-11. Accordingly, the only receipt relatable to the impugned financial year formed the subject matter of the present addition. However, the merits of the issue already stand concluded by the order of the ITAT, Mumbai Bench.
The Ld. DR argued that the assessee’s additions are duly confirmed by the ITAT, and the mere mentioning of limb related to issuance of notice u/s 274 r.w.s 271(1)(c) of the Act is not the reasons for rejecting impugned penalty order. He invited our attention in appeal order paras 6.1.4 to 6.1.6, which are extracted below:-
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Amritabhagwati Tradewing Pvt Ltd
“6.1.4 The appellant's submission itself states that Para 4 of the assessment order mentioned initiation of penalty proceedings for concealment of income and/ or furnishing of inaccurate particulars of income". The notice uls 274 r.w.s. 271(1)(c) dated March 25, 2015, a copy of which is usually appended to the assessment order or served along with it, did contain the standard printed language ""Have concealed the particulars of your income or furnished inaccurate particulars of such income" However, the satisfaction for initiating penalty is primarily recorded in the assessment order itself. The AO in the penalty order has clarified that the assessment order used the word "and" between the two charges. The penalty order also, in Para 7, clearly records the AO's satisfaction that the assessee has concealed the income and has furnished inaccurate particulars of income to the tune of Rs 9,27,00,000/-
1.5 The principles of natural justice require that the assessee must be aware of the specific charges against it. In this case, the assessment order provided the specific basis for initiation covering both charges. The subsequent penalty notice is an opportunity for the assessee to be heard on those charges. The appellant participated in the penalty proceedings and made submissions. Here, the AO's contention in the penalty order is that the assessment order reflected a clear application of mind to both charges. The penalty has been levied after finding that the assessee indeed concealed income and furnished inaccurate particulars by introducing bogus share capital/premium, which was not substantiated.
1.6 Given that the AO, in the penalty order, refers to the assessment order specifying both limbs for penalty initiation, and the penalty order itself reflects a clear finding on both concealment and furnishing inaccurate particulars, the appellant's argument on the technicality of the notice, in this specific context, does not vitiate the penalty order, especially when the quantum additions have been confirmed up to the ITAT, establishing the falsity of the assessee's claims.
Further the same is also emanating from the discussion on the ground related to merits of levying the penalty as discussed later in this order. The appellant has not shown any prejudice caused due
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Amritabhagwati Tradewing Pvt Ltd to the language in the notice when the basis was laid in the assessment order and the penalty order clearly confirms the charge.
Therefore, Ground No.1 and 2 are dismissed.”
We have heard the rival submissions, perused the material placed on record, and carefully considered the judicial precedents relied upon. The primary contention of the assessee is that the notices issued under section 274 r.w.s. 271(1)(c) of the Act suffer from a fundamental defect inasmuch as the Assessing Officer failed to specify the particular limb—whether the penalty proceedings were initiated for “concealment of income” or for “furnishing inaccurate particulars of income.” It is well-settled by the Hon’ble Bombay High Court in Mohammad Farhan A. Shaikh (supra) as well as by the Hon’ble Karnataka High Court in SSA’s Emerald Meadows (supra), affirmed by the Hon’ble Supreme Court, that such omnibus notices betray non-application of mind and vitiate the penalty proceedings. In the present case, a perusal of the assessment order as well as the penalty notices dated 25/03/2015 and 21/10/2023 reveals that the Ld. AO has mechanically referred to “concealing of income and/or furnishing of inaccurate particulars of income” without striking off the irrelevant portion. This ambiguity clearly violates the mandatory requirement of law and the principles of natural justice. We are therefore unable to accept the contention of the revenue that such defect is a mere technicality, particularly when penalty provisions under section 271(1)(c) of the Act carry severe and penal consequences. On merits also, we find that the quantum addition of Rs. 9.27 crores under section 68 of the Act, relating to share capital and share premium, has been upheld by the coordinate Bench of the Tribunal. However, the confirmation of the addition in 10 Amritabhagwati Tradewing Pvt Ltd quantum proceedings does not automatically warrant levy of penalty, unless the statutory conditions are duly complied with. In the absence of a valid notice specifying the exact charge, the penalty proceedings themselves are rendered void ab initio. The Ld. DR was unable to controvert the arguments advanced by the Ld. AR by placing on record any contrary judicial precedent. Respectfully following the ratio laid down in the above judicial precedents, we hold that the penalty order passed under section 271(1)(c) of the Act is not sustainable in law. Accordingly, we set aside the order of the appellate authority and direct the Ld. AO to delete the penalty of Rs. 3,00,76,515/-. In the result, the appeal of the assessee is allowed.
In the result, appeal filed by the assessee bearing ITA No.4802/Mum/2025 is allowed. Order pronounced in the open court on 17th day of September 2025. (VIKRAM SINGH YADAV) JUDICIAL MEMBER Mumbai, िदनांक/Dated: 17/09/2025 Pavanan Copy of the Order forwarded to:
अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकरआयु CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, JODHPUR 5. गाड फाइल/Guard file.
BY ORDER,
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(Asstt.