ADITYA BIRLA FOUNDATION,MUMBAI vs. INCOME-TAX OFFICER (EXEMPTION)-1(1), MUMBAI

THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER & MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER ITA NO. 9301/Mum/2025 (A.Y.2011-12) Aditya Birla Foundation National Faceless Assessment Centre,Ch-611, 6th Floor, MTNL C-1, Aditya Birla Centre, S. K. Ahire Marg, Worli, Mumbai, Telephone Exchange Building, 400030 v/s Cumballa Hills, Peddr Road, PAN AAATA0382P Mumbai, Maharashtra Appellant Respondent Assessee by Sh. Ronak Doshi (virtually appear) Department by Sh. Surendra Mohan, Sr. DR Date of Hearing 12-03-2026 Date of Pronouncement 05- 06-2026

ORDER PER KAVITHA RAJAGOPAL :- This appeal is filed by the assessee challenging the order of the Learned

Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National Faceless

Appeal Centre (“NFAC” for short)passed u/s. 250 of the Income Tax Act, 1961 (‘the

Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2011-12.

2 ITA No. 9301/mum/ 2025 Aditya Birla Foundation i. penalty can be initiated only on one particular limb of section 271(1)(c) of the Act i.e. penalty ought to have been initiated either for concealment of income or for furnishing inaccurate particulars of income.

ii. the irrelevant portions of the show cause notice u/s. 274 r.w.s. 271(1)(c) of the Act dated March 24, 2014 ought to have been stuck-off and the exact charge on which penalty was proposed to be levied should have been clearly mentioned.

iii. penalty can be levied either for concealment of income or for furnishing inaccurate particulars of income

WITHOUT PREJUDICE TO GROUND NO I

GROUND II:

i. the Appellant has made full and true disclosure relating to items of income and deduction and never suppressed any material fact; ii. merely because the claim made by the Appellant was not accepted or not sustainable in law as per one view, it would not lead to levy of penalty;

iii. the claim made by the Appellant is a bonafide claim supported by judicial precedents;

iv. the issues on which additions/disallowances were made were debatable issues; v. if a claim is held as "wrong claim" and/or "inadmissible claim", then such claim would not automatically attract levy of penalty; vi. merely because there are certain additions/disallowances in the assessment proceedings, it will not amount to furnishing of inaccurate particulars of income; vii. merely because the explanation offered by the Appellant is not accepted, it would not lead to invocation of penal provisions and

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viii. inaccurate claim is different from providing inaccurate particulars of income

The Appellant craves leave to add to, alter and / or amend all or any of the above grounds of appeal.”

with DIT(E), Mumbai u/s 12A of the Act. The Assessee had filed its return of income

dated 30/09/2011 declaring total income at a deficit of Rs. 1,65,32,972/- after claiming

deduction u/s 11 of the Act. The Assessee case was selected for scrutiny andassessment

order dated 24/03/2014 was passed u/s 143(3) of the Act, where the Ld. A.O. determined

total income at Rs. 12,29,88,240/- after making various additions/disallowances. The Ld.

A.O. also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate

particulars of income. The Ld. A.O. then issued show cause notice u/s 274 r.w. 271(1)(c)

of the Act dated 24/03/2014 for concealment of particulars of income or furnishing

inaccurate particulars of income on the additions/disallowances made by the Ld. A.O.

during the scrutiny assessment proceedings. The Ld. A.O. then passed the penalty order

u/s 271(1)(c) of the Act dated 28/03/2022 levying penalty of Rs. 72,82,968 being 100%

of the tax which was sought to be evaded by the Assessee.

4 ITA No. 9301/mum/ 2025 Aditya Birla Foundation 4. Aggrieved, the assessee was in appeal before the first appellate authority who vide order dated 24/10/2025 upheld the penalty levied by the Ld. A.O. on the ground that the Assessee had willfully furnished inaccurate particulars of income.

5 Aggrieved, the assessee is in appeal before us, challenging the order of the Ld. CIT(A).

We have heard the rival submissions and perused the material available on 6.

record. The issue that requires adjudication is whether the impugned notice u/s

274 r.w. Section 271 dated 24/03/2014 issued by the Ld. A.O. without specifying

the relevant limb as to whether the same is for concealment of income or

furnishing of inaccurate particular of income, would render the notice invalid in the

eyes of law. The fact that the impugned notice was served to the Assessee without

specifying the relevant limb was not disputed by the Revenue. In such case, it is

now a settled proposition of law that the notice issued without specifying the

relevant limb is held to be invalid and non-est in the eyes of law, by various

decisions of the Hon'ble High Courts and more specifically the Full Bench decision

of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Sheikh

Vs. DCIT [2021] 434 ITR 1 ((Bombay).

reference:

“160. From all the judgments we have quoted about the scope of penalty proceedings under section 271 (1)(c), read with section 274, of the IT Act, we gather the following: (a) Penalty under section 271(1)(c) is a civil liability.

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(b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. www.taxguru.in 48 txa nos.51 & 57 of 2012 (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional authority. (f) Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and 1(B) it should be discernible from the said order which would be a legal fiction constitute concealment because of deeming provision. (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under section 271(1)(c) is a sine qua non for the Assessing Officer to initiate the proceedings because of the deeming provision in sub- section (IB). (h) The imposition of penalty is not automatic. (i) The imposition of penalty even if the tax liability is admitted is not automatic. (j) Even if the assessee has not challenged the order of assessment levying tax and has even paid tax, that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty. (k) If the explanation offered, even though not substantiated by the assessee, but is found bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (l) The direction referred to in Explanation 1(B) to section 271 of the Act should be clear and without any ambiguity. (m) If the Assessing Officer has recorded no satisfaction or has issued no direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the assessing authority. (n) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. [We must, however, admit that it is a contested conclusion.] (o) Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. [This, too, eludes unanimity] (p) The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. Based on such proceedings, no penalty could be imposed to the assessee. (q) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law.

6 ITA No. 9301/mum/ 2025 Aditya Birla Foundation (r) The penalty proceedings are distinct from the assessment proceedings. (s) The findings recorded in the assessment proceedings in so far as “concealment of income” and “furnishing of incorrect particulars” would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. (italics supplied and elaboration omitted).” 8. From the above observation it can be inferred that the Hon’ble Jurisdictional High

Court has summarized the scope of penalty proceedings after consideringacatena of

decision on this issue and has held that specifying the relevant limb or non striking of the

irrelevant limb, as to the initiation of the penalty is mandatory and not complyingwith the

same would not merely be a proceduraldefect but a substantial defect which is not curable

and would render the impugned notice as well as the consequent penalty order to be null

and void. By respectfully following the full Bench decision in the case of Md. Farhan A.

Sheikh (supra) which was subsequently followed by various other decisions, we deem it

fit to allow Ground No. 1 raised by the Assessee and hereby hold that impugned

penaltynotice dated 24/03/2014 and the penalty order dated 28/03/2022 to be invalid and

hereby direct the Ld. AO. to delete the penalty levied in the hands of the assessee.

other grounds of appeal raised by the assessee requires no further adjudication and are

hereby rendered academic in nature.

The following order is pronounced on 05/06/2026 as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (VIKRAM SINGH YADAV) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated: 05-06/2026 R. Naheed, Sr. PS

7 ITA No. 9301/mum/ 2025 Aditya Birla Foundation Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. Dr, ITAT, Mumbai 5. Guard File. BY ORDER, //True COPY// (Assistant Registrar) ITAT, Mumbai