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Facts
The assessee filed an appeal against the penalty order passed by the AO and confirmed by the CIT(A). The penalty was levied under section 271(1)(c) of the Income Tax Act for AY 2015-16.
Held
The Tribunal held that the notice issued by the AO for penalty proceedings was defective as it failed to specify the exact limb of Section 271(1)(c) under which the proceedings were initiated. This defect vitiated the penalty proceedings.
Key Issues
Whether the penalty proceedings initiated under section 271(1)(c) of the Act are sustainable when the notice issued under section 274 does not specify the exact limb of the section.
Sections Cited
271(1)(c), 274, 275, 12AA
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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Dawat E Islami AP, (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 25/07/2025 for the A.Y.2015-16.
2. The assessee has raised the following grounds of appeal:
“1. Ld. AO erred in law, initiated penalty proceeding a mechanical manner and assumed improper jurisdiction by not mentioning in the Assessment Order as well as in penalty notice issued on 19-12-2017 as to exactly under which limb of section 271(1)(c) of the Act, i.e. concealment of particulars of income or furnishing of inaccurate particulars of income, the penalty was triggered and Initiated. Ld. CIT(A) erred in law in law in not allowing the said ground of appeal.
The satisfaction drawn by the Ld. AO while initiating proceeding u/s 271(1)(c) of the Act in the notice issued on 19-12-2017 is in improper and vague manner which also makes the initiation of the said proceeding invalid and void.
The learned Assessing Officer passed an order u/s 271(1)(c) of the IT Act beyond the time limits provided u/s 275 of the IT Act, therefore, the order u/s 271(1)(c) is an invalid order. Ld. CIT(A) erred in not allowing the sald ground of appeal.
1. 1. 1. 1. 1. 4. The appellant has not concealed any particulars of income, however, while filing Form No.10A on 30.03.2017, the appellant was of genuine belief that the registration u/s 12AA will be accorded from 01.04.2016, which includes assessment year 2016-17. Therefore, the claim is genuine and no concealment of income/particulars. Therefore, penalty levied may be deleted.
5. Ld. AO erred in levying penalty u/s 271(1)(c) of the Act and the Ld. CIT(A) erred in confirming the same as the appellant has neither concealed the particulars of income nor furnished inaccurate particulars of income.
6. In the facts and circumstances the penalty levied u/s 271(1) (C) is not according to the provisions of the Act therefore, the same may be deleted.
7. The Appellant reserves the right to add, alter, amend and withdraw any of the above grounds of appeal.”
3. The brief facts of the case are that the Learned Assessing Officer (“Ld. AO”) levied penalty of Rs.6,45,172/- under section 271(1)(c) of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2015–16 vide order dated 24.12.2021. Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(A). However, the assessee did not succeed before the Ld. CIT(A) and the appeal was dismissed confirming the penalty imposed by the Ld. AO. Page 2 of Dawat E Islami AP vs. ITO 4. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that under Ground Nos. 1 and 2, the assessee has challenged the very validity of the penalty proceedings initiated under section 271(1)(c) of the Act. In this regard, the Ld. AR submitted that the notice issued by the Ld. AO under section 274 read with section 271(1)(c) of the Act dated 19.12.2017 is invalid in law as the Ld. AO has failed to specify the exact limb under which the penalty proceedings were initiated. Inviting our attention to the notice issued under section 274 of the Act, extracted at page no. 3 of the paper book, the Ld. AR submitted that the Ld. AO has mentioned that the assessee has “concealed the particulars of income or furnished inaccurate particulars of such income”. It was submitted that both the limbs under section 271(1)(c) of the Act carry different connotations and consequences and therefore the assessee must be made aware of the exact charge so as to enable him to defend himself effectively. It was therefore contended that the non-specification of the exact limb renders the notice issued under section 274 of the Act defective and consequently the penalty order passed pursuant to such defective notice is liable to be quashed. Accordingly, the Ld. AR prayed that the penalty order passed by the Ld. AO and sustained by the Ld. CIT(A) be quashed.
5. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities and submitted that the Ld. AO was justified in levying penalty under section 271(1)(c) of the Act, which was rightly confirmed by the Ld. CIT(A).
Page 3 of Dawat E Islami AP vs. ITO 6. We have heard the rival submissions and perused the material available on record including the case laws relied upon. The issue raised by the assessee is regarding the validity of the penalty proceedings initiated under section 271(1)(c) of the Act on the basis of the notice issued under section 274 of the Act, wherein the Ld. AO has not specified the exact limb of section 271(1)(c) of the Act under which the penalty proceedings were initiated. In this regard, we have gone through the relevant portion of the notice issued under section 274 of the Act, extracted by the assessee at page no. 3 of the paper book, which is to the following effect:
On perusal of above, we find that the Ld. AO has mentioned that the assessee has “concealed the particulars of income or furnished inaccurate particulars of such income” without striking off the irrelevant portion. Thus, the notice does not specify whether the penalty proceedings were initiated for Page 4 of Dawat E Islami AP vs. ITO concealment of income or for furnishing inaccurate particulars of income. We further find that an identical issue has been adjudicated by this Tribunal in para Nos. 8 to 11 of the order in the case of Sunil Kumar Ahuja Vs. ITO, in dated 11/02/2026, wherein relying on the judgment of the Hon’ble Delhi High Court in the case of PCIT v. Shyam Sunder Jindal, 461 ITR 501, which has been affirmed by the Hon’ble Supreme Court by dismissal of the Revenue’s SLP in PCIT v. Shyam Sunder Jindal, [2024] 164 taxmann.com 503 (SC), this Tribunal has held as under :
Page 5 of Dawat E Islami AP vs. ITO Page 6 of Dawat E Islami AP vs. ITO Page 7 of Dawat E Islami AP vs. ITO Page 8 of Dawat E Islami AP vs. ITO
On perusal of above, we find that this Tribunal has held that failure to specify the exact limb in the notice issued under section 274 of the Act renders the penalty proceedings unsustainable in law. Therefore, respectfully following the aforesaid decision and maintaining judicial consistency, we hold that the notice issued by the Ld. AO under section 274 of the Act without specifying the exact charge is defective and consequently the penalty proceedings initiated under section 271(1)(c) of the Act are not sustainable in law. Accordingly, the penalty order passed by the Ld. AO, which is founded on an invalid notice, cannot be sustained.
Since we have allowed the appeal of the assessee on the aforesaid legal ground, we do not consider it necessary to adjudicate the other grounds raised by the assessee and the same are left open.
In the result, the appeal of the assessee is allowed.
Page 9 of Dawat E Islami AP vs. ITO Order pronounced in the Open Court on 11th March, 2026.