THE INDIAN EXPRESS PRIVATE LIMITED,MUMBAI vs. ASST. COMMISSIONER OF INCOME TAX, MUMBAI

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ITA 4337/MUM/2025Status: DisposedITAT Mumbai22 August 2025AY 2010-116 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 notice issued under section 274 of the Income-tax Act, 1961, was defective. Citing the Bombay High Court's decision in Mohd. Farhan A. Shaikh vs. Deputy Commissioner of Income Tax, the Tribunal found that the Assessing Officer (AO) had not specified the limb under which the penalty was proposed to be levied, and the notice did not clearly state the charge of concealing or furnishing inaccurate particulars of income. The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings and must stand on their own, with the assessee being informed of the grounds through a statutory notice. An omnibus notice suffers from vagueness, and penal provisions must be construed strictly. Consequently, the Tribunal set aside the notice under section 274 and quashed the resultant penalty order. Furthermore, even on merits, the Tribunal noted that the penalty was levied on the assessee's claim of bad debts amounting to Rs. 7,19,96,655/-. The Tribunal referred to its own co-ordinate bench's decision in ITA No. 5552/Mum/2017 for AY 2010-11, which had upheld the CIT(A)'s order allowing the carry forward of the said loss. Since the foundation of the penalty proceedings (the defective notice) was removed, and the merits also favored the assessee, the AO was directed to delete the impugned penalty. The appeal of the assessee was allowed.

What were the facts?

The assessee, The Indian Express Private Limited, filed an appeal against the order dated 08/05/2025 passed by the NFAC, Delhi (learned CIT(A)). The appeal pertains to Assessment Year 2010-11. The assessee's grievance is primarily against the confirmation of a penalty of Rs. 2,45,00,000 imposed under section 271(1)(c) of the Income-tax Act, 1961. The assessee argued that the penalty proceedings were without jurisdiction as a specific charge of concealing particulars of income or furnishing inaccurate particulars was not recorded in the notice under section 274 or the assessment order. The assessee also contended that the penalty should have been deleted on a genuine and bona fide legal claim, and further, that relief granted by the Tribunal in quantum proceedings should have led to the deletion of the penalty.

What were the issues?

1. Whether the penalty proceedings are vitiated due to a defect in the notice issued under section 274 of the Income-tax Act, 1961, specifically the failure to strike off irrelevant portions and clearly specify the charge of concealing or furnishing inaccurate particulars of income? - Assessee's contention: The notice under section 274 is legally flawed as it does not specify the charge of concealing particulars of income or furnishing inaccurate particulars. The penalty proceedings are therefore without jurisdiction. The assessee relies on the Bombay High Court judgment in Mohd. Farhan A. Shaikh vs. Deputy Commissioner of Income Tax. - Revenue's contention: Not recorded. 2. Whether the penalty should be deleted on merits, considering the assessee's claim for bad debts and the relief granted by the Tribunal in quantum proceedings? - Assessee's contention: The penalty should be deleted on a legal claim that was genuine and bona fide, and also because the Tribunal had granted relief in the quantum proceedings. The assessee refers to the Tribunal's decision in ITA No. 5552/Mum/2017 for AY 2010-11. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 36(1)(vii)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE

For Appellant: Shri Sukhsagar Syal, A/R
For Respondent: Mr. Virabhadra S. Mahajan, Sr. D/R
Hearing: 14/08/2025Pronounced: 22/08/2025

PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assesse is preferred against the order dated 08/05/2025 by NFAC, Delhi (hereinafter the “ld. CIT(A)"] pertaining to AY 2010-11. 2. The grievance of the assessee reads as under:- “1. On the facts and circumstances of the case and in law, the order passed by the learned CIT(A) confirming the penalty of Rs.2,45,00,000 imposed under section 271(1)(c) of the Income-tax Act, 1961 (the Act') is bad in law.

2.

The Id. CIT(A) erred in not quashing the penalty proceedings which were without jurisdiction inasmuch as a specific charge of concealing the particulars of income or furnishing of inaccurate particulars of income was not recorded, either in the notice u/s 274 of the Act or in the assessment order.

3.

The Id. CIT (A) erred in not deleting the penalty on a legal claim made by the Appellant that was genuine and bona fide.

4.

The Id. CIT (A) erred in upholding the penalty order despite the fact that due relief had been granted by the Tribunal in the quantum proceedings. Each of the above grounds are mutually exclusive, independent and without prejudice to each other. The Appellant craves leave to add, alter, modify or amend any of the grounds) / sub- grounds) of the appeal."

3.

Vide Ground No. 2, the assessee has challenged the legality of the notice u/s 274 of the Act on the ground that it does not specify the charge of concealing particulars of income or furnishing of inaccurate particulars.

4.

Heard the parties. The impugned notice is as under:- PAN/PB/Pg-24/12-13 आदि कर एनए 24. און ער ה आयकर ऑनिनम 1961 की धारा 271 के साथ पढ़ाई भाग 274 के अधिका NOJICE UNDER SERION 274 READ WITH SEX TRON 271 01 THE INCOME TAX ACT 1961 PAN-AACCT 114 0 F आयकर कार्यालय-tax Office Mlu. The Indian Expreas Ltd. 2nd Floor, Express Tow-Ly, Nartimented 13/02/2013. MUMBAI-13- किकर निर्धारिण वर्ग के दौरान मुझे प्रतीत होता है कि अपने के साथ बानी सरकार्ड Whereas in the course of proceeding before me for the assessment car-2010.-1 it appears 11 שאת that you अधिनियम, • बिना डांन्चत कारण के बहन विवरणही दी है जो आपको भारतीय 922 को 22[1/22(2)/34 के अधीन दी गई सुथना के अनुसार देनी थी या जो आपको धारा 1394 ॐ अधीन था आपका अधिनियम 1961 के धाา 139 (2118 के अधीन दी गई सूना सं. अनुसार दाखिल करनी भी अथवा उचित कारण ता. के बिना आपने दिए गए समय के अन्दर और अन्त धारा 139(1) या इस प्रकार की शून्या द्वारा अपेक्षित ऐति से विवरण नहीं दी है। X * have without reasonable cause failed to furnish meeturn of income which you were required to furnish by a notice given under section 22 (1)/22 (2) 34 of the Indian Income-tax Act, 1972 or which you were required tea furnish under section 139(1) or by a notice given under section 139 (2) 148 of the Income Tax Act, 1961. or have without No. dated rensonable cause lailed to furnish it within the time nllowed and the manner required by the said section 139 (1) or by suck notice. Read on 212/13 .५.उ/P.T.O • विना उचित फाल्के आपने भी आयकर अधिनियम 1922 कथा) 22(4)/23(2) या आयकर आंधनियम 1961 को भाग 14211) 14312) 44 अधीन हो गई बना का अनुधार नहीं किया है। सं. ना have withon reasonable cause failed to comply with a notice under section 22(-1)/23(2) of the Indian Income tax Act. 1922 or under section 1421143(2) of the income-tax Act, 1961 No dated • अपनी आय के लिए गा इस प्रकार की आग ती गलन दिए हैं। have concealed the particulars of your income ar inaccurate particulars of such Ingene. furnished * आपको एतदद्वारा नांचत किया जाना है कि ता 19 अ.म.पू.म में आप मेरे कार्यालय में उपस्थिन हो और कारण बताए कि आयकर अधिनियम, 1961 को धारा 271 के अधीन आप पर दण्ड लगाने का आदेश क्या न दिया जाए। यदि आप र उपस्थित नोकन या प्रशधिकृत पांतांनी द्वारा सुनवाई के लिए दिए गए अवसर का लाभ नहीं उठाना नाहने की उन्न नारीख को या उससे पूर्व लिन इसका कारण चनाएं जिस पर धारा 271 के अधीन कोई ऐवा आदेश देने के पूर्व विचार किया जाएगा। 11:00 You are hereby requested to appear before me 21 A.M.PM un $4-03-2003. and show cause why an order imposing a penalty on you should not be usede under section 271 of the inconestas Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative you may show enuse in writing on or before the said date which will be considered before any such order is made under section 271. sonarot in (मुल) {Sual) • जो शब्द या परें अनावश्य हो, उन्हें काट दीजिए। • Delete inappropriate words and paragraphs. आयकर अधिकारी thecome-sav Officer!

5.

From the above it can be seen that the AO has not specified the limb under which he proposes to levy the penalty u/s 271(1)(c) of the Act. The Hon'ble High Court of Bombay in the case of Mohd. Farhan A. Shaikh vs. Deputy Commissioner of Income Tax and Anor. [2021] 434 ITR 1 (Bom[FB]), had the occasion to consider a similar challenge and interalia held as under:- “180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalty proceedings?

181.

It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.

182.

More particularly, a penal provision, even with civil consequences, must be construued strictly. And ambiguity, if any, must be resolved in the affected assessee's favour.

183.

Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law.

6.

Finding parity of facts, respectfully following the decision of the Hon'ble High Court (supra), we set aside the impugned notice u/s 274 of the Act and quash the resultant penalty order.

7.

Even on merits of the case, the penalty has been levied because the assessee claimed Rs.7,19,96,655/- as bad debts with the reason that the company had entered into a memorandum of understanding in respect of a property at Lalbaug, Mumbai and accordingly, an agreement to sale was entered into with M/s. Uppal Housing Ltd., which was managed by Lalbaug Industrial Estate, Mumbai. The assessee could not fulfill the terms of the memorandum of understanding and the said party backed out from the MoU and subsequently the assessee could realize the sale consideration short by Rs.7,19,96,655/- which he had claimed as bad debts u/s 36(1)(vii) of the Act. The quarrel travelled up to the Tribunal and the Co-ordinate Bench in ITA No. 5552/Mum/2017; AY 2010-11, order dated 18/02/2020, held as under:- “11. After hearing both the parties and perusing the material on record including the impugned order, we observe that the Ld. CIT(A) has rightly entertained the claim of the assessee and allowed the long term capital loss to be carried forward to the subsequent years. The Revenue has relied on the decision of Hon'ble Supreme Court in the case of Goetz India Ltd. vs. CIT 284 ITR 322, however, the Hon'ble Bombay High Court in the case of “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd." (supra) has held that appellate authorities can entertain a claim of the assessee which is not made in the return of income after considering the decision of Hon'ble Supreme raised by the revenue.”

8.

In light of the above, since the foundation has been removed, the superstructure must fall. Even on merits of the case, the AO is directed to deleted the impugned penalty.

9.

In the result, appeal of the assessee is allowed. Order pronounced in the Court on 22nd August, 2025 at Mumbai. (NARENDRA KUMAR BILLAIYA) ACCOUNTANT MEMBER Mumbai, Dated 22/08/2025 *SC SPS आदेश की प्रतिलिपि अग्रेषित/

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