Dazzler Confectionery Company Vs ITO (ITAT Mumbai)
Penalty u/s 271(1)(c) Deleted Due to Defective Notice – No Specific Charge Mentioned
AO levied penalty of ₹44.79 lakh u/s 271(1)(c) on disallowances relating to pre-operative expenses & 35D deduction. Penalty notice u/s 274 was issued using “concealment OR furnishing inaccurate particulars” without specifying the exact charge.
Assessee challenged penalty on ground of defective notice. Revenue argued that defect is curable & no prejudice caused.
ITAT held:
- AO failed to specify exact limb of section 271(1)(c) in notice → non-application of mind
- Use of “OR” creates ambiguity & vitiates penalty proceedings
- Following Bombay HC (Full Bench) in Mohd. Farhan A. Shaikh, such defective notice is fatal
- Penalty provisions being penal in nature must be strictly construed
Accordingly, penalty was held invalid & deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the Assessee against the order dated 05.12.2025, impugned herein, passed by National Faceless Appeal Centre (NFAC), Delhi/Ld. Commissioner of Income Tax (Appeals) [in short Ld. Commissioner] u/s 250 of the Income Tax Act, 1961, [in short ‘the Act’] for the A.Y. 2013-14.
2. In the instant case, the Assessing Officer, vide Assessment Order dated 28.03.2016, has made the disallowances of Rs.1,26,60,266/- and Rs.11,46,765/- on account of preoperative expenditure and deduction u/s 35D of the Act, respectively. The Assessing Officer, in the Assessment Order, also initiated the penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and concealing the income.
