Mahendra Brothers Vs DCIT (ITAT Mumbai)
Mumbai ITAT deleted penalties levied u/s 271(1)(c) across multiple years, holding that failure to specify the exact charge (concealment vs. inaccurate particulars) in notice u/s 274 renders penalty proceedings invalid.
The Tribunal observed:
- The AO issued standard/omnibus notices without striking off irrelevant limb, making the charge ambiguous
- Such defective notice violates principles laid down by Bombay HC (Full Bench) in Mohd. Farhan A. Shaikh
- Penalty proceedings are independent and must clearly inform the assessee of the specific allegation
Additionally:
- The quantum addition itself was based on estimation (commission income), further weakening the case for penalty
The ITAT held that:
- Vague notice = invalid jurisdiction for penalty
- Defect cannot be cured by assessment order or subsequent proceedings
Accordingly, penalties for all years were deleted in full, and appeals were allowed, reaffirming strict compliance with procedural requirements for penalty initiation.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. These are three appeals preferred by the same Assessee challenging three separate Orders passed by the Commissioner of Income Tax(Appeals)–48, Mumbai confirming the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act for the Assessment Years 2006-2007, 2007-2008 and 2010-2011. The appeals involving identical issues were heard together and are, therefore, being disposed off by way of common order.
