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Facts
The Assessing Officer made an addition on account of denial of deduction under Section 54F and initiated penalty proceedings. Notices under Section 274 read with Section 271 were issued, which the assessee argued were invalid as they did not specify the exact charge (concealment of income OR furnishing inaccurate particulars).
Held
The Tribunal held that the penalty notices issued under Section 274 read with Section 271 were vitiated because they did not specify the particular limb or charge for the penalty, following the judgment of the Hon'ble Jurisdictional High Court.
Key Issues
Whether the penalty is validly levied when the show cause notice under Section 274 r.w.s. 271 did not specify the exact charge for the penalty.
Sections Cited
143(3), 54F, 274, 271, 271(1)(c), 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRYSHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 30.12.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2010-11.
In the instant case, the Assessing Officer (AO) vide assessment order dated 11.03.2013 u/s 143(3) of the Act, has made the addition of Rs.2,65,94,500/- on account of denial of deduction claimed u/s 54F of the Act. The AO simultaneously also initiated the penalty proceedings for furnishing of inaccurate particulars of income. Subsequently, the AO issued the notices dated 11.03.2013 and 23.09.2015 u/s 274 r.w.s. 271 of the Act for concealment of income OR for furnishing of inaccurate particulars of income and ultimately vide penalty order dated 31.03.2017 u/s 271(1)(c) of the Act, levied the penalty of Rs.1,18,48,981/- @ 100% of the tax sought to be evaded, for furnishing of inaccurate particulars of income AND concealment of income.
Thus, the Assessee has raised the legal ground qua validity of the notice issued u/s 274 r.w.s. 271 of the Act as well as penalty levied vide penalty order dated 31.03.2017 on the ground that the AO had initiated penalty proceedings u/s 271(1)(c) of the Act just for furnishing of inaccurate particulars of income and thereafter issued show cause notices dated 11.03.2013 & 23.09.2015 without specifying any charge or limb i.e. for concealment of particulars of income OR for furnishing of inaccurate particulars of income and ultimately levied the penalty for furnishing of inaccurate particulars of income AND concealment of income. As the AO has not specified the specific limb/charge in the notices issued u/s 274 of the Act, thus the same would vitiate the entire proceedings and entail the penalty order as nullity, in view of the judgment passed by the Hon'ble Jurisdictional High Court in the case of Md. Farhan A Shaikh Vs. DCIT (2021) 434 ITR 1 (Bom.) (HC) (FB).
On the contrary, though the Ld. D.R. refuted the claim of the 4. Assessee and relied on the orders of the authorities below but not the contents of the notices, as pointed above.
We have heard the parties and perused the material available on record. As the issue/ground raised by the Assessee qua validity of notice u/s 274 of the Act, goes to the root of the case, hence for the sake of brevity, we are inclined to decide this ground first.
Admittedly, the AO in the notices u/s 274 r.w.s. 271(1)(c) of the Act (supra) issued, has not specified particular limb/charge of penalty and therefore the penalty levied is hit by various judgments including in the case of CIT Vs. Manjunatha Cotton & Green Factory (2013) 35 taxmann.com 250/2018 and Md. Farhan A Shaikh vs. DCIT (2021) 434 ITR 1 (Bom.) (HC) (FB) {decided by Jurisdictional High Court}, wherein it was held “ that defect in the notice – non striking of the irrelevant matter, shall vitiate the proceedings” and therefore respectfully following the dictum laid down in the judgments referred to above, we are inclined to the penalty under consideration. Thus, the penalty is deleted.
As we have deleted the penalty, hence deem it appropriate not to delve into the other aspects/issues/grounds raised by the Assessee, as the adjudication of the same would prove futile exercise.
In the result, the appeal filed by the Assessee is allowed. 8.
Order pronounced in the open court on 30.07.2025.