SELVAM,TIRUNELVELI vs. ITO CIRCLE 1, TIRUNELVELI, TIRUNELVELI

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ITA 376/CHNY/2026Status: DisposedITAT Chennai18 September 2026AY 2015-165 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notices were defective as the Assessing Officer failed to strike down the relevant charge (concealment or inaccurate particulars). Following the Madras High Court's decision in Babuji Jacob v. ITO, the penalty notices were quashed.

What were the facts?

The assessee appealed against penalty orders for AY 2015-16 and 2016-17. The penalty notices were issued under Section 274 read with Section 271(1)(C) of the Income Tax Act.

What were the issues?

Whether penalty proceedings initiated by a defective notice under Section 274 read with Section 271(1)(C), where the AO failed to strike down the relevant charge, are valid.

Which sections of the Income-tax Act were involved?

Section 274,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha

Hearing: 01.07.2026Pronounced: 18.09.2026

आयकर अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी एस.एस. िव�ने� रिव, �ाियक सद� एवं �ी एस.आर. रगुनाथॎ, लेखा सद� के सम� Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri S.R. Raghunatha, Accountant Member आयकर अपील सं./I.T.A. No.376 & 377/Chny/2026 िनधा�रण वष�/Assessment Year: 2015-16 & 2016-17 Selvam, Vs. The Income Tax Officer, No.15/2 Madura Hospital, Circle -1, Sankarankovil Road, Surandai, Tirunelveli. Tirunelveli, Tamil Nadu, 627 859. [PAN: CLZPS1096L] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Mr. Abishek Murali, C.A. ��थ� की ओर से/Respondent by : Mr. Pelli Prem Kumar, Sr. AR. सुनवाई की तारीख/ Date of hearing : 01.07.2026 घोषणा की तारीख /Date of Pronouncement : 18.09.2026 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

Both the appeals filed by the assessee are directed against the order dated 28.11.2025, passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2015-16 & 2016-17.

-:I.T.A. No.376/Chny/2026:- (Assessment Year: 2015-16)

2 I.T.A. Nos.376 & 377/Chny/2026

2.

Ld. AR, Mr. Abishek Murali, C.A., placed on record the notice dated 03.01.2020 at page No. 1 of the paperbook and submits that the said notice issued under Section 274 read with Section 271(1)(C) of the Income Tax Act, 1961 (for short, the Act) is defective as the AO failed to strike down the relevant charge on which penalty proceedings are being initiated. Ld. AR further submits that the said issue is covered by the decision of the Hon’ble High Court of Madras in the case of Babuji Jacob v. ITO [2021] 124 taxmann.com 363 (Madras), wherein the Hon’ble High Court was pleased to cancel the penalty by holding the very initiation of penalty proceedings to be defective and invalid. Further, he referred to Full Bench decision of the Hon’ble High Court of Bombay in the case of Mohd. Farhan A. Shaikh v. Deputy Commissioner of Income Tax, Central Circle 1, Belgaum, reported in [2021] 125 taxmann.com 253 (Bombay), wherein the Hon’ble Bombay High Court held that the initiation of penalty proceedings are bad under law in view of not striking the relevant charge in the statutory notice issued under Section 274 read with Section 271(1)(C) of the Act.

3.

Ld. DR, Mr. Pelli Prem Kumar, Sr. AR, relied on the order of the Ld. CIT(A).

4.

Heard both the parties and perused the relevant material available on record. On perusal of the notice dated 03.01.2020 at page No. 1 of the paperbook, wherein we note that the AO issued notice under Section 274 read with Section 271(1)(C) of the Act requesting assessee to appear either in person or through duly authorized representative on 20.01.2020, stating that “you have concealed the particulars of income or furnished inaccurate particulars of such income”. Therefore, it is clear from the said

3 I.T.A. Nos.376 & 377/Chny/2026

notice that the AO did not strike out the relevant part of charges on which he is going to initiate penalty proceedings and consequently, imposition of penalty. The Hon’ble High Court of Madras, on an occasion to deal with similar question in the case of Babuji Jacob (supra), wherein the Hon’ble High Court was pleased to frame substantial questions of law which are as under:-

“i. Whether the notice issued under section 271(1)(c) of the Act dated 30-3-2016 in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal ? ii. Whether the proceedings initiated by the respondent/the Assessing Officer is legal and valid? ili. Whether the Appellate Tribunal is justified otherwise in rejecting the said technical ground of wrong initiation of the penalty proceedings under section 271(1)(c) of the Act in misreading the show cause notice dated 30-3-2016 proving perversity in the findings of facts at para 6.5 of the impugned order?” 5. We find the Hon’ble High Court was pleased to hold that a show cause notice was issued to the assessee proposing to initiate proceedings under Section 271(1)(C) of the Act and that the said notice specifically states as to whether the assessee is guilty of concealing particulars of his income or has furnished inaccurate particulars of income, thereby the Hon’ble High Court was pleased to hold the penalty notice issued by the AO is invalid and legally untenable. Thereby, directed the AO to delete addition made on account of imposition of penalty. We find in the present case the notice dated 03.01.2020 at page No. 1 issued by the AO under Section 274 read with Section 271(1)(C) of the Act clearly shows that the AO failed to strike out the relevant charge on which he is going to impose penalty. Therefore, respectfully following the decision of the Hon’ble High Court of Madras in the case of Babuji Jacob (supra), we hold the penalty notice dated 03.01.2020 issued under

4 I.T.A. Nos.376 & 377/Chny/2026

Section 274 read with Section 271(1)(C) of the Act is defective and bad under law. Consequently, penalty order dated 15.03.2022 is quashed.

In the result, appeal of the assessee is allowed. 6.

-:I.T.A. No.377/Chny/2026:- (Assessment Year: 2016-17) 7. We find the issue raised in this appeal is also similar to the issue raised in ITA No. 376/Chny/2026. We find the notice dated 03.01.2020 for AY 2016-17 at page No. 2 of the paperbook, wherein we find the AO failed to strike out the relevant charge in the notice issued under Section 274 read with Section 271(1)(C) of the Act. In similar circumstances, we held the notice dated 03.01.2020 in the case of the assessee in ITA No. 376/Chny/2026 is defective and bad under law in the aforementioned paragraph. Thus, the view taken by us in the assessee’s own case for AY 2015-16 is applicable to the similar issue on the same identical facts in AY 2016-17 also. Thus, we hold the notice dated 03.01.2020 issued under Section 274 read with Section 271(1)(C) of the Act for AY 2016-17 is defective and consequently, the penalty order dated 16.03.2022 is quashed. Thus, grounds raised by the assessee are allowed

8.

In the result, appeal of the assessee is allowed.

Order pronounced in the open Court on 18th September, 2026 at Chennai.

Sd/- Sd/- (S.R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER

5 I.T.A. Nos.376 & 377/Chny/2026 Chennai, Dated, 18.09.2026 MM/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR & 5. गाड� फाईल/GF.

MANISH Digitally signed by MANISH MISHRA MISHRA Date: 2026.09.23 15:10:16 +05'30'

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