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Facts
For AY 2010-11, the AO framed an assessment u/s 144, adding Rs. 226.87 Lacs as unexplained income u/s 68/69. Subsequently, a penalty of Rs. 70,53,886/- was levied u/s 271(1)(c) for concealment of particulars of income due to the assessee's non-compliance during penalty proceedings. The CIT(A) later deleted this penalty.
Held
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of the penalty. It was held that the show-cause notices issued by the AO u/s 274 r.w.s. 271 were vague as they failed to specifically indicate whether the penalty was for concealment of income or furnishing inaccurate particulars of income. Following established legal precedents, such non-specification vitiates the penalty proceedings, rendering the penalty unsustainable on legal grounds.
Key Issues
Whether penalty under Section 271(1)(c) is valid if the show-cause notice under Section 274 fails to specify the exact limb of default (concealment of income or furnishing inaccurate particulars).
Sections Cited
144, 68, 69, 271(1)(c), 274
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा"रण वष" / Assessment Year: 2010-11) ITO Ward-4 Shri Surinder Kumar Verma Aaykar Bhawan, B.C. Bazar बनाम/ Vs. H. No. 38, Kabir Nagar Ambala Cantt., Haryana - 133001 Ambala Cantt., Haryana - 133001 "थायीलेखासं./जीआइआरसं./PAN/GIR No. ACSPV-3298-B (अपीलाथ"/Appellant) (""थ" / Respondent) : अपीलाथ"कीओरसे/ Appellant by : None ""थ"कीओरसे/Respondent by : Sh. Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 27.01.2026 घोषणाकीतारीख /Date of Pronouncement : 28.01.2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2010-11 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 24-02-2024 deleting penalty of Rs.70,53,886/- as levied by Ld. Assessing Officer [AO] u/s 271(1)(c) of the Act vide order dated 21-09-2015. At the time of hearing, none appeared for assessee. The Ld. Sr. DR pleaded for restoration of penalty as levied by Ld. AO. Upon perusal of case records, the appeal is disposed-off as under. 1
It emerges that an assessment was framed u/s 144 on 16-03- 2015 wherein Ld. AO made addition of unexplained income u/s 68 / 69 for Rs.226.87 Lacs. Consequently, penalty was initiated for concealment of income in the assessment order and penalty show cause-notices were issued to the assessee u/s 274 r.w.s. 271 during the course of penalty proceedings. The assessee remained non- compliant and accordingly, Ld. AO levied impugned penalty for concealment of particulars of income.
Upon further appeal, Ld. CIT(A) considered the explanation as well as case laws as cited by the assessee to assail penalty on merits as well as on legal grounds. On the legal issue, it was contended by the assessee that Assessing Officer was not sure about whether the assessee had concealed his income or furnished inaccurate particulars of income. Though in the assessment order, it was mentioned that the assessee had concealed income, however, the show-cause notices as issued u/s 274 r.w.s. 271 did not specify the exact limb out of the two limbs which was applicable to the case of the assessee. When the AO did not record any satisfaction in absolute terms whether the assessee had concealed income or had furnished inaccurate particulars of income, the levy of penalty would be invalid and deserves to be deleted.
The Ld. CIT(A) concurred that Ld. AO, in the assessment order, had initiated penalty for concealment of income, however, in the two show-cause notices as issued by Ld. AO on 16-03-2015 & 07-08- 2015, Ld. AO did not struck-off the irrelevant or non-applicable part / 2 charge and also did not specify the exact charge for which the assessee was being penalized while initiating penalty against the assessee. The two limbs viz. concealment of income and furnishing of inaccurate particulars of income, were separate charges and would carry different connotation / meaning. Non-framing of specific charges would vitiate the penalty proceedings as per settled legal position. Therefore, it was to be accepted that AO had failed to frame specific charge against the assessee for initiation and imposition of penalty u/s 271(1)(c). From perusal of assessment order, penalty order and penalty notices issued u/s 274 r.w.s 271(1)(c), it was evident that the penalty proceedings were initiated on both counts / limbs viz., concealment of income as well as for furnishing of inaccurate particulars of income. The Ld. AO did not specify the exact charge for which the assessee was being penalized while initiating penalty against the assessee. The ratio of decision of Hon'ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory (359 ITR 565) was applied wherein it was held that notice u/s 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it was for concealment of income or for furnishing of incorrect particulars of income. Mere sending of printed form mentioning all the grounds of Sec.271 would not satisfy the requirement of law. The assessee should know the grounds which he has to meet specifically otherwise the principles of natural justice would be offended. On the basis of such proceedings, no penalty could be imposed on the assessee. This decision was followed 3 extensively in catena of judicial pronouncements rendered by various Hon'ble High Courts as well as different benches of Tribunal. Finally, the impugned penalty was held to be non sustainable on legal grounds against which the revenue is in further appeal before us.
From the findings of Ld. CIT(A), it clearly emerges that the both the show-cause notices as issued by Ld. AO u/s 274 r.w.s. 271 are vague in nature and the same do not specify exact limb out of two limbs of Sec.271(1)(c) which was applicable to the case of the assessee. Non-framing of specific charges in these notices would vitiate the penalty proceedings as per the cited decision of Hon’ble High Court. The fact of initiating penalty in the assessment order is not sufficient compliance since penalty proceedings are separate proceedings. The Ld. AO was required to frame specific charge against the assessee in the show-cause notices which was not done. This being so, we do not find any error in the adjudication of legal grounds by Ld. CIT(A). The penalty has rightly been deleted on legal grounds.