Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 13690

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Madhumita Roy, Judicial Member, Amitabh Shukla, Accountant Member
Saraswati Wood Private Limited – Appellant
Versus
DCIT – Respondent
ITA No.8801/DEL/2025

Advocates:
For the Appellants/Petitioners: Paras Dawar
For the Respondents: Ravikant Kumar Chaudhary

Failure to frame a specific charge in a penalty notice under section 271(1)(c) of the Income Tax Act, by not specifying whether the penalty is for concealment of income or furnishing inaccurate particulars, vitiates the penalty proceedings due to non-application of mind and lack of natural justice.

Headnote:(A) Income Tax Act, 1961 - Section 271(1)(c) - Penalty proceedings - Concealment of income vs. furnishing of inaccurate particulars - Requirement of specific charge - Revenue must clearly specify in show-cause notice whether proceeding is for concealment of income or for furnishing inaccurate particulars - Failure to frame specific charge in show-cause notice vitiates penalty proceedings - Statutory notice must indicate with clarity nature of satisfaction recorded - If notice is in printed form, inapplicable portions must be struck off to indicate application of mind. (Paras 4, 6, 9-12, 15)

(B) Penalty - Validity of notice - Assessment order cannot cure defect in penalty notice - Assessment and penalty proceedings are distinct - Notice must stand on its own as it initiates penalty proceedings - Omnibus notice without deleting irrelevant portions lacks application of mind and causes prejudice to assessee. (Paras 12, 181-182)

Facts of the case:
The assessee challenged the penalty order passed under section 271(1)(c) of the Act. The assessing authority had initiated penalty proceedings by issuing a notice that did not distinguish between the two limbs of the section—concealment of income and furnishing of inaccurate particulars. Furthermore, the final penalty order contained contradictory findings regarding which specific limb the assessee was being penalized for. The appellate authority upheld the penalty, leading to the current appeal.

Findings of Court:
The court observed that the assessing authority failed to specify the charge against the assessee in the show-cause notice and in the penalty order. The failure to frame a specific charge renders the proceedings bad in law, as the assessee must be informed of the precise grounds for the proposed penalty to enable a proper defense. The court emphasized that the assessing authority cannot change the basis of the penalty between the assessment and the penalty order.

Issues: Whether the failure to strike off irrelevant portions in a printed penalty notice issued under section 271(1)(c) and the omission to specify a clear charge regarding either 'concealment of income' or 'furnishing of inaccurate particulars' vitiates the penalty order.

Ratio Decidendi: The court held that the two limbs of section 271(1)(c) carry different connotations and legal implications. A show-cause notice acts as a vital tool to inform the assessee of the specific breach alleged. Issuing a standard form notice without selecting the relevant limb demonstrates a non-application of mind, which is fatal to the validity of the penalty proceedings and cannot be cured by the findings in the assessment order.

Result: Appeal of the assessee is allowed.

Table of Content
1. assessment of penalty validity under section 271(1)(c) of the act. (Para 1 , 2 , 3 , 4 , 5)
2. requirement of a specific charge in penalty notices for validity. (Para 6 , 7 , 8)

ORDER

PER AMITABH SHUKLA, AM,

1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre/Ld. Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 29.10.2025 arising out of penalty order dated 17.03.2022 passed under section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year 2012-13. The word ‘Act’ herein this order would mean Income Tax Act, 1961.

2. The assessee has raised following grounds of appeal:-

1. The ld. CIT(A) has erred both in law and on facts in upholding penalty of Rs.1,45,956/- in the absence of valid assumption of jurisdiction by ld. AO.

2 The ld. CIT(A) has erred both in law and on facts in upholding penalty of Rs.1,45,956/- levied under section 271(1)(c) of the Act.”

3. Heard rival parties. Material on record perused.

4. The only issue seminal to the present appeal is regarding the maintainability of the order u/s 271(1)(c) of the Act dated 17.03.2022 passed by the ld. AO. The ld. Counsel for the assessee vehemently argued that the ld. AO has stated in the assessment order that the assessee had concealed its income, issued notice dated 13.12.2019 indicating the same, however, while passing the order, it in para-10 and 11 at page-7 of the order indicated that the assessee is guilty of furnishing of inaccurate particulars of income. It was argued that since there was this change in the presumption of concealment or furnishing of inaccurate particulars of income, the penalty order dated 17.03.2022 has become legally unsustainable and deserves to be quashed. It was argued that the ld. CIT(A) also as evident from para-5.2 and para -6 on page-3-4 of his appellate order also given self-contradictory findings.

5. The ld. DR placed reliance upon the orders of lower authorities.

6. We have noted that the facts of the present case are identical to those in the case of Dial net Communications Ltd. , wherein, vide ITA No. 7885/DEL/2019 for Assessment year: 2015-16 dated 19.09.2025. In the said case, following was concluded:-

“..4.0 We have heard the rival submissions in the light of material available on records. The issue of legality of a penalty notice u/s 271(1) (c ) has been a matter of great debate in the judicial forums. Thus, it is now a settled principle of law that the Revenue authorities are required to clearly specify in their penalty notice, if issued u/s 271(1)(c), as to whether they wish to initiate penalty for the concealment of income OR for furnishing of inaccurate particulars thereof. It is settled that penalty would not survive if such classification is not borne on the face of the notice itself. Thus, in the case of Mahavir Chand Jain in ITA No.905 to 912 through its order dated 13.05.2022 the Chennai tribunal has observed as under:-

“…..7. Before us, Ld. AR raised a pertinent legal issue and submitted that specific charge i.e., furnishing of inaccurate particulars of income or concealment of income, has not been framed against the assessee in the show-cause notice as well as in penalty order. Therefore, considering the ratio of various binding judicial precedents, the penalty stood vitiated for want of framing of specific charge. The copies of these decisions have been placed on record which include the decision of Hon’ble Madras High Court in Babuji Jacob vs ITO (430 ITR 259) as well as the decision of Hon’ble Bombay High Court in PCIT V/s Goa Coastal Resorts and Recreation (P.) Ltd (272 Taxman 157) against which revenue’s Special Leave petition (SLP) has already been dismissed by Hon’ble Supreme Court which is reported at 130 Taxmann.com 379. The Ld. Sr. DR, has similarly relied on decision of High Court of Madras in M/s. Gangotri Textiles Ltd vs DCIT (121 Taxmann.com 171) as well as another decision in Sundaram Finan

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2026 Supreme(Online)(ITAT) 13690

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)Madhumita Roy, Judicial Member, Amitabh Shukla, Accountant MemberSaraswati Wood Private Limited – AppellantVersusDCIT – RespondentITA No.8801/DEL/2025

Failure to frame a specific charge in a penalty notice under section 271(1)(c) of the Income Tax Act, by not specifying whether the penalty is for concealment of income or furnishing inaccurate particulars, vitiates the penalty proceedings due to non-application of mind and lack of natural justice.

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Madhumita Roy, Judicial Member, Amitabh Shukla, Accountant Member
Saraswati Wood Private Limited – Appellant
Versus
DCIT – Respondent
ITA No.8801/DEL/2025