DAZZLER CONFECTIONERY COMPANY PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER WARD 3(1)(1, MUMBAI

Thereafter, the Assessing Officer issued statutory notice dated 28.03.2016 u/s 274 r.w.s 271 of the Act for the following limb/charges:  Has concealed the particulars of income “OR”....................... Furnishing inaccurate particulars of such income.

Therefore, the Assessee, being aggrieved, challenged the said penalty levied, by filing First Appeal before the Ld. Commissioner, who, vide impugned order, affirmed the penalty by dismissing the First Appeal filed by the Assessee.

Thus, the Assessee, being aggrieved, has preferred instant appeal.

Heard the parties and perused the material available on record. The Assessee, at the outset, demonstrated the fact and issue by drawing attention of this Court to the notice dated 28.03.2016 u/s 274 r.w.s 271

On the contrary, the Ld. DR specifically relied on the judgment passed by the Juri ictional High Court in the case of Veena Estate (P) Ltd. vs. CIT (2024) 158 Taxmann.com 341 (Bom.), and claimed that the alleged defect in notice issued to the Assessee u/s 271(1)(c) r.w.s 274, in regard to which the Assessee had never raised an objection from the very inspection, could not be permitted to be raised in appeal, specifically in absence of any prejudice being caused.

Heard the parties and perused the material available on record, and considered the rival submissions of the parties. Admittedly, the Assessing Officer in the aforesaid penalty notice, has not specified any particular limb/charge for initiation of the penalty proceedings but, in fact, used ‘OR’ in between the limbs as specified in section 271(1)(c) of the Act. Recently, the Hon’ble Coordinate Bench of the Tribunal in the case of 4 Dazzler Confectionery Company, Private Limited, M/s. Allied Digital Services Limited Vs. Deputy Commissioner of Income Tax, Central Circle 1(3) vide (ITA No.8147/M/2025 decided on 26.02.2026), has dealt with the identical issue and ultimately deleted the identical penalty, by observing and holding as under:- “7. We have heard the parties and perused the material available on record. Admittedly, the AO initiated the penalty proceedings in the assessment order for filing of inaccurate particulars of income, however, thereafter issued a notice under Section 274 r.w.s. 271 (c) of the Act dated 28.03.2013 for concealment of particulars of income OR furnishing of inaccurate particulars of income meaning thereby without specifying any specific charge/limb. The AO further vide penalty order, ultimately levied the penalty under consideration for concealment of income OR furnishing inaccurate particulars of income, which goes to show that the AO while levying penalty was also confused and/or unclear qua limb/charge of penalty levied. Thus, the decision of the AO in levying the penalty is hit by the judgment of the Juri ictional High Court in the case of Md. Farhan A Shaikh (supra) .

We further observe that the validity/legality of such kind of notice as involved in this case, has also been examined by the Hon’ble [now] ITO Ward 41(3)(1) {ITA Nos.7130,7131 & 7132/M/2025 decided on 05.02.2026 and ultimately deleted the identical penalty levied, on the basis of similar kind of notice u/s 274 r.w.s. 271(i)(c) of the Act, by observing and holding as under:

As, the Assessee has raised a legal point/ground, which goes to the root of the case, therefore, before delving into the 5 Dazzler Confectionery Company, Private Limited, merits of the case, we deem it appropriate to decide the legal ground first.

Coming to the legal ground raised by the Assessee, we observe that the Assessing Officer, in the assessment order dated 30.03.2014 passed under section 143(3) read with section 147 of the Act, simultaneously initiated penalty proceedings under section 274 read with section 271(1)(c) of the Act for concealment of particulars of income and subsequently issued a notice dated 30.03.2014 under section 274 read with section 271(1)(c) of the Act for concealment of particulars of income or furnishing of inaccurate particulars of income and on the basis of such notice, ultimately levied the penalty of Rs.70,00,000/- under section 271(1)(c) of the Act for concealment of income.

Admittedly, in the notice dated 30.03.2014 issued under section 274 read with section 271(1)(c) of the Act, the Assessing Officer has not specified the specific limb / charge for initiating the penalty proceedings, so as to make the Assessee aware “as on what charge/limb penalty proceedings have been initiated and/or on what charge the Assessee has to defend the case.

Though the Ld. DR drew attention of this Court to the notice dated 28.03.2018 issued under section 274 read with section 271(1)(c) of the Act, whereby the specific charge of concealment of particulars of income was communicated to the Assessee and the Assessee was show-caused to appear on 13.04.2018, either personally or through a duly authorised representative, to reply as to why an order imposing a penalty should not be made under section 271(1)(c) of the Act. Therefore, it is a fact that, in such notice, the date for compliance was given as 13.04.2018. but the Assessing Officer, prior to the said date, passed the penalty order on 30.03.2018 itself, i.e., anti-date, as prescribed in the notice. Thus, such notice lost its sanctity and would be of no help to the Revenue.

We observe from the impugned order that though the Ld. Commissioner has also considered the aspect qua non- specification of the limb/charge for initiating penalty proceedings by issuing a notice dated 30.03.2014 under section 274 read with section 271(1)(c) of the Act, by relying on various judgments, however, it is a fact that the Ld. Commissioner has not considered the judgment of the Hon’ble Juri ictional High Court in the case of Md. Farhan A Shaikh vs. DCIT (2021) 434 ITR 1 (Bom.) (HC) (FB) and 6 Dazzler Confectionery Company, Private Limited, various other judgments of the juri ictional Benches of the Tribunal, including in the case of Korbusier Kinema Private Limited, Juhu vs. NFAC ACIT, Circle-15(1)(2), ITA No. 1016/M/2025, decided on 01.05.2025 wherein, the Hon’ble Coordinate Bench of the Tribunal not only considered the judgment of the Hon’ble Juri ictional High Court in the case of Md. Farhan A Shaikh (supra), but also in the case of Veena Estate (P) Ltd. vs. CIT (2024) 461 ITR 483 (Bom.), which was delivered in favour of the Revenue, and held as under:

Thereafter, the AO issued a show cause notice dated 27.12.2008 for concealment of the particular of income or/and furnishing of inaccurate particulars of such income and ultimately vide penalty order dated 18.01.2022 u/s 271(1)(c) of the Act imposed the penalty to the tune of Rs.9.97.234/being 200% of the tax sought to be evaded on the income of Rs.14.95.851/-.

The Assessee, being aggrieved, challenged the said levy of penalty before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner vide impugned order dated 17.12.2024 affirmed the levy of penalty.

The Assessee, being aggrieved, challenged the decision of the Ld. Commissioner on various aspects including notice issued u/s 274 of the Act dated 27.12.2018 and by relying on the judgment passed by the Hon'ble Juri ictional High 8. On the contrary, the Ld. D.R. refuted the claim of the Assessee by placing reliance on the judgment in the case of Veena Estate (P.) Ltd. vs. CIT (2024) 461 ITR 483 (Bom.) passed by the Hon'ble Juri ictional High Court, concerning the identical issue, wherein it was held that if an Assessee does not challenge the validity of notice during the penalty or appellate proceedings but instead responds substantially to the allegations, such objections are barred at a later stage.

We have heard the parties and perused the material available on record. As the issue/ground raised by the Assessee qua 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 issued the penalty notice dated 27.12.2018 u/s 274 of the Act which is reproduced herein below:

Coming to the judgment relied on by the Ld. D.R. in the case of Veena Estate (P.) Ltd. (supra), we observe that in that particular case the notice u/s 274 of the Act was challenged after 23 years for the first time before the Hon'ble High Court by raising additional ground, which was not admitted and rejected by the Hon'ble High Court by interim order. Here it is not the case so, as in the instant case the Assessee has challenged the notice u/s 274 r.w.s. 271 of the Act before the second appellate authority and within a reasonable time and therefore the judgment referred to by the Ld. D.R. is factually dissimilar.

Even otherwise, the Hon'ble Juri ictional High Court in the Full Bench case in the case of Md. Farhan A Shaikh (supra) has elaborately dealt with the issue and the relevant judgments and therefore respectfully following the said judgment, we are inclined to delete the penalty imposed by the AO and affirmed by the Ld. Commissioner. Thus, the penalty is deleted.

We further observe that the Hon’ble Juri ictional High Court, recently in the case of Principal Commissioner of Income Tax -6 vs. Colo Colour Private Limited (Income Tax Appeal No. 48 of 2022), decided on 16.09.2025, also dealt with an identical issue, qua not specifying the relevant limb/charge for initiating the penalty proceedings and held as under:

It is well settled that the condition precedent for levy of penalty under Section 271(1)(c) is only when

The Hon’ble High Court has held that there cannot be two opinions that section 271(1)(c) of the Act is required to be strictly construed. Hence, in the absence of a clear position regarding concealment of particulars of income or furnishing of inaccurate particulars of income in the facts of the present case, penalty proceedings could not have been initiated.

The Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar), has also dealt with identical notice and held as under:

2. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind.

The Hon'ble High Court of Delhi in the case of M/s. Sahara India Life Insurance Company Ltd. 432 ITR 84 (Del.) while following the above judgement in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar), held as under:

Thus, on the aforesaid analyzations, we are unable to sustain the penalty levied under section 271(1)(c) of the Act. Hence, the same is deleted.

Thus, respectfully following the aforesaid judgment, we are inclined to delete the penalty under consideration, hence the same is deleted.

Thus, respectfully following the judgment referred to above, we are inclined to delete the penalty. Hence, the penalty is deleted by allowing appeal of the Assessee. 10. In the result, the Assessee’s Appeal is allowed.

The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT