Case Law Details
Dhiren Gopal Vs DCIT (ITAT Bangalore)
The appeal concerns the validity of penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act for Assessment Year 2015–16. The assessee had originally filed a return declaring income of Rs. 10.31 crore. Subsequently, a search and seizure operation under Section 132 was conducted in November 2019, during which documents relating to undisclosed foreign income and investments were found. It was observed that the assessee and his brothers had received funds from a Singapore-based company in the form of loans, which were not disclosed in the original return. Out of the total amount, a portion was admitted as additional income and offered to tax in a return filed under Section 153C.
During assessment proceedings, the Assessing Officer (AO) disallowed certain interest expenses and initiated penalty proceedings for concealment of income. A penalty of Rs. 55.21 lakh was imposed under Section 271(1)(c). The first appellate authority partly allowed relief, deleting penalty on interest disallowance but sustaining penalty relating to deemed dividend income, holding that the disclosure was not voluntary and ignorance of law was not a valid defence.
Before the Tribunal, the assessee raised an additional legal ground challenging the validity of the penalty proceedings on the basis that the initial show cause notice issued under Section 274 read with Section 271(1)(c) was unsigned. The Tribunal admitted this ground, noting that it was purely legal and required no fresh investigation of facts.
Upon examination, the Tribunal found that the show cause notice dated 30.03.2022 was neither physically nor digitally signed. It held that Section 282A mandates that any notice issued by an income tax authority must be signed, and the use of the term “shall” makes this requirement mandatory. The Tribunal rejected the Revenue’s argument that the presence of name and designation or generation of a Document Identification Number (DIN) could cure the defect. It further held that Section 282A(2), which deems authentication based on printed details, does not dispense with the requirement of signature.
Relying on judicial precedents, including High Court rulings, the Tribunal observed that a notice without signature is a jurisdictional defect and renders the notice invalid. Such a defect cannot be treated as a mere procedural irregularity under Section 292B. The Tribunal emphasized that a valid notice is a condition precedent for assumption of jurisdiction to levy penalty, and absence of signature renders the notice equivalent to no notice in law.
Consequently, the Tribunal held that the unsigned notice issued for initiating penalty proceedings was invalid and did not confer jurisdiction on the AO. As a result, the subsequent penalty order and related proceedings were also held to be unsustainable and were quashed. The Tribunal allowed the appeal on this legal ground without adjudicating other issues raised by the assessee.
In conclusion, the Tribunal ruled that failure to sign a statutory notice under Section 274 is a fatal defect that invalidates penalty proceedings under Section 271(1)(c), leading to the quashing of the penalty order.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the order of ld. Pr. CIT (A)-11, Bengaluru dated 21.10.2025 vide DIN: ITBA/APL/M/250/2025-26/1081898838(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the AY 2015-16.
2. The assessee has raised the following grounds of appeal: –
4. We have heard both the parties on admission of additional grounds. The Lucknow bench of the Hon’ble Allahabad High Court in the case of CIT Vs. Sahara India (2012) 347 ITR 331 held that a legal issue can be raised at any stage but there shall be good reason for admitting the additional ground. In our Opinion all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of the adjudication of above grounds. Further we are also of the opinion that the additional grounds raised in the present case are purely legal in nature & therefore these are critical for a fair adjudication of the matter. The Hon’ble Madras High Court in the case of CIT Vs Indian Bank (2015) 230 Taxman 635 (Madras) held that Rule 11 of the I.T. Rules makes it clear that the assessee has the right to raise additional grounds and if the same is beneficial to the assessee, the same should be considered by the Tribunal.
4.1 Further, the Hon’ble Karnataka High Court in the case of Gundathur Thimmappa & Sons vs. CIT, Mysore, reported in (1968) 70 ITR 70 held that when the point raised by the assessee is a point which went to the root of the matter and affected not merely his liability to pay tax but also jurisdiction of the Tribunals and Authorities themselves to subject the amount concerned to tax, the Appellate Tribunal had the discretion to permit point of law to be raised for the first time in appeal because the question went to the root of the case. The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 held that undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Accordingly, we are inclined to admit the additional legal grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and these are critical for a fair adjudication of the matter.
5. Now the brief facts of the case are that the assessee, along with his brothers Mr. Jawahar Gopal and Mr. Manohar Gopal is the managing director of the Featherlite Group which was in the business of manufacturing and marketing of office and home furniture across the country. The assessee filed his original return of income on 30/11/2015 by declaring total taxable income of Rs. 10,31,03,370/-. A search and seizure action u/s. 132 of the Act was carried out on 14/11/2019 in the case of Featherlite Office Systems Pvt Ltd. During the search proceedings, office of M/s. Featherlite Office Systems Pvt Ltd. situated at No.16/A, Millers Road, Next to Ambedkar Bhavan, Vasanthnagar, Bangalore-560052 was searched and documents as per panchanama were seized which pertain to Sri. Dhiren Gopal.
5.1 During the course of search proceedings, it was found that the assessee along with his two brothers became the directors of a Singapore company namely M/s. Feather Singapore Pte. Ltd. which was incorporated in the year 2004. When the Singapore Company made substantial profits, a joint bank account was opened in the name of the three brothers and an amount of USD 10 lakhs was transferred to the joint bank account as a loan to the directors from the Singapore Company. However, the joint bank account was not declared in the return of income of the assessee, and during the search proceedings, it was found that the funds were siphoned off from the Singapore Company in the guise of loans to directors for making personal investments by the directors. Further, the assessee claimed interest expenses towards the said loan for the AY 2015-16. However, the interests claimed during the years were not paid at all and the so-called loans were received without any interest.
5.2 In view of the evidence found, the assessee along with his two brothers had accepted, after excluding their initial collective investment in the Singapore company which was around USD 2.5 lakhs made out of their declared sources of income, the balance amount of USD 7.5 lakhs which is amounting to INR Rs.4.5 crores was offered as additional income in their individual hands for the AY 2015-16. Hence, the assessee has admitted in the sworn statement recorded under section 132(4) of the IT Act that the approximately additional income of Rs. 1,50,00,000/- each is estimated as taxable income in the hands of all the three Directors for the AY 2015-16. Consequently proceeding as per section 153C of the Act in the case of the assessee were initiated and accordingly notice u/s. 153C of the Act was issued to the assessee for the AY 2015-16 on 14/06/2021. In response, the assessee filed the return of income on 11/10/2021 declaring a total income of Rs. 11,96,38,920/- including the income of Rs. 1,62,22,654/- received from the foreign entity.During the course of assessment proceedings, the return of income and submission of the assessee were verified, and it was seen that the assessee had incorrectly claimed the interest expenses of Rs.20,450/- in his return of income. The AO disallowed the same and the assessment proceedings u/s. 153C of the Act were completed on 30/03/2022 by assessing the total income of Rs.11,96,59,370/- including the income of Rs.1,62,22,654/- received from the foreign entity. Since the assessee has concealed the interest and dividend income, the AO observed in the assessment order that the penalty u/s. 271(1)(c) of the Act is initiated separately for concealment of income.
6. The AO, thereafter, issued unsigned show cause notice u/s. 274 r.w.s 271(1)(c) of the Act on 30/03/2022 by alleging that the assessee has concealed the particulars of income and directed the assessee to show cause as to why an order imposing a penalty should not be made u/s. 271(1)(c) of the Act. Further, as there was a change of incumbent, a notice u/s. 129 of the Act dated 29/06/2022 was issued and served on the assessee by e- mail. Subsequently, the AO had also issued one more signed show cause notice on 18/08/2022 referring to a penalty notice issued on 30/03/2022 granting final opportunity to explain as to why penalty u/s. 271(1)(c) of the Act for AY 2015-16 should not be levied.
6.1 The assessee vide his reply dated 29/04/2022 filed on 04/05/2022 as well as vide reply dated 29/08/2022, submitted that the income accepted during the search relating to dividend income and income from investments earned outside India has been offered to tax in the return filed u/s. 153C of the Act after deducting expenditure, however, during the assessment proceedings, the said expenditure had been disallowed and the gross income has been considered and taxable income has been determined. Accordingly, the contended income which is ultimately brought to tax was the income declared in the return of income and the same has been accepted. Hence no income has been concealed. Further, before the AO, the assessee also submitted that levy of penalty is a criminal in nature, whereas filing incorrect income in return u/s. 153C of the Act is a civil nature. Hence, the degree of evidence required for the levy of penalty is greater compared to degree of evidence required for making an addition. The assessee also relied upon several judicial pronouncements in support of his case. The ld. AO, however relying on the judgement of Apex Court in Union of India Vs. Dharamendra Textile Processors (2007) 295 ITR 244, as well as observations of the Apex Court in MAK Data P. Ltd. Vs. CIT, Civil appeal no: 9772 of 2013 which held that the penalty u/s. 271(1)(c) of the Act is a civil liability for which willful concealment is not an essential ingredient for attracting civil liability as is the case of proceedings u/s. 276C of the Act. Further the AO held that voluntarily disclosure does not release the assessee from the mischief of penal proceedings. The ld. AO also held that had there not been a search proceeding, there was no intention of the assessee to disclose the concealed income to tax. Lastly, the ld. AO held that as the assessee could not furnish any explanation as to why the income from the foreign entity was not disclosed in the original return of income filed u/s. 139(1) of the Act and hence the AO was satisfied that the assessee has concealed the particulars of income and after considering the overall facts and merits of the case imposed a penalty of 100% of the tax sought to be evaded and accordingly levied penalty of Rs.55,21,032/-.
7. Aggrieved, by the penalty order passed by AO on 16/09/2022, the assessee preferred an appeal before the ld. Pr.CIT(A)-11, Bengaluru.
8. The ld. Pr.CIT(A)-11, Bengaluru partly allowed the appeal of the assessee. During the course of appellate proceeding, the assessee stated that he was advised on tax matters by his CFO and accounts head. It was submitted that the assessee was not aware of the provisions of deemed dividend u/s. 2(22)(e) of a bonafide was under a bonafide belief that loan taken from Featherlite Singapore would not amount to deemed dividend. On being confronted during the search proceeding about the same, the assessee offered the deemed dividend voluntarily by filing return u/s. 153C of the Act. It was also contended that the penalty cannot be levied on such deeming provisions. The ld. Pr.CIT(A)-11, Bengaluru however held that the deemed dividend u/s. 2(22)(e) of the Act was admitted during the course of search proceedings on being unearthed by the department and hence the disclosure or admission of deemed dividend on the loan cannot be said to be voluntary. The contention of the assessee that it was wrongly advised and hence it was under a bonafide belief that the deemed dividend income need not be offered to tax was also not acceptable as the assessee is one of the directors of the company. The ld. Pr.CIT(A)-11, Bengaluru was of the opinion that there can be one excuse for ignorance of law in such cases. Since the filing of return u/s. 153C was not voluntary but pursuant to the search, the ld. Pr.CIT(A)-11, Bengaluru was also of the opinion that the AO has correctly initiated and levied penalty u/s. 271C of the Act with respect to the deemed dividend and accordingly dismissed this grounds of appeal.
8.1 Further, with regard to claim of interest expenditure on the loan taken, the ld. Pr.CIT(A)-11, Bengaluru held that merely because the assessee claim of deduction of interest expenditure has not been accepted by the revenue, the penalty u/s. u/s. 271(1)(c) of the Act is not attracted. Further, If the contention of the revenue is accepted, then the assessee would be liable to penalty u/s. 271(1)(c) of the Act in every case where the claim made by the assessee is not accepted by the AO for any reason. The Court held that this cannot be the intention of the legislature. Accordingly, the ld. Pr.CIT(A)-11, Bengaluru was of the opinion that the interest expense claimed by the assessee do not justify levy of the concealment penalty u/s. 271(1)(c) of the Act and accordingly allowed this ground of appeal. The ld. Pr.CIT(A)-11, Bengaluru, thus partly allowed the appeal of the assessee.
9. Again aggrieved by the order of ld. Pr.CIT(A)-11, Bengaluru dated 21/10/2025, the assessee has filed the present appeal before this Tribunal. The assessee has filed a paper book comprising 277 pages containing therein the copy of the various documents/records/return/notices/submissions as relied upon by the assessee.
10. Before us, the ld. A.R. of the assessee by raising the additional legal ground submitted that the notice u/s. 274 r.w.s. 271(1)(c) of the Act dated 30/03/2022 initiating the penalty proceedings was issued without a valid signature as mandated u/s. 282A of the Act and consequently the penalty proceeding initiated without a valid signature is void-ab-initio and accordingly the penalty order dated 16/09/2022 is also liable to be quashed. Further, the ld. A.R. of the assessee vehemently submitted that the assessee was not aware of the provisions of deemed dividend u/s. 2(22)(e) of the Act and was under a bonafide belief that the loan taken from Featherlite Singapore would not amount to deemed dividend. Further, the assessee was completely dependent on the advice of his CFO and accounts head related to tax matters. On being confronted during the search proceedings about the same, the assessee offered the deemed dividend to tax voluntarily by filing a return u/s. 153C of the Act and therefore the penalty should not be levied. Lastly, the ld. A.R. of the assessee also contended that the deeming fiction u/s. 2(22)(e) of the Act is limited and cannot be extended to penalty.
11. The ld. D.R. on the other hand, supported the order of the Authorities below and vehemently submitted that had there not been a search proceedings u/s. 132 of the Act, there was no intentions of the assessee to disclose the concealed income.
Further, with regard to legal ground as raised by the assessee, the ld. D.R. vehemently submitted that every notice issued, served given for the purpose of this act by any income tax authority shall be deemed to be authenticated if the name and office of a designated income tax authority is printed, stamped or otherwise written thereon. Further, the ld. D.R. submitted that no notice issued shall be invalid merely by reason of any mistake, defect or omission if such notice is in substance and effect in conformity with or according to the intend and purpose of this Act. As the assessee responded to the notice u/s. 274 r.w.s 271(1)(c) of the Act by filing his reply on 29/04/2022 and participated in the proceedings before the AO, now at this stage the assessee shall be precluded from taking any such objection.
12. We have heard the rival submissions and perused the material available on records. As we have already admitted the additional ground raised by the assessee hold to be purely legal in nature and are critical for a fair adjudication of the matter, we deemed it fit and proper to first adjudicate this legal ground as raised by the assessee and if the necessity so desire, we will adjudicate other grounds of appeal as raised by the assessee. On going through the assessment order dated 30/03/2022, we noticed that the AO had categorically observed that since the assessee had concealed the interest and dividend income, penalty u/s. 271(1)(c) of the Act is initiated separately for the concealment of income. Thus, while concluding the assessment proceedings, the AO on the observation that the assessee has concealed the interest and dividend income was satisfied that the penalty u/s. 271 (1)(c) of the initiated separately for the concealment of income. Further, ongoing through the show cause notice u/s. 274 r.w.s u/s. 271 (1)(c) of the Act dated 30/03/2022, the AO initiated the penalty proceeding by alleging that the assessee has concealed the particulars of income. Further, ongoing through the said show cause notice dated 30/03/2022, we also noticed that as rightly contended by the ld. A.R. of the assessee, the said notice is neither signed by the AO physically nor through digital signature. The copy of the said notice dated 30/03/2022 is reproduced below for ease of reference and convenience: –
On going through the above Show cause dated 30/03/2022 vide DIN & Notice No. ITBA/PNL/S/271(1)(c)/2021-22/1042168399(1), we take note of the fact that at the bottom of the page of the Notice, there is a note which state that “if digitally signed, the date of the digital signature may be taken as date of document”. Further on the same page of the notice, it is also mentioned that in case the document is digitally signed, please refer digital signature at the bottom of the page. However, we noticed that at the bottom of the page of the notice u/s 274 r.w.s. 271(1)(c) of the Act, it is neither digitally nor manually/physically signed by the AO, Central Circle-1(1), Bangalore. Therefore, we find the contention of the assessee enormously correct that the show cause notice u/s 274 r.w.s. 271(1)(c) of the Act dated 30/03/2022 issued for initiating penalty is unsigned.
12.1 Before us, the ld. DR fervently submitted that the Penalty show cause notice issued u/s. 274 r.w.s. 271(1)(c) of the Act contains the name, designation of the competent authority as well as the details of the office of the competent authority. Further, it is also argued by the ld. DR that as per the provisions of section 282A(2) of the Act, a notice or any other documents shall be deemed to be authenticated if the name and the office of the designated authority is printed, stamped or otherwise written. In this case, the show cause notice dated 30/03/2022 duly contains all the relevant details as envisaged under the provisions of section 282A(2) of the IT Act. Before proceeding further, it is apposite here to reproduce the relevant provision of section 282A of the Act for ease of convenience & reference-
Authentication of notices and other documents.
282A. (1) Where this Act requires a notice or other document to be issued by any income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.
2. Every notice or other document to be issued, served or given for the purposes of this Act by any income-tax authority, shall be deemed to be authenticated if the name and office of a designated income-tax authority is printed, stamped or otherwise written thereon.
3. For the purposes of this section, a designated income-tax authority shall mean any income-tax authority authorised by the Board to issue, serve or give such notice or other document after authentication in the manner as provided in subsection (2).
12.2 On plain reading of the above section clearly exhibit that the first and foremost condition under sub-section (1) of section 282A is that the notice or other document to be issued by any I. Tax Authority shall be signed by that authority. Further, the expression “shall be signed” used in section 282A(1) of the Act makes the signing of the notice or other document by that authority a mandatory requirement. Therefore, a notice or other document as referred in section 282A(1) of the Act will take legal effect only after it is signed by that I. Tax Authority, whether physically or digitally. The usage of the word “shall” make it a mandatory requirement. We are of the considered opinion that initiation of the penalty under section 274 r.w.s. 271(1)(c) of the Act has to be signed first either physically or digitally & thereafter the notice can be issued in paper form or communicated in electronic form by that authority.
12.3 Further, the Revenue has sought to rely on Section 282A of the Act to validate the unsigned Show cause notice. On its plain reading, Section 282A of the Act requires that a notice issued under the Act by the Income Tax Authority must be signed. Reliance is placed on sub-section (2) of Section 282A of the Act, which provides that every notice issued, served, or given for the purposes of the Act by any Income Tax Authority shall be deemed to be authenticated if the name and office of a designated Income Tax Authority is printed or otherwise written thereon. A reading of this sub-section, however, clearly shows that it does not dispense with the requirement of signing the notice or documents by the Income Tax Authority. Therefore, we are of the considered opinion that the reliance on Section 282A offers no assistance to the Revenue. Further, mere generation of DIN number in the Show cause notice is not sufficient to cure the inherent defects, lacunae, omissions and deficiency in the show cause notice u/s 274 r.w.s. 271(1)(c) of the Act. In holding so, we take support & guidance from the decision of the Hon’ble Jurisdictional High Court in the case of the Deputy Commissioner of Income Tax Circle- 4 (2) (1), Bengaluru. V. M/s. Yeshoda Electricals, reported in (KAR-HC) 2025 ITL 7637, the relevant paragraph are reproduced below-
“7. On consideration of the submissions of the respective counsels for the parties, the record indicates the undisputed fact that a notice under Section 148 of the Act was issued on 22.03.2012 for the Assessment Year 2007-08, and the said notice was not signed by the Assessing Officer.
7.1 It is well settled that any notice issued without the requisite signature of the issuing authority cannot constitute a valid notice under law. The mere fact that the Assessee did not raise an objection cannot, by itself, validate a notice that is otherwise invalid. The notice under Section 148 of the Act is a jurisdictional notice, and any defect therein cannot be ignored. Non-signing of a jurisdictional notice is a serious defect, which renders the notice invalid. Section 148 of the Act mandates the issuance of the notice, and such issuance is complete only when the notice bears the signature of the issuing authority.
8. The Revenue has sought to rely on Section 282A of the Act to validate the unsigned notice. On its plain reading, Section 282A requires that a notice issued under the Act by the Income Tax Authority must be signed. Reliance is placed on sub-section (2) of Section 282A, which provides that every notice issued, served, or given for the purposes of the Act by any Income Tax Authority shall be deemed to be authenticated if the name and office of a designated Income Tax Authority is printed or otherwise written thereon. A reading of this subsection, however, clearly shows that it does not dispense with the requirement of signing the notice by the Income Tax Authority. Therefore, reliance on Section 282A offers no assistance to the Revenue.”
12.4 Thus, It is well settled that any Notice/Order/Approval issued without the requisite signature of the issuing authority cannot constitute a valid notice under law. The mere fact that the Assessee did not raise an objection cannot, by itself, validate a notice that is otherwise invalid.
12.5 Now coming to another contention of the ld. DR that no notice issued shall be invalid merely by reason of any mistake, defect or omission if such notice is in substance and effect in conformity with or according to the intend and purpose of this Act, we are of the considered opinion that a notice initiating penalty under Section 274 r.w.s. 271(1)(c) of the Act is a jurisdictional notice, and any defect therein cannot be ignored. Non-signing of a jurisdictional notice is a serious defect, which renders the notice invalid. We are of the considered opinion that section 292B of the Act is intended to ensure that an inconsequential technicality does not defeat the justice. But the signing of a notice under section 271(1)(c) of the Act is not merely an inconsequential technicality. It is a requirement of the provisions of section 282A of the Act. We are of the considered opinion that the unsigned penalty notice is a notice with body without soul. Hence, it is an invalid notice and consequently, equivalent to no notice. In holding so we rely on the decision of the Madhya Pradesh High Court in the case of Umashankar Mishra v. Commissioner of Income-tax reported in (1982) 136 ITR 330, the relevant paragraph are reproduced below-
“The first question for consideration is whether the Tribunal was right in holding that the notice issued to the assessee under section 271(1)(a) of the Act was a valid notice. Now, the Tribunal has found that that notice was not signed by the ITO. Section 282 of the Act provides that a notice under the Act may be served on the person named therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of rule 1 of O. 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, it must be held that the notice to show cause why penalty should not be levied issued by the ITO should have been signed by the ITO and the omission to do so invalidated the notice. In B.K. Gooyee v. CIT [1966] 62 ITR 109 (Cal.), the question for consideration was whether the absence of the signature of the ITO on the notice under section 34 of the Indian Income-tax Act, 1922, was a mere irregularity or a clerical mistake. Dealing with this question, Datta J. Observed as follows (p. 119) :
“In the present case, there was more than a mere irregularity or a clerical mistake, for, in my view, a notice without the signature lacks an essential and/or an integral and /or an inseparable vital part or requirement of a notice under section 34, a notice the terms of which are a condition precedent to the assumption of jurisdiction by the Income-tax Officer. It is notice with a body but without a soul. Hence, it is an invalid notice and consequently, equivalent to no notice.”
We respectfully agree with the aforesaid observations. The Tribunal distinguished the decision in [1966] 62 ITR 109 on the ground that the provisions of section 292B of the Act were introduced after that decision. But, that provision, in our opinion, is intended to ensure that an inconsequential technicality does not defeat justice. But, the signing of a notice under section 271(1)(a) of the Act is not merely an inconsequential technicality. It is a requirement of the provisions of O. 5, rule 1(3) of the CPC, which are applicable by virtue of section 282 of the Act. Under the circumstances, the provisions of section 292B of the Act would not be attracted in the instant case and the Tribunal, in our opinion, was not right in holding that the notice issued under section 271(1)(a) of the Act was a valid notice in the eye of law.
In view of our answer to the first question, our answer to the second question is that the Tribunal was not right in holding that the absence of the signature on the notice simply constituted a mistake or omission within the meaning of section 292B of the Act.
In view of the fact that no valid notice was served on the assessee before levying penalty, our answer to the third question is that, on the facts and in the circumstances of the case, the penalty levied under section 271(1)(a) of the Act was not valid. Thus, our answers to all the three questions referred to this court are in the negative and in favour of the assessee.”
12.6 Further, we also takes a guidance & support from the decision of the Hon’ble High court of Allahabad in the case of Vikas Gupta & ANR v. Union of India & Ors. Reported in (2022) 448 ITR 1, the relevant paragraph of reproduced below for ease of reference & convenience-
“25. Thus the expression “shall be signed” used in s. 282A(1) of the Act 1961 makes the signing of the notice or other document by that authority a mandatory requirement. It is not a ministerial act or an empty formality which can be dispensed with. “Signed” means to sign one’s name; to signify assent or adhesion to by signing one’s name; to attest by signing or when a person is unable to write his name then affixation of “mark” by such person. The document must be signed or mark must be affixed in such a way as to make it appear that the person signing it or affixing his mark is the author of it. Therefore, a notice or other document as referred in s. 282A(1) of the Act, 1961 will take legal effect only after it is signed by that IT authority, whether physically or digitally. The usage of the word “shall” make it a mandatory requirement.
26. In the case of Chhugamal Rajpal vs. S.P. Chaliha & Ors. (1971) 1 SCC 453 (para-5) : AIR 1971 SC 730 : (1971) ITR 603, Hon’ble Supreme Court considered the validity of recording satisfaction under s. 151 by the CIT for the purposes of issuance of notice under s. 148 of the Act, 1961 and held as under :
“5. In his report the ITO does not set out any reason for coming to the conclusion that this is a fit case to issue notice under s. 148. The material that he had before him for issuing notice under s. 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the CIT, Bihar and Orissa. He does not mention the facts contained in those communications. All that he says is that from those communications ‘it appears that these persons (alleged creditors) are name lenders and the transactions are bogus’. He has not even come to a prima facie conclusion that the transactions to which he referred are not genuine transactions. He appears to have had only a vague feeling that they may be bogus transactions. Such a conclusion ‘does not fulfil the requirements of s. 151(2). What that provision requires is that he must give reasons for issuing a notice under s. 148. In other words he must have some prima facie grounds before him for taking action under s. 148. Further his report mentions : “Hence proper investigation regarding these loans is necessary. In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under s. 148. Before issuing a notice under s. 148, the ITO must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under s. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or (b) of s. 147 are satisfied, the ITO has no jurisdiction to issue a notice under s. 148. From the report submitted by the ITO to the CIT, it is clear that he could not have had reasons to believe that by reason of the assessee’s omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the ITO had any material before him which could satisfy the requirements of either cl. (a) or (b) of s. 147. Therefore he could not have issued a notice under s. 148. Further the report submitted by him under s. 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under s. 148. We are also of the opinion that the CIT has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under s. 148. To question No. 8 in the report which reads ‘Whether the CIT is satisfied that it is a fit case for the issue of notice under s. 148’, he just noted the word ‘yes’and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under s. 148. The important safeguards provided in ss. 147 and 151 were lightly treated by the ITO as well as by the CIT. Both of them, appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance.”
(emphasis, italicized in print, supplied by me)
Question No. (a) and (b)
27. The first and foremost condition under sub-s. (1) of s. 282A is that notice or other document to be issued by any IT authority shall be signed by that authority. The word “and” has been used in sub-s. (1), in conjunctive sense, meaning thereby that such notice or other document has first to be signed by the authority and thereafter it may be issued either in paper form or may be communicated in electronic form by that authority. In the present set of facts, it is the admitted case of the respondents that the Principal CIT has not recorded satisfaction under his signature prior to the issuance of notice by the AO under s. 148 of the Act, 1961.
28. 282A(1) of the Act, 1961 specifically provides that a notice or other documents issued by any IT authority shall be signed by that authority in accordance with such procedure as may be prescribed. Sec. 151 of the Act, 1961 specifically provides recording of satisfaction by the Prescribed Authority, on the reasons recorded by the AO that it is a fit case for the issue of notice under s. 148 of the Act, 1961. Unless such satisfaction is recorded, the AO could not get jurisdiction to issue notice under s. 148. A satisfaction, to be a valid satisfaction under s. 151 of the Act, 1961, has to be recorded by the Prescribed Authority under his signature on application mind and not mechanically, as also held by the Hon’ble Supreme Court in the case of Chhugamal Rajpal (supra). Unless the Prescribed Authority under s. 151 of the Act, 1961 records his satisfaction on application of mind and under his signature, there cannot be a valid satisfaction empowering the AO to assume jurisdiction to issue notice under s. 148 of the Act, 1961. In other words, an AO may issue jurisdictional notice under s. 148 only after the Prescribed Authority under s. 151 of the Act records his satisfaction that it is fit case for issue of notice under s. 148.
29. In the present set of facts there was no valid satisfaction recorded by the by the Prescribed Authority under s. 151 of the Act, 1961 when the AO issued notice to the assessees under s. 148 of the Act, 1961. At the time when the notice under s. 148 of the Act, 1961was issued by the AO to the petitioner there was no valid satisfaction recorded by the Prescribed Authority i.e. the Principal Chief CIT or Chief CIT or Principal CIT or CIT. Subsequent to issuance of the notice under s. 148 of the Act, 1961 by the AO, the satisfaction under s. 151 was digitally signed by the Prescribed Authority. Therefore, the point of time when the AO issued notices under s. 148, he was having no jurisdiction to issue the impugned notices under s. 148 of the Act, 1961. Consequently the impugned notices issued by the AO under s. 148 of the Act, 1961 were without jurisdiction. The questions No. (a) and (b) are answered accordingly.
30. Since we have come to the conclusion that there was no valid satisfaction under s. 151, therefore, the question whether Principal Chief CIT or Chief CIT or Principal CIT or CIT for the purposes of recording of satisfaction under s. 151 is a designated IT authority under s. 282A of the Act 1961, is left open.”
12.7 Thus, respectfully following the above decisions of the Jurisdictional High Court as well as Other Hon’ble High Courts, we are of the considered opinion that as in the present case, the notice initiating the penalty under u/s 274 r.w.s. 271(1)(c) of the Act dated 30/03/2022 having no signature affixed on it, digitally or manually, the same is invalid and would not vest the AO with any further jurisdiction to proceed to levy penalty. Consequently, the notice dated 30/03/2022 u/s 274 r.w.s. 271(1)(c) of the Act issued to the assessee being invalid and accordingly consequential reminder notice dated 18/08/2022 as well as penalty Order dated 16/09/2022 are set-aside & hereby quashed.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 27th Apr, 2026
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