M/S NIHO CONSTRUCTION LTD,NEW DELHI vs. ITO WARD -18 (3), NEW DELHI

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ITA 5867/DEL/2026Status: DisposedITAT Delhi10 September 2026AY 2011-124 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notice under Section 271(1)(c) must clearly specify the ground for penalty, either concealment of income or furnishing inaccurate particulars, by striking off the inapplicable one. Failure to do so vitiates the penalty proceedings.

What were the facts?

The Assessing Officer disallowed a loss and made other additions, leading to a penalty under Section 271(1)(c). The assessee argued that the penalty notice was vague, failing to specify whether it was for concealment of income or furnishing inaccurate particulars.

What were the issues?

Whether a penalty notice under Section 271(1)(c) is vitiated if it fails to specify the exact ground for imposing penalty, i.e., concealment of income or furnishing inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI

Before: SHRI VIMAL KUMAR & SHRI SANJAY AWASTHI

For Appellant: Shri Suraj Gupta, CA
For Respondent: Shri Tarun Sharda, Sr. DR
Hearing: 18.08.2026

ITA No.5867/DEL/2026 M/S NIHO CONSTRUCTION LTD. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E” NEW DELHI BEFORE SHRI VIMAL KUMAR, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.5867/DEL/2026 Assessment Year: 2011-12 M/S NIHO CONSTRUCTION LTD., Vs. INCOME TAX OFFICER, C/o M/s Raj Kumar & Associates, Income Tax Office, L-7A (LGF), South Extension Part-II, Ward 18(3), New Delhi, Delhi 110049. C.R. Building, New Delhi, PAN No. AABCN8530G Delhi 110002. Appellant Respondent Assessee by Shri Suraj Gupta, CA Revenue by Shri Tarun Sharda, Sr. DR Date of hearing: 18.08.2026 Pronouncement on 10.09.2026 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. This appeal arises from order dated 20.03.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.

1.1 In this case a loss of Rs.4,54,97,000/- was disallowed by the AO on the ground that the assessee failed to substantiate this claim with proper documentary evidence. Several other additions were also made pertaining to balances written off, interest/rebate/delay charges of Rs.163,99,917/-, and disallowance u/s 40(a)(ia) of Rs.10,81,933/-. Thereafter, the Ld. AO levied a penalty u/s 271(1)(c) of the Act at Rs.267,54,868/-.

ITA No.5867/DEL/2026 M/S NIHO CONSTRUCTION LTD. 1.2 The assessee approached the Ld. CIT(A) where a clear finding has been given that the assessee furnished inaccurate particulars of income by tendering claims which were not supported by evidences and thus, penalty was clearly exigible in this case.

1.3 The assessee has approached the ITAT with grounds protesting denial of opportunity and also pointing out an allegedly fatal defect in the initiation of proceedings.

2.

Before us the Ld. AR took us through the notice of penalty dated 28.03.2014 and read out the following:

“Have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of Explanation 1, 2, 3, 4 & 5”. It was the submission that by not specifying whether the assessee was to be penalized for furnishing inaccurate particulars of income or concealment of income, the assessee was put at a severe legal disadvantage. It was the submission that this was not legally tenable and therefore the penalty proceedings were vitiated.

2.1 The Ld. DR relied on the orders of the authorities below and pointed out that whatever may have been the case regarding the initiation but in para 5 of the Ld. AO’s order it is clearly written that the penalty was being levied for filing inaccurate particulars of income which amounted to concealment of tax. It was further pointed out that the Ld.

ITA No.5867/DEL/2026 M/S NIHO CONSTRUCTION LTD. CIT(A) has given a clear finding in para 5 of the impugned order that the assessee was rightly subjected to penalty u/s 271(1)(c) of the Act due to furnishing inaccurate particulars of income.

3.

We have considered the rival submissions and have gone through the records before us. It is now a well settled principle of law that the initiation of penalty proceedings u/s 271(1)(c) of the Act have to spell out exactly whether the assessee was proposed to be penalized for furnishing inaccurate particulars of income or for concealment of the same thereon. The Ld. AO is supposed to “strike of” the provision out of the two which he does not propose to refer to. There are a number of coordinate bench decisions and even High Court decisions on this proposition and we can do no better than to cite the case of Chetan Gupta reported in 181 taxmann.com 946 (Del.), order dated 15.12.2025. The head notes from this case clinch the issue in favour of the assessee as under:

“A perusal of the notice issued to the assessee would reveal that notice was not confined to the ground that the assessee has concealed the income with respect to the addition made. It also incorporate ‘or furnished inaccurate particulars of such income’. In other words, the notice does not state the specific ground on which notice has been issued nor a tick (?) has been put on the specific ground on which the notice was required to be issued. [Para 7]” Accordingly, there is no hesitation in holding that the initiation of proceedings were bad in law and therefore the penalty proceedings are also untenable, deserving to be quashed.

ITA No.5867/DEL/2026 M/S NIHO CONSTRUCTION LTD. 4. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 10.09.2026

Sd/- Sd/- (VIMAL KUMAR) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10.09.2026 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI

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