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Income Tax Appellate Tribunal, DELHI BENCH, F: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI BRAJESH KUMAR SINGH
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 1.1 Since common issues are involved in both the appeals, they are disposed of by this consolidated order for the sake of convenience and brevity.
Brief facts of the case: In this case, the assessment order under section 143(3) of the Act was passed on 30.12.2011, in which, inter alia, the assessee’s claim for exemption under section 10(1) of the Act, on account of agricultural income of Rs. 55,07,79,154/-, was denied by the AO and the A.O. treated the same as business income (relevant paras are 4 and 31-35 of the assessment order). Further, an amount of Rs. 4,76,13,799/- was added on account of ‘Revaluation of closing stock’. (relevant paras are 37 and 38 of the assessment order). On account of these disallowances, the A.O. initiated penalty proceedings for furnishing inaccurate particulars of income under section 271(1)(c) of the Act, and noted in para no. 36, 38 and 39 of his order as under:
“ 36. As assessee has furnished inaccurate particulars of its income to the extent of Rs. 55,07,79,154/-, I am satisfied that it attracts penalty u/s 271(1)(c) of the Act. Therefore, penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 are initiated in this regard.
The closing stock will, therefore, be increased by Rs. 14,29,95,311/-. However, it is seen that an addition of Rs. 9,53,81,512/- was made on similar grounds in the previous assessment year i.e. 2006-07 and therefore, for the year under ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. consideration, the opening stock of the assessee will also be increased by this amount. As a net result profit of the assessee will be enhanced by an amount of Rs. 4,76,13,799/-.
As assessee has furnished inaccurate particulars of its income and concealed particulars of its income to this extent. I am satisfied that it attracts penalty u/s 271(1)(c) of the Act. Therefore, penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 are intimated in this regard.”
2.1 Further, in this case, the AO levied penalty amounting to Rs. 20,33,92,953/- for furnishing inaccurate particulars of its income. The para no. 13 of the penalty order levying the penalty is reproduced as under:
“ 13. It view of this it is clear that assessee has furnished inaccurate particulars of its income in respect of the additions amounting to Rs.59,83,92,953/- (Rs.55,07,79,154/- + Rs. 4,76,13,799/-), and accordingly, it is found to be a fit case for imposition of penalty u/s 271(1)(c) of the Act, I therefore, impose a penalty of Rs. 20,33,93,765/-as worked out below.”
2.2 Thus in this case, the Assessing Officer in the assessment order dated 30.12.2011 passed in this case-initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and also levied penalty u/s 271(1)(c) of the Act on account of furnishing of inaccurate particulars of income.
2.3 In this regard, the list of dates and the relevant developments/proceedings for deciding this appeal are stated as hereunder:
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. A.Y. : 2008-09
Sr. No. DATE 1 30.12.2011 Assessment Order u/s 143 (3) passed and penalty notice u/s 274 r.w.s 271(1)(c) of the Act issued. 2. 27.03.2015 Penalty order u/s 271(1)(c) passed levying penalty of Rs. 20,33,93,765/- 3. 23.02.2017 The above penalty order dt. 27.03.2015 deleted by the Ld. CIT(A) -7. New Delhi. 4. 13.05.2021 Application under Rule 27 of the ITAT Rules, 1963 filed by the assessee as stated by the assessee in para 12 of its M.A. application filed by the assessee on 21.10.2021against the ITAT’s order dt. 23.08.2021 in ITA No.- 3083/Del/2017 & 3084/Del/2017 for A.Y. 2008-09 & 2009- 10 respectively, raising the following ground of that “ That the Ld. AO erred in facts and in law by imposing the penalty amounting to INR 20,33,93,765/- under section 271(1)(c) of the Income Tax Act, 1961 as no satisfaction as to concealment of income or furnishing of inaccurate particulars thereof was recorded in the assessment Notice. 5. 23.08.2021 ITAT ‘F’ Bench, Delhi passed an order reversing the order of Ld. CIT(A) and confirmed the penalty order passed by the AO, in referred in sr. no. 4 for A.Y. 2008-09 & 2009-10. 6. 21.10.2021 M.A. application filed by the assessee on the ground that its Rule 27 application was not decided by the assessee. 7. 03.09.2025 M.A. order passed by the ITAT, Delhi in M.A. No. 188/Del/2021 and 189/Del/2021, (arising out of ITA No.- 3083 & 3084/Del/2017) recalling its order dated 23.08. 2021 by observing as under:
4. We have heard both the parties and perused the material available on record. The Appeals in and 3084/Del/2017 have been filed by the Revenue and the Assessee filed applications under Rule 27 of Income Tax Appellate Tribunal Rules, by raising the issue of 6 ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. defective notice. The Ld. Assessee's Representative has filed the written submission wherein a specific contention has been urged under the heading of "Charge in Penalty Notice no clear- Concealment or Inaccurate Particulars". Further, the Assessee has also relied on plethora of Judgments in support of the contention of non-mentioning of specific limb in the penalty notice.
As could be seen from the order of the Tribunal dated 23/08/2021, the Tribunal neither addressed the issue regarding "defective notice" nor disposed-off the applications filed by the Assessee under Rule 27 of the Rules. In our considered opinion, not deciding the application filed by the Assessee under Rule 27 of the Rules is an error apparent from record. Therefore, we recall the order dated 23/08/2021 passed in 3084/Del/2017 and the Appeals are restored to its original number.”
3. Thus, it is seen that the Co-ordinate Bench of the Tribunal recalled its earlier order dated 23.08.2021 on the ground that the application dated 13.05.2021 filed by the assessee under Rule 27 of the ITAT Rules, 1963 was not decided by the Tribunal, while passing its order dated 23.08.2021. Therefore, in view of the fact that order dated 23.08.2021 of the Co-ordinate Bench of Tribunal confirming the penalty order u/s 271(1)(c) of the Act, passed by the AO, which was deleted by the Ld. CIT(A) had been recalled by a common order dated 03.09.2025 in the aforesaid M.A. Nos- 188/Del/2021 and 189/Del/2021 (arising out of ITA No.- 3083 & 7
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 3084/Del/2017) , the ground of appeal in departmental appeal has to be adjudicated afresh by us, in light of the application filed by the assessee under Rule 27 of the ITAT Rules.
4. The Department is in appeal before us, on the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty levied by the Assessing Officer amounting to Rs. 20,33,93,765/- by ignoring the fact that the assessee had made wrong claim for deduction under the provisions of Income Tax Act, 1961.”
4.1 The ground taken by the assessee in the application dated 13.05.2021 under Rule 27 of the ITAT Rules, 1963 is reproduced as under:
“That the Ld. AO erred in facts and in law by imposing the penalty amounting to INR 20,33,93,765/- under section 271(1)(c) of the Income Tax Act, 1961 as no satisfaction as to concealment of income or furnishing of inaccurate particulars thereof was recorded in the assessment Notice.” (emphasis supplied)
4.2 In this case, it was noticed that in the ground taken in the application filed by the assessee under Rule 27 of ITAT Rules, 1963 in respect of both the appeals filed by the department, the defect has been mentioned in respect of the assessment notice as underlined above whereas the assessee had made submissions 8
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. regarding the defect in the issuance of the penalty notice dated 31.12.2011 and 15.02.2013. Therefore, the matter was fixed up for clarification hearing on 16.10.2025, wherein the assessee vide its letter dated 16.10.2025 submitted as under:
“This is with reference to above mentioned ITA No.- 3083/Del/2017 wherein we want to submit our request as follows: In the Ground raised through Rule 27 application filed on 13.05.20221 before the Honorable Bench, the term 'Assessment Notice' has been mentioned inadvertently in place of 'Penalty Notice'. The intent of the ground was to challenge the validity of the penalty proceedings on the basis that the charge in the penalty notice was not clearly spelt out. The context of the ground itself makes that evident. The use of the word 'Assessment' is a mere drafting error, as the penalty notice was issued along with the assessment order. The appellant respectfully submits that this inadvertent error may kindly be treated as corrected, and if deemed necessary, liberty may be granted to file a short letter or revised ground to that effect. We request the Hon’ble Bench to kindly accept our request and allow us to rectify inadvertent error.”
4.3 The Ld. CIT(DR) did not raise any objection to the above submission of the assessee.
4.4 After considering the above facts, we are of the considered view that the explanation of the assessee that defect in the ground of appeal filed by the assessee in the Application under Rule 27 of the ITAT Rules, 1963 by mentioning ‘Assessment Notice’ instead of ‘penalty notice’ was an inadvertent error and that it should be read
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. as ‘penalty notice’ instead of ‘assessment notice’ is acceptable and we proceed accordingly.
4.5 It may be mentioned that the Ld. CIT(A) had deleted the impugned penalty order on the ground that the assessee had given an explanation which was bona-fide and that there was no furnishing of inaccurate particulars of income or deliberate attempt to conceal income. The observation of the Ld. CIT(A) in para no. 3.13 is reproduced as under:
“3.13. In view of the legal position and the facts of the case, the appellant had given an explanation, which is bona-fide. Further, there is no furnishing of inaccurate particulars of income or deliberate attempt to conceal income. The rigors of the provisions of section 271(1)(c) are clearly not attracted in this case. In view thereof, the penalty levied u/s 271(1)(c) of the Act of Rs.20,33,93,765/- is deleted. These grounds of appeal are ruled in favour of the appellant.”
5. With respect to the application filed under Rule 27, the Ld. AR submitted that the facts in the present assessment year are identical to the facts in earlier years, where similar penalty orders under section 271(1)(c) of the Act were levied for respective Assessment Years 2002-03, 2003-04, 2005-06 and 2010-11. The Ld. A.R. submitted that these penalties were confirmed by the Ld. CIT (A), but in further appeal filed by the assessee, the said penalty orders were deleted by the Coordinate Bench of the Tribunal vide
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. order dated 10.05.2023 in to 6018/Del/2019 on the undisputed proposition that relevant limb of penalty notices was not identified as to whether the penalty was for concealment or for furnishing of inaccurate particulars of income.
6. The Ld. AR further submitted that, upon the department filing an appeal against the said order of the Tribunal, the Hon’ble Delhi High Court dismissed the appeal of the department. The Ld. AR further submitted that the facts are identical in this case for both the assessment years i.e. 2008-09 and 2009-10, wherein the respective penalty notices dated 30.12.2011 and 15.02.2013, as reproduced in para no. 1 of this order were issued without identifying the relevant limb, as to whether the penalty proceeding was initiated for concealment of income or for furnishing of inaccurate particulars of income. In view of these facts, it was submitted that the matter in this year was covered in favour of the assessee by the above orders of the Co-ordinate Bench of the Tribunal and the Hon’ble Delhi High Court in assessee’s own case, as discussed above and submitted that the order of the Ld. CIT(A) deleting the penalty be sustained by allowing the application under Rule 27 of the ITAT Rules, 1963 filed by it.
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 7.1 In this regard, the relevant extract of the submission dated 25.09.2025 of the assessee company is reproduced as under:
“4. The specific ground which was raised through rule 27 applicable was in relation to charge not clear in Penalty Notice issued. Our Submission Re: Charge not clear whether for Concealment of Inaccurate Particulars 5. Penalty provisions in tax law are quasi-criminal in nature. They require a clear, specific charge so that the assessee knows what exactly they are being accused of (e.g., concealment of income vs. furnishing inaccurate particulars). If the notice is vague or mixes up charges, the assessee is denied a fair opportunity to defend themselves. Such defective notices/charges make the penalty order invalid.
In the case before us, it is clear that the charge as specified in Notice u/s 274 for both the years is not clear as the officer has used the word "or" in the notices and infact in the notices issued for AY 2009-10, the appropriate clause has not been ticked. It may be noted that for Notice issued for AY 208-09, the officer has ticked the statement but has not struck off the inappropriate words and its not clear whether penalty is levied for concealment or inaccurate particulars. Argunado, even if it is said that penalty has been initiated for concealment even then penalty ought to be deleted for the reason that penalty was eventually levied by AO for furnishing inaccurate particulars. And it's settled by various courts including jurisdictional High Court that penalty initiated for one limb and levied for another limb is bad in law. -----xxxxxxx------
It is important to note that in the case of the Taxpayer itself the penalty was deleted Delhi ITAT in to 6018/ Del/2019 dated 10 May 2023 [Refer CLC III Page 05-10] on the pretext that charge in Notice is not clear. Thereafter the Departmental appeal was also dismissed by Honorable Delhi High Court in its Order dated 26 August 2025 [ refer CLC III Page 1-4].”
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 7.2 Further, the assessee also relied upon various case laws in support of its submission under Rule 27 of the ITAT, Rules, 1963.
8. On the other hand, the Ld. CIT (DR) filed a written submission, which is reproduced as under:
“1. PRELIMINARY SUBMISSIONS 1.1 The present Miscellaneous Applications filed by the assessee have been allowed on the limited ground that the Tribunal's order dated 23/08/2021 did not address the specific issue regarding "defective notice" raised by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules. 1.2 The Revenue respectfully submits that the assessee's contention regarding defective penalty notice is legally untenable and factually incorrect, and the same ought to be rejected by this Hon'ble Tribunal.
2. FACTUAL MATRIX 2.1 The assessee had filed applications under Rule 27 of the ITAT Rules raising the issue of "defective notice" claiming that the penalty notice under Section 274 read with Section 271(1)(c) did not specify the particular charge. 2.2 The Tribunal in para 4 of its order dated 07/09/2025( sic correct date 03.09.2025) has noted that the assessee filed written submissions with specific contention under the heading "Charge in Penalty Notice not clear -Concealment or Inaccurate Particulars" and relied on various judgments supporting non-mentioning of specific limb in penalty notice.
REVENUE'S COUNTER-ARGUMENTS A. NO LEGAL REQUIREMENT FOR SPECIFIC CHARGE MENTIONING IN PENALTY NOTICE 3.1 The Hon'ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory [2012] 209 Taxman 56 has categorically held that the notice under Section 274 read with Section 271(1)(c) need not explicitly mention the specific reason for initiation of penalty proceedings, provided the Assessing Officer has applied his mind and recorded satisfaction in the assessment order. 3.2 The Mumbai Bench of ITAT in Mahesh M Gandhi vs ACIT [TS- 5465-ITAT-2017(MUMBAI)-O) has upheld that not mentioning specific reasons in penalty notice cannot invalidate penalty ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. proceedings when the AO has recorded satisfaction in the assessment order regarding the invocation of penalty provisions. B. SUBSTANTIAL COMPLIANCE DOCTRINE 3.3 The Hon'ble Bombay High Court in Principal CIT vs. Mohd. Farhan A. Shaikh [2024] 159 taxmann.com 226 has observed that even assuming defect in notice, if it causes no prejudice to the assessee and the assessee clearly understood the purport and import of the notice, principles of natural justice cannot be read in abstract form. 3.4The said judgment specifically held: "Even assuming that there was a defect in the notice, it had caused no prejudice to the assessee, and the assessee 'clearly understood what the purport and import of the notice were under Section 274 read with Section 271 of the Income-tax Act, 1961. The principles of natural justice cannot be read in abstract form." C. NO PREJUDICE CAUSED TO ASSESSEE 3.5 In the present case, the assessee has not demonstrated any specific prejudice caused due to the alleged defect in the penalty notice. The Supreme Court in Board of Directors Himachal Pradesh Transport Corporation vs. HC Rahi [2008] 11 SCC 502 has held that principles of natural justice cannot be viewed in a rigid manner and depend on facts and circumstances of each case. The Revenue submits that the assessee was fully aware of the nature of allegations and had adequate opportunity to defend its case, as evidenced by the detailed written submissions filed by the assessee before the Tribunal. D. ASSESSMENT ORDER CONTAINS ADEQUATE SATISFACTION 3.7 The Hon'ble Supreme Court in MAK Data Pvt. Ltd. vs. CIT-11 [2013] 358 ITR 593 has clarified the onus framework under Section 271(1)(c). The Court held that once the AO records satisfaction about concealment/inaccurate particulars, and the assessee fails to discharge the initial onus, penalty can be levied without separate detailed satisfaction. 3.8 The assessment order in the present case contains adequate reasons and satisfaction for initiating penalty proceedings, which cannot be questioned on technical grounds of notice drafting.
DISTINGUISHING ASSESSEE'S CITED PRECEDENTS A. DELHI HIGH COURT DECISIONS 4.1 The assessee may rely on recent Delhi High Court decisions like PCIT vs. various assessees reported in [2024] which held penalty notices invalid for lack of specific charge mentioning. However, these decisions are distinguishable on facts: 14
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd.
4.2 In those cases, there was complete absence of any indication about the nature of penalty proceedings, whereas in the present case, the assessment order clearly indicates the grounds for penalty initiation. 4.3 The Hon'ble Supreme Court in Pr. CIT-5 vs. Kolkata Port Trust [2023] (11) TMI 292 has clarified that defective notice u/s 274 where inapplicable portion is not struck off does not automatically invalidate penalty proceedings if substantial compliance is achieved. B. PATNA HIGH COURT PRECEDENT 4.4 The assessee cannot derive support from Suresh Sheth vs. ITO (ITAT Mumbai) as the same deals with cases where there was complete absence of satisfaction recording, which is not the position in the present case.
5. LEGAL PRINCIPLES SUPPORTING REVENUE A. SECTION 271(1B) DEEMING PROVISION 5.1 The insertion of Section 271(1B) by Finance Act 2008 creates a deeming provision that where addition/disallowance is made, penalty proceedings shall be deemed to have been initiated. The ICAI publication on "Penalty u/s 271(1)(c): Initiation, Satisfaction & Levy clarifies this position. 5.2 The Hon'ble Allahabad High Court in ShyamBiri Works (P) Ltd. vs. CTT (2003) 185 CTR (All) 510 has held that post-amendment, satisfaction only at the stage of imposition of penalty is required, not at initiation stage. B. TECHNICAL DEFECTS NOT FATAL 5.3The Hon'ble Supreme Court in various decisions has held that technical defects in notice do not vitiate penalty proceedings if substantial justice is served and no prejudice is caused to the assessee. 5.4 The principle of "substantial compliance" as enunciated by various High Courts provides that minor procedural lapses cannot defeat substantive justice.
6. PRAYER 6.11n view of the above submissions, it is respectfully prayed that this Hon'ble Tribunal may be pleased to: i) Hold that the penalty notice issued under Section 274 read with Section 271(1)(c) is valid and not defective, ii) Reject the assessee's contention regarding defective notice for want of merit; 15
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. iii) Uphold the penalty proceedings initiated by the Assessing Officer; iv) Pass such other orders as this Hon'ble Tribunal may deem fit and proper in the interest of justice. CASE LAW CITATIONS: 1. CIT vs. Manjunatha Cotton & Ginning Factory [2012] 209 Taxman 56 (Karnataka HC) 2. Mahesh M Gandhi vs ACIT [TS-5465-ITAT-2017(MUMBAI)-O] 3. Principal CIT vs. Mohd. Farhan A. Shaikh [2024] 159 taxmann.com 226 (Bombay HC) 4. MAK Data Pvt. Ltd. vs. CIT-II [2013] 358 ITR 593 (SC) 5. Board of Directors Himachal Pradesh Transport Corporation vs. HC Rahi [2008] 11 SCC 502 (SC) 6. Pr. CIT-5 vs. Kolkata Port Trust [2023] (11) TMI 292 (SC) 7. ShyamBiri Works (P) Ltd. vs. CIT [2003] 185 CTR (All) 510 (Allahabad HC)”
We have heard both the parties and perused the material available on record. In the present case, it is an undisputed fact that the penalty notice dated 30.12.2011 issued under section 271(1)(c) of the Act is omnibus notice without specifying the specific charge upon the assessee as to whether it is for concealment of income or for furnishing of inaccurate particulars of income. This position is also not disputed by the Ld. CIT(DR). It is relevant to note that, on similar facts, the coordinate bench of the Tribunal, in to 6018/Del/2019 for Assessment Years 2002-03, 2003-04, 2005-06, and 2010-11, vide order dated 10.05.2023, deleted the respective penalty orders. The relevant findings of the 16
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. Tribunal, as recorded in paragraphs 6 ,7 & 8 of the said order, are reproduced below:
“6 Upon careful consideration and hearing both the parties, we find that notice issued u/s 271(1)(c) is omnibus notice without specifying the specific charge upon the assessee as to whether it is for concealment of income or furnishing of inaccurate particulars of income. In this regard, we may gainfully refer to the decision of the Hon'ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs ACIT in Tax Appeal No.51 and 57 of 2012 dated 11.03.2021. We may also refer to the order of Hon'ble jurisdictional High Court in the case of Pr. CIT vs Sahara India Life Insurance Company Ltd. in & ors. vide order darted 02.08.2019, the Hon'ble High Court has laid down the following exposition:
"21. The Respondent had challenged the upholding of the penalty imposed under section 271(1)(c) of the Act, which was accepted by the ITAT It followed the decision of the Karnataka High Court in CIT vs Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e whether for concealment of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax SSA’S Emerald Meadows (2016) 73 Тахтаn, com 241(Kar.), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 05 August, 2016. “ 7. Accordingly, following the precedent and on the undisputed proposition that relevant limb of penalty notices was not identified as to whether the penalty was for concealment or furnishing of inaccurate particulars of income, we set aside the orders of the authorities below by holding that notice u/s 271(1)(c) is invalid. Accordingly, the appeal of the assessee. stands allowed.
Our above order applies mutatis mutandis to others assessment years as well.”
9.1 Further, this order of the Coordinate Bench of the Tribunal was affirmed by the Hon’ble Delhi High Court, and the relevant 17
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. observations of the Hon’ble Delhi High Court in its order dated 26.08.2025 in 345/2025, 349/2025, and 350/2025, in the case of Pr. CIT vs. Corteva Agriscience Seeds Pvt. Ltd. are reproduced as under:
“16. The issue which arose before the ITAT was whether the notice issued by the AO, more particularly under Section 271(1)(c) of the Act in printed form, without specifically mentioning whether the proceedings were initiated on the ground of concealment of income or on account of furnishing inaccurate particulars of income, was invalid and bad in law.
The notice on that ground was held to be bad, by relying upon the judgement of this Court in Principal Commissioner of Income Tax v. Gragerious Projects Pvt. Ltd; Neutral Citation: 2024:DHC:9019-DB, wherein this Court in paragraph 21 held as under. "21. The High Court in the case of Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., (2021) 432 ITR 84 Delhi, followed the decision of the Karnataka High Court in in CIT vs Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Kar.) and held as under:- "The Respondent had challenged the upholding of the penalty imposed under section 271(1)(c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT vs Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under ie. whether for concealment of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241(Kar.), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 05th August, 2016"." (Emphasis supplied)
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd.
Mr. Singh, counsel for the appellant, fairly concedes to the fact that following Sahara India Life Insurance Co. Ltd (supra), this Court has rendered following judgments holding that a notice issued in the manner issued by the AO in this case under Section 271(c) invalid: Pr. Commissioner of Income Tax, Delhi 1 v. M/S Blackroak Securities Pvt. Ltd. Neutral Citation: 2023:DHC: 8841-DB and Pr. Commissioner of Income Tax, D Unitech Reliable Projects Pvt. Ltd.; Neutral Citation: 2023:DHC: 4258-DB.
If that be so for parity of reasons, we follow the judgment rendered by this Court in Commissioner of Income Tax (International Taxation)- 1, New Delhi vs. Geпраct Services LLC: Neutral Citation: 2025:DHC:3420-DB, wherein this Court in paragraphs 8-11 held as under: "8. However, we note that the learned ITAT did not express any opinion as to the CIT(A)’s view, it rejected the Revenue's appeal solely on the ground that the notice issued by the AO under Section 274 of the Act read with Section 271 of the Act did not specifically state as to under which limb of Section 271(1)(c) of the Act, penalty proceedings were intended to be proceeded. Section 271(1)(c) of the Act has two limbs: the first is where the allegation is at the assessee has concealed income: and the second is, that the assessee has furnished incorrect particulars of income.
9. This court has, in a number of decisions, held that the notice, which does not specifically indicate the particular limb of Section 271(1)(c) that is sought to be invoked, would be invalid as being vague.
Mr. Rai, the learned counsel for the Revenue, also does not dispute that the issue involved is covered by several decisions of this court including Principal Commissioner of Income Tax v. Gragerious Projects Pvt. Ltd: Neutral Citation; 2024:DHC:9019- DB, Pr Commissioner of Income Tax, Delhi 1 v. M/S Blackroak Securities Pvt. Ltd.: Neutral Citation; 2023:DHC: 8841-DB and Pr. Commissioner of Income Tax, Delhi 7 v. Unitech Reliable Projects Pvt. Ltd.: Neutral Citation; 2023:DHC: 4258-DB.
In view of the above, no substantial question of law arises for consideration of this court in the present appeal."
In view of the above discussion, we do not see any substantial question of law arising for consideration in this appeal.
The appeals are disposed of in favour of the respondent/assessee and against the appellant/revenue.”
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd.
9.2 Further, as noted above in this case, the Assessing Officer in the assessment order dated 30.12.2011 passed in this case had initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and had also levied penalty u/s 271(1)(c) of the Act on account of furnishing of inaccurate particulars of income. However, even in such a situation also the Hon’ble Delhi High Court in the case of Pr. CIT-04 vs M/s Gragerious Projects Pvt. Ltd. & Ors(supra) agreed with the view of Hon’ble Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. 2021 Hon'ble Supreme Court OnLine Bom 345 which held that even if the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), but the defect in the notice by not striking off the irrelevant matter will vitiate the penalty proceedings.
9.3 The relevant discussion in the order of the Hon’ble Delhi High Court in the above-mentioned case is reproduced as under:-
“An identical issue came up for consideration before the Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. 2021 SCC OnLine Bom 345, wherein, the Court while dealing with the aspect of prejudice ruled as under:- "Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or 20 ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. both grounds mentioned in Section 271(1)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(l)(c), read with section 274 of Income-tax Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour.
Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No.2: Has Kaushalya failed to discuss the aspect of “prejudice”? 184. Indeed, Kaushalya did discuss the aspect of prejudice. As we have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya closes the discussion by 21 ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done.”
No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non- application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice.
That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off? 187. In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff, on the facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars.
We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non-application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 22 ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd.
In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest".
Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2006] 287 ITR 91 (SC); (2007) 2 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei, AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, the principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution.
As a result, we hold that Dilip N. Shroff treats omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two tax appeals before the Division Bench concerned for further adjudication."
Following the decision of the Karnataka High Court in the case of CIT v. Manjunath Cotton and Ginning Factory (supra) and the other decisions of different High Courts, the ITAT rightly held that the levy of penalty under Section 271(1)(c) of the Act in the case of the assessee was not valid.
We are unable to find any error having been committed by the ITAT. No substantial question of law arises.
The appeals are accordingly dismissed.” (Emphasis supplied)
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 9.4 Therefore, in view of the above order of the Co-ordinate Bench of Tribunal and affirmed by the Hon’ble Delhi High Court in assessee’s own case as referred above and further in view of the decision of the Hon’ble Delhi High Court in the case of Pr. CIT-04 vs M/s Gragerious Projects Pvt. Ltd. & Ors(supra), the impugned penalty order dated 27.03.2015 in this case for A.Y. 2008-09 is not sustainable, when the penalty notice dated 30.12.2011, under Section 271(1)(c) of the Act in printed form has been issued, without specifying the specific charge upon the assessee as to mentioning whether it is for concealment of income or for furnishing inaccurate particulars of income.
9.5 We, therefore, uphold the order passed by the Ld. CIT(A) deleting the penalty of Rs. 20,33,93,765/- by allowing the application filed by the assessee under Rule 27 of the ITAT Rules, 1963 of application filed by the assessee. However, since Rule 27 application of the assessee has been allowed by us, the ground of appeal filed by the Department become academic and is dismissed.
10. Facts in ITA No.- 3084/Del/2017 for A.Y. 2009-10 being identical for Assessment Year 2008-09 in the present appeal, the above order applies mutatis mutandis.
ITA No.-.3083 & 3084/Del/2017 M/s PHI Seeds Pvt. Ltd. 11. Accordingly, both the appeals of the Revenue are dismissed and both the Rule 27 application of the assessee are allowed for A.Y. 2008-09 and 2009-10.
Order pronounced in the open court on 31st October, 2025.