Suresh Kumar Modi HUF Vs ITO (ITAT Ranchi)
The ITAT, Ranchi Bench, held that penalty u/s 271AAB cannot survive where the notice u/s 274 is vague and does not specify the exact charge or clause invoked. In this case (AY 2016-17), though the assessee had admitted undisclosed income during search and paid tax, the AO issued a routine penalty notice without mentioning which specific limb of s.271AAB was applicable.
The Tribunal noted that the notice merely contained standard language (“concealed particulars / furnished inaccurate particulars”) and failed to disclose the statutory basis for levy of penalty under s.271AAB. This defect goes to the root of jurisdiction and vitiates the entire penalty proceedings.
Following its own co-ordinate bench decisions in identical matters, the ITAT held that such non-application of mind is fatal, irrespective of disclosure during search. Accordingly, the penalty of ₹3.01 lakh u/s 271AAB was deleted, and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT RANCHI
1. This is an appeal filed by the assessee against the order of the ld. CIT(A), Patna-3, Patna in Appeal No. CIT(A), Patna-3/10082/2018-19 dated 31/03/2025 for the A.Y. 2016-17 by raising following grounds of appeal:
“1. The order of the Asst. Commissioner of Income Tax, Central Circle – 1. Ranchi is bad in law and facts.
2. The Commissioner of Income Tax (Appeal) erred in confirming the penalty U/s Sec 271AAB as per order of Asst. Commissioner of Income Tax, Central Circle – 1. Ranchi based on notice issued for penalty u/s 274 of the Income Tax Act 1961.
3. The Commissioner of Income Tax (Appeal) erred in not following the orders of Jurisdictional Tribunal, High Courts as well as Supreme Court of India.
4. Any other grounds if any will be urged at the time of the hearing.”
2. The facts of the case, in brief, are that the assessment order under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) was passed on 27/12/2017 wherein income of the assessee was assessed at ₹ 33,42,020/-. The penalty proceedings under Section 271AAB of the Act was also initiated by the Assessing Officer while passing the order under Section 143(3) of the Act. Subsequently, the Assessing Officer passed penalty order under Section 271AAB of the Act on 28/06/2018 and imposed a penalty of ₹ 3,01,520/- being 10% of the tax sought to be evaded on the ground that the assessee had admitted the quantum of undisclosed income in course of search and seizure proceedings and disclosed the same in the income tax return filed by the assessee and paid the requisite tax on that.
