SARTHAV PROJECTS,AHMEDABAD vs. ITO WARD 3(3)(5), AHMEDABAD, AMBAWADI, AHMEDABAD

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ITA 2559/AHD/2026Status: DisposedITAT Ahmedabad15 October 2026AY 2011-125 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961, is not sustainable. The primary reasoning was that the notice issued under Section 274 read with Section 271(1)(c) was defective. The notice stated that the assessee had "concealed the particulars of income or furnished inaccurate particulars of such income" without striking off the inapplicable limb. This vagueness deprived the assessee of a clear understanding of the charge to be answered, hindering an effective response. The Tribunal relied on judicial precedents, including Principal Commissioner of Income Tax vs. Unitech Reliable Projects (P) Ltd., which support the requirement of specifying the charge in the penalty notice. Furthermore, the Tribunal noted that the income assessed in the reassessment proceedings was the same as the income declared by the assessee, and no additions or disallowances were made by the AO. The penalty proceedings were initiated solely due to the delay in filing the return, which, in the absence of material establishing concealment or inaccurate particulars, does not justify the imposition of penalty. The Revenue did not provide any material to establish otherwise. Consequently, the penalty of Rs. 14,76,538/- was deleted. Other contentions raised by the assessee were left undecided as academic.

What were the facts?

The assessee, Sarthav Projects, filed an appeal against the order dated 14.05.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi. This order upheld a penalty of Rs. 14,76,538/- levied under Section 271(1)(c) of the Income-tax Act, 1961, for Assessment Year 2011-2012. The penalty proceedings were initiated because the assessee filed its return of income only after receiving a notice under Section 148 of the Act. The assessee contended that it voluntarily disclosed its entire income and paid self-assessment tax and interest to regularize its tax position, demonstrating bona fide intent. The assessee also argued that no additions or disallowances were made by the Assessing Officer (AO) during reassessment, meaning the returned income was accepted, thus negating concealment or inaccurate particulars.

What were the issues?

1. Whether the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961, is legally sustainable when the notice issued under Section 274 of the Act is vague and does not specify the particular limb (concealment of particulars of income or furnishing of inaccurate particulars of income) under which the penalty proceedings are initiated? Assessee's contentions: - The penalty is contrary to law and not supported by the facts. The assessee voluntarily disclosed income and paid taxes, showing bona fide intent. No concealment or inaccurate particulars were furnished. - The AO accepted the returned income without any additions/disallowances, making the penalty unsustainable. - The penalty proceedings were initiated solely for the delay in filing the return, which is not a valid basis for penalty under Section 271(1)(c) when income is accepted. - The show-cause notice under Section 274 read with Section 271(1)(c) is vague as it alleges both "concealed the particulars of income" and "furnished inaccurate particulars of such income" without striking off the inapplicable limb, violating settled legal principles. Relied on: Principal Commissioner of Income Tax vs. Unitech Reliable Projects (P) Ltd., Archana Achut Sail vs. ITO, Hitesha Sachin Taku vs. Income Tax Officer. Revenue's contentions: - The judgment records no specific contentions for the Revenue regarding the vagueness of the notice or the sustainability of the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 148,Section 143(3),Section 147,Section 250,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

For Appellant: Ms Nupur Shah, AR
For Respondent: Ms. Kalpana Singh, Sr. DR
Hearing: 23.09.2026Pronounced: 15.10.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

-

This appeal has been filed by the Assessee against the order dated 14.05.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2011- 2012. ITA No.2559/AHD/2026, AY-2011-12 - 2–

2.

The Assessee has raised the following grounds of Appeal:-

I. Levy of penalty u/s.271(1)(c) of the Act-Rs.14,76,538/-

1.1.

The Ld. CIT(A) has erred both legally and factually in upholding the penalty levied under section 271(1)(c) of the Income-tax Act of Rs. 14,76,538/-. The levy of penalty by the Ld.AO, which was affirmed by the Ld. CIT(A), is contrary to law and not supported by the factual matrix of the case. Hence, the penalty imposed by the Ld.AO and confirmed by the Ld. CIT(A) should be quashed in its entirety.

2.

The Ld. CIT(A) has erred both in law and on facts by failing to appreciate that the appellant firm, in response to the notice issued under section 148 of the Income-tax Act, voluntarily and bona fide disclosed the entire income and filed its return of income on 18.12.2018. Further, in order to avoid protracted litigation and for the purpose of compliance, the appellant paid the self- assessment tax and interest under sections 234A and 234B of the Act up to the date of filing the return. These facts demonstrate the appellant's bona fide intention to regularize its tax position. Therefore, there was neither concealment of income nor furnishing of inaccurate particulars of income in the return filed by the appellant.

3.

The Ld. CIT(A) has erred both in law and on facts in failing to appreciate that penalty under section 271(1)(c) can be levied only when there is concealment of particulars of income or furnishing of inaccurate particulars of income. In the present case, when the Ld.AO himself has accepted the returned income without making any addition /disallowance while completing the reassessment. Thus, the income declared by the appellant in the return filed in response to the notice u/s. 148 of the Act stands accepted in toto and hence the question of concealment of income or furnishing of inaccurate particulars does not arise.

4.

The Ld. CIT(A) has erred in law and on facts in not considering that the sole basis adopted by the Ld.AO for initiating penalty proceedings is that the appellant had not filed the return of income within the due date and had filed the return only after issuance of notice under section 148. Such reasoning by itself cannot form the basis for levy of penalty under section 271(1)(c) when the income returned by the appellant has been accepted without any variation.

5.

The Ld. CIT(A) erred in failing to appreciate that in the assessment order passed under section 143(3) read with section 147 of the Act, the Ld. AO merely stated that "penalty proceedings under section 271(1)(c) of the Act are being initiated for concealment of income." However, the show-cause notice dated 31.12.2018 issued under section 274 read with section - 3– 271(1)(c) alleges that "you have concealed the particulars of income or furnished inaccurate particulars of such income." The notice, therefore, is vague and does not identify which limb of section 271(1)(c) concealment of particulars of income or furnishing of inaccurate particulars of income, the penalty proceedings were directed against. In view of this fundamental ambiguity and lack of specification, the impugned malty order is contrary to settled legal principles and deserves to be quashed.

6.

The Ld. CIT(A) has erred in law and on facts in not considering the written submission filed by the appellant along with various judicial pronouncements in a proper perspective. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.

3.

At the time of hearing, the Ld. Counsel for the assessee relied upon the following judicial precedents in support of the contention that penalty under section 271(1)(c) of the Income-tax Act, 1961, cannot be sustained where the notice issued under section 274 does not specify the particular limb under which the penalty is proposed to be levied:

1.

Principal Commissioner of Income Tax vs. Unitech Reliable Projects (P) Ltd., [2024] 166 taxmann.com 135 (SC), dated 14.08.2024. 2. Archana Achut Sail vs. ITO, [2025] 173 taxmann.com 52 (Mumbai- Trib.), dated 25.03.2025. 3. Hitesha Sachin Taku vs. Income Tax Officer, [2026] 189 taxmann.com 493 (Mumbai-Trib.), dated 30.07.2026. 4. We have heard both sides and perused the material available on record. We find that the notice dated 31.12.2018, issued under section 274 read with section 271(1)(c) of the Act, was in a standard format and stated that the assessee had “concealed the particulars of income or furnished inaccurate particulars of such income”, without striking off the inapplicable limb. However, the assessment order records that the - 4– penalty proceedings were initiated for “concealment of income”. Thus, the notice did not clearly specify the particular charge under which the assessee was required to explain why penalty should not be imposed.

5.

Concealment of particulars of income and furnishing of inaccurate particulars of income constitute distinct limbs of section 271(1)(c) of the Act. The assessee must be made aware of the specific charge to enable an effective response. Where the notice does not specify the applicable limb, the assessee is deprived of a clear understanding of the charge to be answered. The judicial precedents relied upon by the Ld. AR support the requirement of specifying the charge in the penalty notice. In view of the facts of the present case and the judicial position relied upon by the assessee, we hold that the penalty imposed pursuant to the defective notice cannot be sustained.

6.

We further note that the income assessed pursuant to the reassessment proceedings was the same as the income declared by the assessee in the return filed in response to the notice issued under section 148 of the Act. No addition or disallowance was made by the AO. The penalty proceedings were initiated solely on account of the delay in filing the return of income. Mere delay in filing the return, in the absence of any material establishing concealment of income or furnishing of inaccurate particulars of income, does not justify the imposition of penalty under section 271(1)(c) of the Act. The Revenue has not brought any material on record to establish otherwise.

- 5–

7.

In view of the foregoing discussion, we hold that the penalty notice issued under section 274 read with section 271(1)(c) of the Act was defective and that the consequential penalty of Rs. 14,76,538/- is not sustainable. Accordingly, the penalty is deleted. Since the appeal is decided in favour of the assessee on this ground, the other contentions raised by the assessee are left open and are not adjudicated, being academic in nature.

8.

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

The order pronounced in the open Court on 15.10.2026. (TAPAS RAM MISRA) VICE-PRESIDENT () Ahmedabad; Dated 15.10.2026 MV

आदेश की "ितिलिप अ"ेिषत / Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant

2.

""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) /The CIT(A)- 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड"फाईल /Guard file. आदेशानुसार/ BY ORDER,सहायकपंजीकार (Dy./Asstt.

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