INCOME-TAX OFFICER-8(3)(1), MUMBAI, MUMBAI vs. VIBGYOR TEXOTECH LIMITED, MUMBAI

ORDER

PER OM PRAKASH KANT, AM

(i) "In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLETE the penalty levied u/s. 271(1)(c) of the I. T. Act, 1961 of Rs.7,07,78,919/ 271(1)(c) of the I. T. Act, 1961 of Rs.7,07,78,919/- holding that the holding that the non-mentioning of relevant limb OR non mentioning of relevant limb OR non-striking off of irrelevant striking off of irrelevant limb in the penalty notice is limb in the penalty notice is a substantive defect in the initiating a substantive defect in the initiating proceedings." proceedings." (ii) "In the facts and in circumstances of the case and in law, the (ii) "In the facts and in circumstances of the case and in law, the (ii) "In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) solely on the basis of limb, without examining the merits of the solely on the basis of limb, without examining the merits of the solely on the basis of limb, without examining the merits of the case." (iii) In the facts and in circumstances of the case and in law, the ) In the facts and in circumstances of the case and in law, the ) In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that no prejudice was caused Ld. CIT(A) erred in ignoring the fact that no prejudice was caused Ld. CIT(A) erred in ignoring the fact that no prejudice was caused to the assessee, and the same is curable u/s 292B to the assessee, and the same is curable u/s 292B of of the Act.? Briefly stated, facts of the case are that in the reassessment 2. Briefly stated, facts of the case are that in the r Briefly stated, facts of the case are that in the r completed under section 143(3) read with section 147 of the completed under section 143(3) read with section 147 of the completed under section 143(3) read with section 147 of the Income-tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the total income of the assessee was determined at ₹28,34,12,447/ 28,34,12,447/-, total income of the assessee was determined at and penalty proceedings under section 271(1)(c) of the Act were and penalty proceedings under section 271(1)(c) of the and penalty proceedings under section 271(1)(c) of the initiated. The quantum matter travelled up to the Tribunal, and initiated. The quantum matter travelled up to the Tribunal, and initiated. The quantum matter travelled up to the Tribunal, and pursuant to the order giving effect, the total income was finally pursuant to the order giving effect, the total income was finally pursuant to the order giving effect, the total income was finally determined at ₹21,02,57,100/ 21,02,57,100/-. Consequent thereto, a show . Consequent thereto, a show-cause notice was issued to the assessee for levy of penalty, and after notice was issued to the assessee for levy of penalt notice was issued to the assessee for levy of penalt considering its submissions, the Assessing Officer imposed penalty considering its submissions, the Assessing Officer imposed penalty considering its submissions, the Assessing Officer imposed penalty of ₹7,07,78,990/-.

2.1 In appeal before the Ld. CIT(A), the assessee raised a specific In appeal before the Ld. CIT(A), the assessee raised a specific In appeal before the Ld. CIT(A), the assessee raised a specific legal plea that the notice issued under section 274 read with section legal plea that the notice issued under section 274 read with section legal plea that the notice issued under section 274 read with section 271(1)(c) suffered from the vice of vagueness inasmuch as it did not from the vice of vagueness inasmuch as it did not from the vice of vagueness inasmuch as it did not specify whether the penalty proceedings were initiated for specify whether the penalty proceedings were initiated for specify whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of concealment of income or for furnishing of inaccurate particulars of concealment of income or for furnishing of inaccurate particulars of income. It was contended that such a defect rendered the penalty income. It was contended that such a defect rendered the penalty income. It was contended that such a defect rendered the penalty proceedings void ab initio. oid ab initio.

2.2 The Ld. CIT(A), after considering the submissions of the The Ld. CIT(A), after considering the submissions of the The Ld. CIT(A), after considering the submissions of the assessee and examining the penalty notice, found that the relevant assessee and examining the penalty notice, found that the relevant assessee and examining the penalty notice, found that the relevant limb of section 271(1)(c) had not been struck off in the notice issued limb of section 271(1)(c) had not been struck off in the notice issued limb of section 271(1)(c) had not been struck off in the notice issued under section 274. Placing reliance on th under section 274. Placing reliance on the binding precedents of the e binding precedents of the Hon’ble Supreme Court in Hon’ble Supreme Court in CIT v. SSA’s Emerald Meadows CIT v. SSA’s Emerald Meadows [2016] 73 taxmann.com 248 (SC), the Hon’ble Karnataka High Court in CIT v. taxmann.com 248 (SC), the Hon’ble Karnataka High Court in taxmann.com 248 (SC), the Hon’ble Karnataka High Court in Manjunatha Cotton & Ginning Factory Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565, and the [2013] 359 ITR 565, and the Hon’ble jurisdictional High Court in Hon’ble jurisdictional High Court in Mohd. Farhan A. Shaikh Mohd. Farhan A. Shaikh (supra), the Ld. CIT(A) held that non (supra), the Ld. CIT(A) held that non-specification of the precise specification of the precise charge is a substantive defect going to the root of jurisdiction, and charge is a substantive defect going to the root of jurisdiction, and charge is a substantive defect going to the root of jurisdiction, and therefore, the penalty order c therefore, the penalty order could not be sustained. The penalty was ould not be sustained. The penalty was accordingly deleted observing as under observing as under: “4. �न ण�य/ Decision / Decision: The assessee company had not filed return of income for the A.Y. 2009- The assessee company had not filed return of income for the A.Y. 2009 The assessee company had not filed return of income for the A.Y. 2009 10. Proceedings u/s 147 of the Act were initiated and assessment order 10. Proceedings u/s 147 of the Act were initiated and assessment order 10. Proceedings u/s 147 of the Act were initiated and assessment order u/s 143(3) of the Act was passed on 30.03.2016 determining total f the Act was passed on 30.03.2016 determining total f the Act was passed on 30.03.2016 determining total income at Rs. 28,31,12,447/ income at Rs. 28,31,12,447/-. The matter travelled upto ITAT and the . The matter travelled upto ITAT and the order giving effect was passed determining total income at Rs. Rs. order giving effect was passed determining total income at Rs. Rs. order giving effect was passed determining total income at Rs. Rs. 21,02,57,100/-. Penal proceedings u/s 271(1)(c) of the Act was init . Penal proceedings u/s 271(1)(c) of the Act was init . Penal proceedings u/s 271(1)(c) of the Act was initiated and imposed at Rs 7,07,78,919/ and imposed at Rs 7,07,78,919/-. Hence, this appeal. Ground No 1 As the notice u/s. 274 suffers from the vice of vagueness in As the notice u/s. 274 suffers from the vice of vagueness in As the notice u/s. 274 suffers from the vice of vagueness in view of the fact that the notice does not state whether notice issued for view of the fact that the notice does not state whether notice issued for view of the fact that the notice does not state whether notice issued for fling inaccurate particulars or for concealment of income, the notice u/s. fling inaccurate particulars or for concealment of income, the notice u/s. fling inaccurate particulars or for concealment of income, the notice u/s. 274 and consequent proceedings are legally in 274 and consequent proceedings are legally invalid. The appellant has submitted as under: The appellant has submitted as under:

The notice of penalty is not clear whether for concealment or for The notice of penalty is not clear whether for concealment or for The notice of penalty is not clear whether for concealment or for inaccurate particulars. Hence entire proceedings are illegal in view of inaccurate particulars. Hence entire proceedings are illegal in view of inaccurate particulars. Hence entire proceedings are illegal in view of Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The Deputy Commissioner of Income Tax, Central Circle Deputy Commissioner of Income Tax, Central Circle-1, Belgaum. Copy of 1, Belgaum. Copy of decision attached and copy of notice u/s. 271(1)(c) attached. decision attached and copy of notice u/s. 271(1)(c) attached. In the order of penalty, the AO has concluded as under: In the order of penalty, the AO has concluded as under: As the reply of the assessee is not satisfactory, as no explanation or As the reply of the assessee is not satisfactory, as no explanation As the reply of the assessee is not satisfactory, as no explanation documentary evidences in its support, for non imposition of penalty u/s documentary evidences in its support, for non imposition of penalty u/s documentary evidences in its support, for non imposition of penalty u/s 271(1)(c), has been given by the assessee. 271(1)(c), has been given by the assessee. Considering the above facts and reply filed by the assessee, it has been Considering the above facts and reply filed by the assessee, it has been Considering the above facts and reply filed by the assessee, it has been proved that the assessee has deliberately submitted the inaccurate proved that the assessee has deliberately submitted the inaccurat proved that the assessee has deliberately submitted the inaccurat particulars of income in ITR filed in response to notice u/s 148 and particulars of income in ITR filed in response to notice u/s 148 and particulars of income in ITR filed in response to notice u/s 148 and during the assessment proceedings, to avoid payment of taxes. Penalty during the assessment proceedings, to avoid payment of taxes. Penalty during the assessment proceedings, to avoid payment of taxes. Penalty proceedings under section 271(1)(c) of the Income tax Act, 1961 were proceedings under section 271(1)(c) of the Income tax Act, 1961 were proceedings under section 271(1)(c) of the Income tax Act, 1961 were initiated for the A.Y. 2009 initiated for the A.Y. 2009-10 in the case of the assessee vide penalty the assessee vide penalty notice u/s 271(1)(c) of the Act issued on 30.03.2016. notice u/s 271(1)(c) of the Act issued on 30.03.2016. Therefore, after considering all facts and circumstances of the case, I am Therefore, after considering all facts and circumstances of the case, I am Therefore, after considering all facts and circumstances of the case, I am satisfied that the assessee has concealed its income and therefore is satisfied that the assessee has concealed its income and therefore is satisfied that the assessee has concealed its income and therefore is liable for penalty u/s 271(1)(c liable for penalty u/s 271(1)(c) of the Act. The tax sought to be evaded in ) of the Act. The tax sought to be evaded in this case comes to Rs. 7,07,78,919/ this case comes to Rs. 7,07,78,919/-(After deduction of prepaid tax). (After deduction of prepaid tax). Therefore, the minimum of penalty leviable in this case comes to Rs. Therefore, the minimum of penalty leviable in this case comes to Rs. Therefore, the minimum of penalty leviable in this case comes to Rs. 7,07,78,919/- @ 100% and maximum of penalty leviable in this case @ 100% and maximum of penalty leviable in this case @ 100% and maximum of penalty leviable in this case comes to Rs. 21,23,36,757/ to Rs. 21,23,36,757/- @ 300%. After considering all facts and @ 300%. After considering all facts and circumstances of the case, I impose a penalty of Rs. 7,07,78,919/-, which circumstances of the case, I impose a penalty of Rs. 7,07,78,919/ circumstances of the case, I impose a penalty of Rs. 7,07,78,919/ is about 100% of the tax sought to be evaded in this case is about 100% of the tax sought to be evaded in this case The penalty notice dated 30/03/2016 under section 274 rws 271(1)(c) The penalty notice dated 30/03/2016 under section 274 rws 271( The penalty notice dated 30/03/2016 under section 274 rws 271( given by AO is reproduced as under: given by AO is reproduced as under: *have concealed the particulars of your Income as per order u/s 143(3) *have concealed the particulars of your Income as per order u/s 143(3) *have concealed the particulars of your Income as per order u/s 143(3) attached furnished inaccu particulars of such income. attached furnished inaccu particulars of such income. As such, from the extracts of the notice reproduced as above, it is clearly As such, from the extracts of the notice reproduced as above, it is clearly As such, from the extracts of the notice reproduced as above, it is clearly evident that the AO did not specify charge under which penalty the AO did not specify charge under which penalty the AO did not specify charge under which penalty proceedings had been initiated by him on the assessee. As such, proceedings had been initiated by him on the assessee. As such, proceedings had been initiated by him on the assessee. As such, initiation of penalty itself is bad in law. Copy of penalty notice issued initiation of penalty itself is bad in law. Copy of penalty notice issued initiation of penalty itself is bad in law. Copy of penalty notice issued under section 274 rws 271(1)(c) dated 30.03.2016 under section 274 rws 271(1)(c) dated 30.03.2016 is as under under :

From the notice issued for initiation of penalty proceedings u/s 274 r.w.s. m the notice issued for initiation of penalty proceedings u/s 274 r.w.s. m the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act, it is seen that the AO is not certain as to under which 271(1)(c) of the Act, it is seen that the AO is not certain as to under which 271(1)(c) of the Act, it is seen that the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case, I limb the penalty was to be levied. Considering these facts of the case, I limb the penalty was to be levied. Considering these facts of the case, I am of the view that non am of the view that non-mentioning of relevant limb in the penalty notice ing of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter is a substantive defect and infirmity which goes to the root of the matter is a substantive defect and infirmity which goes to the root of the matter and is not curable at the later and is not curable at the later stage. The case of the assessee is case of the assessee is squarely covered by the decision of the Hon'ble Apex Court case of CIT squarely covered by the decision of the Hon'ble Apex Court case of CIT squarely covered by the decision of the Hon'ble Apex Court case of CIT vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said decision, the Hon'ble Court has dismissed the SLP filed by the Revenue decision, the Hon'ble Court has dismissed the SLP filed by the Revenue decision, the Hon'ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding by observing that there is no merit in the petition of the revenue upholding by observing that there is no merit in the petition of the revenue upholding the order of Hon'ble High Court wherei the order of Hon'ble High Court wherein the decision of the coordinate n the decision of the coordinate division bench of Hon'ble Karnataka High Court in the case of CIT Vs division bench of Hon'ble Karnataka High Court in the case of CIT Vs division bench of Hon'ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been followed. The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar Agarwal ITAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: TAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: TAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: There is no merit in this intended appeal. The impugned notice under There is no merit in this intended appeal. The impugned notice under There is no merit in this intended appeal. The impugned notice under Section 271(1)(c) does not specify which of the two contraventions, the Section 271(1)(c) does not specify which of the two contraventions, the Section 271(1)(c) does not specify which of the two contraventions, the assessee is guilty of. For those reasons, the notice is bad. We are assessee is guilty of. For those reasons, the notice is b assessee is guilty of. For those reasons, the notice is b supported in our view by the decision of the Supreme Court in Amrit supported in our view by the decision of the Supreme Court in Amrit supported in our view by the decision of the Supreme Court in Amrit Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 SCC 419, a Division Bench of our Court in Principal Commissioner of SCC 419, a Division Bench of our Court in Principal Commissioner of SCC 419, a Division Bench of our Court in Principal Commissioner of Income Tax - 19, Kolkata Versus Dr. 19, Kolkata Versus Dr. Murari Mohan Koley, ITAT No. 306 of Murari Mohan Koley, ITAT No. 306 of 2017 (so far unreported) decided on 18th July, 2018, judgements of the 2017 (so far unreported) decided on 18th July, 2018, judgements of the 2017 (so far unreported) decided on 18th July, 2018, judgements of the Karnataka and Bombay High Courts referred to in the preceding Karnataka and Bombay High Courts referred to in the preceding Karnataka and Bombay High Courts referred to in the preceding judgement and an unreported judgement of the Division Bench in judgement and an unreported judgement of the Division Bench in judgement and an unreported judgement of the Division Bench in Principal CIT1, Kolkata Principal CIT1, Kolkata Versus M/S. SRMB Srijan Ltd. made on 26th Versus M/S. SRMB Srijan Ltd. made on 26th February, 2019 on the same point. We make it absolutely clear that we February, 2019 on the same point. We make it absolutely clear that we February, 2019 on the same point. We make it absolutely clear that we have only gone into the question of technical defect in the notice stated to have only gone into the question of technical defect in the notice stated to have only gone into the question of technical defect in the notice stated to have been issued under Section 271(1)(c) read with Section 274 of the have been issued under Section 271(1)(c) read with Section 274 of t have been issued under Section 271(1)(c) read with Section 274 of t Income Tax Act, 1961 and the consequences thereof. Income Tax Act, 1961 and the consequences thereof. The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum [2021] 125 taxmann.com 253 (Bombay) held that: [2021] 125 taxmann.com 253 (Bombay) held that:  As aptly pointed As aptly pointed out by the referring Division Bench, before this out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by CIT v. Court there are two sets of cases. One set of cases is led by CIT v. Court there are two sets of cases. One set of cases is led by CIT v. Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a decision earliest in point of time. The other set does not have a decision earliest in point of time. The other set does not have a decision earliest in point of time. The other set does not have a lead case; th lead case; they all have been cryptic but stand persuaded by ey all have been cryptic but stand persuaded by Manjunatha (supra). For that reason, the Karnataka High Court's Manjunatha (supra). For that reason, the Karnataka High Court's Manjunatha (supra). For that reason, the Karnataka High Court's decision has been discussed in detail. Nevertheless, the referring decision has been discussed in detail. Nevertheless, the referring decision has been discussed in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: Division Bench has found on one precedential plank these cases: Division Bench has found on one precedential plank these cases: (1) CIT v. Samson Perinchery [2017] 88 taxmann.com 413/392 ITR mson Perinchery [2017] 88 taxmann.com 413/392 ITR mson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18 v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18 v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18-6- 2019] and (4) Pr. 2019] and (4) Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [TX CIT v. Goa Dourado Promotions (P.) Ltd. [TX Appeal No. 18 of 2019, dated 26 Appeal No. 18 of 2019, dated 26-11-2019] On the opposite plank 2019] On the opposite plank is Kaushalya (supra). All by co is Kaushalya (supra). All by co-equal Benches, though. [Para 162] equal Benches, though. [Para 162]  The Tax Appeal No. 24/2019, decided on 11 The Tax Appeal No. 24/2019, decided on 11-11-2019, relates to 2019, relates to Pr. CIT (Central) v Pr. CIT (Central) v. Goa Coastal Resorts & Recreation (P.) Ltd. In . Goa Coastal Resorts & Recreation (P.) Ltd. In that one, the Division Bench has held that the notice which is that one, the Division Bench has held that the notice which is that one, the Division Bench has held that the notice which is issued to the assessee must indicate whether the Assessing issued to the assessee must indicate whether the Assessing issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves Officer is satisfied that the case of the assessee involves Officer is satisfied that the case of the assessee involves concealment of particulars concealment of particulars of income or furnishing of inaccurate of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in particulars of income or both, with clarity. If the notice is issued in particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not the printed form, then the necessary portions which are not the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with applicable are required to be struck off, so as to indicate with applicable are required to be struck off, so as to indicate with clarity the nature o clarity the nature of the satisfaction recorded. In both Samson f the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not Perinchery and New Era Sova Mine, the notices issued had not Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the struck of the portion which were inapplicable. From this, the struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of Division Bench concluded that there was no proper record of Division Bench concluded that there was no proper record of satisfaction or proper applic satisfaction or proper application of mind in a matter of initiation of ation of mind in a matter of initiation of penalty proceedings. In the present case, as well if the notice is penalty proceedings. In the present case, as well if the notice is penalty proceedings. In the present case, as well if the notice is perused, it is apparent that the relevant portions have not been perused, it is apparent that the relevant portions have not been perused, it is apparent that the relevant portions have not been struck off. This leaves no ground for interference with the struck off. This leaves no ground for interference with the struck off. This leaves no ground for interference with the impugned order. The i impugned order. The impugned order are quite consistent by the mpugned order are quite consistent by the law laid down in the case of Samson Perinchery case (supra) and law laid down in the case of Samson Perinchery case (supra) and law laid down in the case of Samson Perinchery case (supra) and New Era Sova Mine case (supra) and, therefore, warrant no New Era Sova Mine case (supra) and, therefore, warrant no New Era Sova Mine case (supra) and, therefore, warrant no interference. [Para 169] interference. [Para 169]  Question No. 1: If assessment order clearly records satisfaction fo Question No. 1: If assessment order clearly records satisfaction fo Question No. 1: If assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in imposing penalty on one or other, or both grounds mentioned in imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), does a mere defect in notice section 271(1)(c), does a mere defect in notice-not notice not notice-not striking off irrelevant matter striking off irrelevant matter-vitiate penalty proceedings? COME vitiate penalty proceedings? COME TAX DEPARTMEN TAX DEPARTMEN  It does. The primary burden lies on the revenue. It does. The primary burden lies on the revenue. In the assessment In the assessment proceedings, it forms an opinion, prima facie or otherwise, to proceedings, it forms an opinion, prima facie or otherwise, to proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that launch penalty proceedings against the assessee. But that launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under translates into action only through the statutory notice under translates into action only through the statutory notice under section 271(1)(c), read with section 274. True, the as section 271(1)(c), read with section 274. True, the as section 271(1)(c), read with section 274. True, the assessment proceedings form the basis for the penalty proceedings, but they proceedings form the basis for the penalty proceedings, but they proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. are not composite proceedings to draw strength from each other. are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a Nor can each cure the other's defect. A penalty proceeding is a Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. The corollary; nevertheless, it must stand on its own. The corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that proceedings culminate under a different statutory scheme that proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the remains distinct from the assessment proceedings. Therefore, the remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty assessee must be informed of the grounds of the penalty assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice proceedings only through statutory notice. An omnibus notice proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. [Para 181] rom the vice of vagueness. [Para 181]  More particularly, a penal provision, even with civil consequences, More particularly, a penal provision, even with civil consequences, More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be must be construed strictly. And ambiguity, if any, must be must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. [Para 182] resolved in the affected assessee's favour. [Para 182]  Therefore, the first question is answered to the effect that Pr. CIT Therefore, the first question is answered to the effect that Pr. CIT Therefore, the first question is answered to the effect that Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, dated 26-11- 2019] and other cases have adopted an approach 2019] and other cases have adopted an approach more in consonance with the statutory scheme. That means it mus more in consonance with the statutory scheme. That means it mus more in consonance with the statutory scheme. That means it must be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] 216 ITR 660 (Bom.) does not lay down the correct proposition of 216 ITR 660 (Bom.) does not lay down the correct proposition of 216 ITR 660 (Bom.) does not lay down the correct proposition of law. [Para 183] law. [Para 183] Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'?  Indeed, Smt Kaushalya Case (supra) d Indeed, Smt Kaushalya Case (supra) did discuss the aspect of id discuss the aspect of prejudice. As already noted, Kaushalya noted that the assessment prejudice. As already noted, Kaushalya noted that the assessment prejudice. As already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be orders already contained the reasons why penalty should be orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, 'fully knew in initiated. So, the assessee, stresses Kaushalya, 'fully knew in initiated. So, the assessee, stresses Kaushalya, 'fully knew in detail the exact charge of the revenue agai detail the exact charge of the revenue against him'. For Kaushalya, nst him'. For Kaushalya, the statutory notice suffered from neither non the statutory notice suffered from neither non-application of mind application of mind nor any prejudice. According to it, 'the so nor any prejudice. According to it, 'the so-called ambiguous called ambiguous wording in the notice [has not] impaired or prejudiced the right of wording in the notice [has not] impaired or prejudiced the right of wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opport the assessee to a reasonable opportunity of being heard'. It went unity of being heard'. It went onto observe that for sustaining the plea of natural justice on the onto observe that for sustaining the plea of natural justice on the onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, 'it has to be established that ground of absence of opportunity, 'it has to be established that ground of absence of opportunity, 'it has to be established that prejudice is caused to the concerned person by the procedure prejudice is caused to the concerned person by the procedure prejudice is caused to the concerned person by the procedure followed'. Kaushalya closes the followed'. Kaushalya closes the discussion by observing that the discussion by observing that the notice issuing 'is an administrative device for informing the notice issuing 'is an administrative device for informing the notice issuing 'is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him assessee about the proposal to levy penalty in order to enable him assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. [Para 184] INC to explain as to why it should not be done. [Para 184] INC to explain as to why it should not be done. [Para 184] INC  No doubt, there can exist a case w No doubt, there can exist a case where vagueness and ambiguity here vagueness and ambiguity in the notice can demonstrate non in the notice can demonstrate non-application of mind by the application of mind by the authority and/or ultimate prejudice to the right of opportunity of authority and/or ultimate prejudice to the right of opportunity of authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In hearing contemplated under section 274. So asserts Kaushalya. In hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it fact, for one assessment year, it set aside the penalty proceedings set aside the penalty proceedings on the grounds of non on the grounds of non-application of mind and prejudice. [Para application of mind and prejudice. [Para 185]  That said, regarding the other assessment year, it reasons that That said, regarding the other assessment year, it reasons that That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, the assessment order, containing the reasons or justification, the assessment order, containing the reasons or justification, avoids prejudice to the avoids prejudice to the assessee. That is where, it is reckoned, the assessee. That is where, it is reckoned, the reasoning suffers. Kaushalya's insistence that the previous reasoning suffers. Kaushalya's insistence that the previous reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings supply justification and cure the defect in penalty proceedings supply justification and cure the defect in penalty proceedings has not met acceptance. [Para 186] proceedings has not met acceptance. [Para 186] Question No. 3: What is effect of Suprem Question No. 3: What is effect of Supreme Court's decision in Dilip N. e Court's decision in Dilip N. Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue of non-application of mind when irrelevant portions of printed notices application of mind when irrelevant portions of printed notices application of mind when irrelevant portions of printed notices are not struck off ? are not struck off ?  In Dilip N. Shroff, case (supra) for the Supreme Court, it is of In Dilip N. Shroff, case (supra) for the Supreme Court, it is of In Dilip N. Shroff, case (supra) for the Supreme Court, it is of 'some significance that in the standard Pro significance that in the standard Pro-forma used by the Assessing forma used by the Assessing Officer in issuing a notice despite the fact that the same postulates Officer in issuing a notice despite the fact that the same postulates Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but that inappropriate words and paragraphs were to be deleted, but that inappropriate words and paragraphs were to be deleted, but the same had not been done'. Then, Dilip N. Shroff the same had not been done'. Then, Dilip N. Shroff, case (supra) on , case (supra) on facts, has felt that the Assessing Officer himself was not sure facts, has felt that the Assessing Officer himself was not sure facts, has felt that the Assessing Officer himself was not sure whether he had proceeded on the basis that the assessee had whether he had proceeded on the basis that the assessee had whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. concealed his income or he had furnished inaccurate particulars. concealed his income or he had furnished inaccurate particulars. [Para 187]  It may, in this context, be respectful It may, in this context, be respectfully observed that a ly observed that a contravention of a mandatory condition or requirement for a contravention of a mandatory condition or requirement for a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further communication to be valid communication is fatal, with no further communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the proof. That said, even if the notice contains no caveat that the proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the inapplicable portion be deleted, it is in the interest of fairness and interest of fairness and justice that the notice must be precise. It should give no room for justice that the notice must be precise. It should give no room for justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff case (supra) disapproves of ambiguity. Therefore, Dilip N. Shroff case (supra) disapproves of ambiguity. Therefore, Dilip N. Shroff case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show the routine, ritualistic practice of issuing omnibus show the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly notices. That practice certainly betrays non- application of mind. application of mind. And, therefore, the infraction of a mandatory procedure leading to And, therefore, the infraction of a mandatory procedure leading to And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. [Para 188] penal consequences assumes or implies prejudice. [Para 188] penal consequences assumes or implies prejudice. [Para 188]  In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 the Supreme Court has encapsulated the Supreme Court has encapsulated the principles of prejudice. the principles of prejudice. One of the principles is that 'where procedural and/or substantive One of the principles is that 'where procedural and/or substantive One of the principles is that 'where procedural and/or substantive provisions of law embody the principles of natural justice, their provisions of law embody the principles of natural justice, their provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. infraction per se does not lead to invalidity of the orders passed. infraction per se does not lead to invalidity of the orders passed. Here again, prejudice mus Here again, prejudice must be caused to the litigant, "except in the t be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only case of a mandatory provision of law which is conceived not only case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest'. [Para 189] in individual interest but also in the public interest'. [Para 189] in individual interest but also in the public interest'. [Para 189]  Here, section 271(1)(c) is one such provision. With calamitous, Here, section 271(1)(c) is one such provision. With calamitous, Here, section 271(1)(c) is one such provision. With calamitous, albeit commerci albeit commercial, consequences, the provision is mandatory and al, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, brooks no trifling with or dilution. For a further precedential prop, brooks no trifling with or dilution. For a further precedential prop, Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to in Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to in Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to in which the Apex Court has quoted with approval its earlier which the Apex Court has quoted with approval its earlier which the Apex Court has quoted with approval its earlier judgment in State o judgment in State of Orissa v. Dr. Binapani Dei [AIR 1967 SC f Orissa v. Dr. Binapani Dei [AIR 1967 SC 1269]. According to it, when by reason of action on the part of a 1269]. According to it, when by reason of action on the part of a 1269]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of statutory authority, civil or evil consequences ensue, principles of statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no natural justice must be followed. In such an event, although no natural justice must be followed. In such an event, although no express provisi express provision is laid down on this behalf, compliance with on is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue principles of natural justice would be implicit. If a statue principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held contravenes the principles of natural justice, it may also be held contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. [Para 190] ultra vires Article 14 of the Constitution. [Para 190]  As a result, it is held t As a result, it is held that Dilip N. Shroff Case (supra) treats hat Dilip N. Shroff Case (supra) treats omnibus show omnibus show-cause notices as betraying non-application of mind application of mind and disapproves of the practice, to be particular, of issuing notices and disapproves of the practice, to be particular, of issuing notices and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable in printed form without deleting or striking off the inapplicable in printed form without deleting or striking off the inapplicable parts of that ge parts of that generic notice. [Para 191] In all the above decision, it has been held that non mentioning of relevant In all the above decision, it has been held that non mentioning of relevant In all the above decision, it has been held that non mentioning of relevant limb or non-striking off of irrelevant limb in the penalty notice is a striking off of irrelevant limb in the penalty notice is a striking off of irrelevant limb in the penalty notice is a substantive defect in the initiation of proceedings itself and the substantive defect in the initiation of proceedings itself and the substantive defect in the initiation of proceedings itself and the consequent penalty levied on the basis of such defective notice cannot be ty levied on the basis of such defective notice cannot be ty levied on the basis of such defective notice cannot be sustained. In view of these facts and circumstances of the case, the AO is sustained. In view of these facts and circumstances of the case, the AO is sustained. In view of these facts and circumstances of the case, the AO is directed to delete the penalty levied u/s 271(1)(c) directed to delete the penalty levied u/s 271(1)(c) of the Act. Act.”

Order pronounced in the open Court. Order pronounced in the open Court.