MUKESH KHURANA,NEW DELHI vs. DCIT, CENTRAL CIRCLE, NOIDA

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ITA 4708/DEL/2018Status: DisposedITAT Delhi02 February 2026AY 2008-094 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 penalty levied under section 271(1)(c) of the Income-tax Act, 1961, was not sustainable in law. The reasoning was based on two primary grounds. Firstly, the AO's penalty notice failed to specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal noted that the lower appellate authority (CIT(A)) had not rebutted this stand of the assessee, and this lack of specificity in the notice was held to be a mandatory requirement, as supported by the decisions in PCIT Vs. Sahara India Life Insurance Co. Ltd. and PCIT Vs. Gopal Kumar Goyal. Secondly, the Tribunal observed that the issue of unexplained cash credits under section 68 is subjective and requires appreciation of evidence. It was also noted that the assessee's return income had been accepted. Relying on the Supreme Court's decision in CIT vs. Reliance Petroproducts (P) Ltd., the Tribunal concluded that such subjective issues do not attract the penalty provisions of section 271(1)(c). Consequently, the penalty was deleted in its entirety.

What were the facts?

The assessee, Sh. Mukesh Khurana, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, against the order of the Commissioner of Income Tax (Appeals)-IV (CIT(A)) dated 12.04.2018. This order upheld a penalty of Rs.3,03,03,876/- levied under section 271(1)(c) of the Income-tax Act, 1961, by the Assessing Officer (AO) in an order dated 31.03.2016. The penalty proceedings stemmed from a departmental search action dated 09.10.2013, which led to a section 153A notice. The assessee had offered credits in his bank account to tax under section 68 as 'income from other sources' in his return filed on 22.03.2016. The quantum proceedings related to these credits have attained finality.

What were the issues?

1. Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, is sustainable in law, considering the AO's penalty notice did not specify whether it was for concealment of income or furnishing inaccurate particulars of income. Assessee's contentions: The assessee argued that the AO's penalty notice was defective for failing to specify whether the penalty was for concealment of income or furnishing inaccurate particulars. This omission is mandatory as per the case laws of PCIT Vs. Sahara India Life Insurance Co. Ltd. (2021) and PCIT Vs. Gopal Kumar Goyal (2023). Furthermore, the assessee contended that the issue of unexplained cash credits under section 68 is subjective and requires appreciation of evidence, and since the assessee's return income was accepted, the penalty under section 271(1)(c) should not be attracted, citing CIT vs. Reliance Petroproducts (P) Ltd. (2010). Revenue's contentions: The judgment does not record any specific contentions made by the Revenue on these issues.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 68,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA

For Respondent: Ms. Monika Singh, CIT(DR)
Hearing: 02.02.2026Pronounced: 02.02.2026

ORDER

PER SATBEER SINGH GODARA, JM

1.

This assessee’s appeal for assessment year 2008-09, arises against the Commissioner of Income Tax (Appeals)-IV [in short, the “CIT(A)”], Kanpur’s order dated 12.04.2018 passed in case no. CIT(A)-IV/KNP/10371/DCIT-CC/Noida/2016-17/58, involving proceedings under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.

2.

It transpires during the course of hearing that the assessee/appellant is aggrieved against both the learned lower authorities’ action holding him to have concealed and furnished inaccurate particulars of taxable income whilst levying the impugned section 271(1)(c) penalty of Rs.3,03,03,876/- in the Assessing Officer’s order dated 31.03.2016 as upheld in the lower appellate discussion.

3.

That being the case, we first of all make it clear that the impugned quantum issue of the assessee’s credits in the bank account which stood offered to tax under section 68 under the head “income from other sources” in his return as well as computation submitted on 22nd March, 2016 in response to section 153A notice issued after the departmental search action dated 09.10.2013. There is thus no dispute that the quantum proceedings in the assessee’s case have attained finality.

4.

We now advert to the impugned penalty proceedings. The Revenue could hardly dispute that even at para 4 (page 5) of the lower appellate discussion, the learned CIT(A) has not rebutted the assessee’s stand that the Assessing Officer’s penalty notice nowhere specified as to whether it was an instance of concealment

2 | P a g e or furnishing of inaccurate particulars of income; as the case may be, which has been held as mandatory limb in the penalty show- cause notice as per the case laws PCIT Vs. Sahara India Life Insurance Co. Ltd. (2021) 432 ITR 84 (Del.) and PCIT Vs. Gopal Kumar Goyal (2023) 153 taxmann.com 534 (Del.). This is indeed coupled with the fact that not only the assessee’s return income itself stood accepted but also such an issue of section 68 unexplained cash credits is highly a subjective one requiring appreciation of the entire evidence tendered before the departmental authorities thereby not attracting section 271(1)(c) of the Act stipulating the foregoing twin limbs as per the CIT vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) 5. Faced with this situation, we are of the considered view that both the learned lower authorities’ action levying the impugned section 271(1)(c) penalty in the assessee’s case is not sustainable in law. The same stands deleted in very terms therefore.

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