Loading judgment…

M/S. R R INDUSTRIES LTD.,CHENNAI vs DCIT, CENTRAL CIRCLE-1(4), CHENNAI | BharatTax

M/S. R R INDUSTRIES LTD.,CHENNAI vs. DCIT, CENTRAL CIRCLE-1(4), CHENNAI

ITA 2742/CHNY/2025Status: DisposedITAT Chennai18 February 2026AY 2009-1019 pages

AI SummaryAllowed

Facts

The assessee appealed against the confirmation of penalty imposed under section 271(1)(c) of the Income Tax Act for AYs 2008-09 to 2010-11. The primary grievance was the defective penalty notice issued by the AO, which did not specify the exact charge against the assessee.

Held

The Tribunal found the penalty notice issued under section 274 r.w.s. 271(1)(c) to be defective and invalid as it did not specify whether the penalty was for concealment of particulars or furnishing inaccurate particulars of income. Relying on the jurisdictional High Court's decision in Babuji Jacob, the Tribunal held the penalty to be vitiated.

Key Issues

Whether the penalty notice issued under Section 274 r.w.s. 271(1)(c) of the Income Tax Act was invalid for failing to specify the exact limb of the offence.

Sections Cited

271(1)(c), 274, 143(3), 153C, 153A, 10A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, C BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY. S

आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short ‘the Ld.CIT(A)’), Chennai-18, dated 07.08.2025, for the Assessment Year (hereinafter in short ‘AY’) 2008-09 to 2010-11 confirming the penalty- imposed u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘).

to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. :: 2 ::

2.

Since the facts and issues are same for all the assessment years, the penalty appeal for AY 2008-09 is taken as the lead case, and the result of which will be followed for other years/appeals. The main grievance of the assessee is against the action of the Ld.CIT(A)

1.

1. confirming the penalty. The assessee is noted to have raised issues on merits including legal issues and the Ld AR drew our attention to the grounds/additional grounds of appeal filed before this Tribunal; and he wants us to examine a legal issue wherein challenge is made to the notices issued by the AO u/s.274 r.w.s.271(1)(c) of the Act dated 31.03.2015 [for AYs 2008-09 to AY 2010-11] as bad in law being defective/invalid in law and therefore, according to assessee, the penalty imposed needs to be quashed.

3.

Brief facts of the case, as taken note from perusal of the penalty order for the Assessment Year 2008-09, are that the appellant-assessee, is a public limited company, which is engaged in the business of letting its properties in industrial park. And it filed its return of income for the Assessment year 2008-09 on 30.09.2008 admitting income of Rs.14,09,720/-, which was selected for scrutiny and an order u/s 143(3)

1. of the Act, dated 18.11.2010 was passed in this case. Later, a search was conducted in the premises of the MD of the assessee company on 11.10.2012 and certain material relating to the assessee were found and seized. Consequently, the assessment was completed vide order dated to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. :: 3 ::

1.

of the Act, without specifically mentioning in the impugned notice u/s.274 r.w.s. 271(1)(c) of the Act, what specific fault/infraction assessee should defend against the proposed penalty 271(1)(c) i.e. whether the assessee furnished inaccurate particulars of his income, or concealed the particulars of his income, without which the impugned notice is bad in law for being vague/arbitrary and not issued without application of mind. In order to buttress his arguments, he has cited the case-law/decision of the Hon’ble jurisdictional Madras High Court in the case of Babuji Jacob reported in 430 ITR 259 (Madras), wherein, in on an identical case, penalty was levied by the AO u/s.271(1)(c) of the Act; and the assessee challenged the imposition of penalty, inter alia, on the ground that the notice issued by AO u/s.271(1)(c) of the Act, in the printed form without specifically mentioning whether the proposed penalty was initiated for concealment of particulars of income or on account of furnishing of to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. inaccurate particulars of income, was bad in law; and the Hon’ble Madras High Court answered the question in favor of assessee and held that such an omission/failure on the part of AO, to specify the fault in the notice is legally untenable and such notice is defective and invalid. Therefore, Ld AR, urged that since AO had issued the impugned notice for captioned assessment years [AYs] without striking down the inapplicable portion in the printed notice, the same was issued without due application of mind and suffers for being vague; and due to omission on the part of AO to spell out clearly the infraction for which assessee was called upon to explain/defend, the assessee didn’t know what was the charge/fault, the AO had in mind, to levy penalty u/s 271(1)(c) of the Act, therefore the impugned notice is bad in law and therefore the penalty levied needs to be deleted. The Ld.AR also relied on the following case laws:

10.

We have heard both the parties and perused the material available on record. Since the assessee has raised, inter-alia, legal issue regarding invalid notice issued u/s.271(1)(c) r.w.s.274 of the Act, we will examine/adjudicate the said legal issue. For doing that, first of all we have to peruse the show cause notice (SCN) issued by the AO u/s 271(1)(c) r.w.s. 274 of the Act dated 31.03.2015 by which the AO gave to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. notice to the assessee as to “why an order imposing a penalty on you should not be imposed u/s 271(1)(c) of the Act?” On perusal of the SCN dated 31.03.2015 [for all the captioned AYs], we note that both the faults specified in Section 271(1)(c) of the Act are given therein i.e. “have concealed the particulars of his income” or “furnished inaccurate particulars of such income”. In other words, the AO has put to notice the assessee on both the faults without striking down the inapplicable fault which could have specified which fault AO has in mind that assessee has committed i.e. whether he is proposing penalty for the fault of “concealment of particulars of income” or “for furnishing of inaccurate particulars of income”. We note that by not striking down one of fault, the assessee was not in a position to defend properly the charge/fault against which the AO was proposing to levy penalty because both faults are different and distinct. Therefore, the notice was per-se confusing and vague; and infirm in eyes of law, for non-application of mind of the AO before issuing notice u/s.274 r.w.s.271(1)(1)(c) of the Act, as well as exposes the whimsical/arbitrary attitude of the AO, who has scant regard for Rule of Law and therefore, bad in law; and such notice cannot be held to be valid and legally tenable as pleaded by Revenue; and we note that in similar factual background, this Tribunal has consistently held such notices to be bad in law for not specifying the specific fault for which the assessee was being proceeded against for levy of penalty. And such to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. actions of the Tribunal has been upheld by several judgments of the various High Courts. In this regard, we note that in a similar case, where there was difference of opinion by two Division Benches, the Full Bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bombay) dated 11.03.2021 held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded, would vitiate the penalty itself. And thus the Hon’ble High Court upheld the view of the division bench order in the case of PCIT Vs. Goa Dourado Promotions (P.)

I. Kunhayammed v. State of Kerala (2000)6 SCC 359 II. Khoday Distilleries v. Sri Mahadeshwara Sahakara Sakkare Karkhane (2019) 2 SCC 136 19. Having said so, we also find force in the submission of the Ld.DR that the order passed by the Hon’ble Madras High Court in the case of Gangotri Textiles Ltd., was on the peculiar facts of that case and so, it is distinguishable. And in that case, the defect in the notice was raised for the first time before the Hon’ble Madras High Court, which was also a fact, the Hon’ble High Court noted to refuse admission of the same; and secondly, the Hon’ble High Court took note of the distinguishing facts of the case, wherein the assessee didn’t disclose about the sale of its land & to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. windmill in its RoI filed u/s.139(1) of the Act on 26.09.2012 and after ‘13’ months of issuance of statutory notice u/s.143(2) of the Act, the assessee by letter dated 03.03.2015, admitted that due to oversight, it didn’t offer the capital gains in its return and attached a summary of total income adjusting profit on the LTCG & STCG; and even at that stage, didn’t bother to file revised return. Considering the aforesaid facts, the Hon’ble High Court wondered as to how the assessee while responding to the penalty notice dated 12.03.2015, could have asserted that there was no concealment of income or furnishing of inaccurate particulars of income as envisaged, sec.271(1)(c) of the Act. The Hon’ble High Court took note of the fact that, the assessee didn’t disclose about the sale of the land & windmill in its return which fact/omission was clearly discernable from the perusal of the RoI/ITR, wherein, at the relevant column, it is stated as ‘nil’. In such factual back ground, the Hon’ble High Court held that “it will not only be a case of filing of inaccurate particulars, but also a case of concealment of income” meaning in the peculiar facts both faults are attracted. Therefore, in the aforesaid factual back ground, the assessee having understood the ingredients of the penalty proposed to be levied against it, coupled with the omission on the part of the assessee of not raising the invalidity/legal issue pertaining to the notice before the Ld.CIT(A)/Tribunal, refused to entertain the legal issue regarding defect in the notice and was of the view that there was no substantial question of to 2743/Chny/2025 (AYs 2008-09 to 2010-11) M/s. RR Industries Ltd. law against the action of the Tribunal confirming the penalty u/s.271(1)(c) of the Act. Therefore, the decision rendered in Gangotri Textiles Ltd.supra, is distinguishable on the peculiar facts of that case and therefore, dismissal of the SLP refusing leave to appeal, as noted supra would not come to the aid of the Revenue to wipe out the stare- decisis/judicial precedent of ratio laid down by the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra). Therefore, we don’t find any merits in the submissions/written submissions by the Revenue against the legal issue of defective notice dated 31.03.2015 for all AYs before us and which has been decided on the binding ratio of decision of the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra) and other case laws cited supra; and hence, we don’t find any merit in the submissions of the Ld.DR for Revenue and hence rejected.