Penalty notice u/s 274 r.w.s 271AAB defective if it fails to specify applicable clause, vitiating proceedings for violating natural justice by denying specific charge awareness.

आदेश/ORDER 

PER GEORGE GEORGE K, VICE PRESIDENT:

This appeal filed by the Revenue is directed against the order of Commissioner of Income Tax (Appeals), Chennai-20, dated 26.08.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year in 2015-16.

2. The grounds raised by the department read as follows:-

1. The Order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and in law.

2. The Ld.CIT(A) erred in deleting Rs.69,71,783/- levied as penalty u/s 271AAB(1) (c).

3. The Ld.CIT(A) erred in relying on the decision of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com.250 & Commissioner of Income-tax v. SSA'S Emerald Meadows [2016] 73 taxmann.coт 248 (SC) to render relief to the assessee without taking cognizance of the decision of the Hon'ble Supreme Court of India in Gangotri Textiles Ltd. v. Deputy Commissioner of Income-tax [2022]137 taxmann.com 198 (SC) wherein it has dismissed the SLP filed by the assessee against the order of the Hon'ble High Court of Madras on the contention that notice issued under section 274 read with section 271(1)(c) was defective on the ground that the Assessing Officer did not apply his mind while issuing the notice on the ground that the grounds for penalty are clearly dealt in the assessment order.

4. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing Officer may be restored.

3. Brief facts of the case are as follows: The assessee is a private limited company engaged in the business of manufacturing and trading of granite and marbles. The business premises of the assessee was subjected to search u/s.132 of the Act on 12.02.2025, in consequence of a search of businesses at Nagpur belonging to the brother of the Managing Director of the assessee company. For the assessment year 2015-16, assessee company had filed its return of income on 23.01.2016 declaring total income of Rs.1,61,24,840/-. Notice u/s.153A of the Act was issued to the assessee company for the assessment year 2009-10 to 2014-15 on 06.05.2016. For the assessment year 2015-16, the return of income was selected for scrutiny being search year and notice u/s.143(2) of the Act was issued on 12.09.2016. During the course of assessment proceedings, the AO noted that returned income of Rs.1,61,24,840/- includes additional income of Rs.80,00,000/- towards excess stock and Rs.20,00,000/- towards disclosure made during the course of search proceedings at Nagpur. The AO further noted that excess stock of Rs.2,32,39,276/- was found during the search proceedings. Since assessee had already offered Rs.80 lakhs in the returned income, the AO proposed addition of balance amount of Rs.1,52,39,276/- (Rs.2,32,39,276 – Rs.80,00,000). Further, the AO observed that certain payments were supported only by self-made vouchers and details of the recipients are not fully given in the vouchers, hence, the genuineness of such payment could not be verified. Aggregate of such self-made vouchers came to Rs.14,25,000/- which also proposed to be disallowed by the AO in absence of verifiable evidences. The assessee raised objections to the proposal. However, the objections were rejected and assessment was completed u/s.143(3) of the Act on 31.12.2016 as under:-

4. Against the assessment order, the assessee filed a