Penalty Deleted as Section 271(1)(c) Notice Failed to Specify Charge: ITAT Delhi

ACIT Vs Tata Teleservices ltd (ITAT Delhi)

Summary: ITAT Delhi dismissed the Revenue’s appeal and allowed the cross objection of Tata Teleservices ltd for AY 2007-08, holding that penalty under Section 271(1)(c) could not survive where the Assessing Officer’s notice under section 274 read with section 271(1)(c) failed to strike off the irrelevant portion and did not specify whether the charge was concealment of particulars of income or furnishing inaccurate particulars of income. The appeal arose from the NFAC order dated 31.03.2024 concerning penalty imposed by order dated 30.03.2018. The Tribunal noted that the penalty show-cause notice dated 24.12.2009 did not specifically identify the offence alleged against the assessee.

Relying on the Full Bench decision of the Bombay High Court in Mohd. Farhan A Shaikh vs DCIT, 434 ITR 1 (Bom)(FB), the Tribunal observed that omnibus notices reflect non-application of mind and that violation of a mandatory procedural requirement carrying penal consequences entails prejudice. The Tribunal also relied upon PCIT vs Sahara India Life Insurance Co. Ltd, 432 ITR 84 (Del), where the Delhi High Court, following CIT v. Manjunatha Cotton & Ginning Factory and CIT v. SSA’s Emerald Meadows, upheld the principle that a notice is bad in law if it does not specify the limb of section 271(1)(c) under which penalty proceedings are initiated. On examining the notice in the present case, the Tribunal found the cited High Court rulings squarely applicable and directed the AO to delete the penalty. Consequently, the Revenue’s grounds became academic, its appeal was dismissed and the assessee’s cross objection was allowed.