Anshul Specialty Molecules Pvt. Ltd. Vs DCIT (ITAT Mumbai)
No Specific Charge, No Penalty: Mumbai ITAT Cancels Section 270A Levy for Defective Notice
The Mumbai ITAT quashed a penalty of ₹5.57 lakh levied under section 270A against Anshul Specialty Molecules Pvt. Ltd., holding that the Assessing Officer had failed to specify the exact clause under which the assessee was alleged to have under-reported income. The penalty arose from a disallowance made under section 14A read with Rule 8D in respect of exempt dividend income.
The assessee contended that while initiating penalty proceedings, the Assessing Officer merely referred to “under-reporting of income” without identifying which of the specific clauses of section 270A(2) was attracted. It was argued that such a vague notice deprived the assessee of a meaningful opportunity to defend itself and rendered the penalty proceedings invalid.
The Tribunal examined the penalty notice and found that the Assessing Officer had indeed failed to specify the precise limb of section 270A applicable to the assessee’s case. Relying on the decisions of the Rajasthan High Court in G.R. Infraprojects Ltd. and the Delhi High Court in Schneider Electric South East Asia (HQ) Pte. Ltd., the Tribunal observed that the Assessing Officer is duty-bound to clearly indicate the exact charge before imposing penalty. A mere generic reference to under-reporting or misreporting of income is insufficient in law.
The ITAT held that failure to specify the relevant clause of section 270A strikes at the root of the penalty proceedings and renders both the notice and the consequential penalty order invalid. Since the penalty itself was quashed on this legal ground, the Tribunal did not consider it necessary to adjudicate the merits of the disallowance under section 14A.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
