Institute of the Franciscan Vs ITO/ACIT (Exemptions) (ITAT Chennai)
The assessee, a charitable trust, was subjected to penalty under section 270A at 200% arising from disallowance of donations. The appeal before the CIT(A) was dismissed on account of delay, and the matter reached the ITAT.
Before the Tribunal, the assessee raised a crucial legal ground that the penalty notice did not specify the exact limb—whether the proceedings were initiated for “underreporting of income” or “misreporting of income.”
The ITAT accepted this contention and held that section 270A clearly contemplates two distinct defaults, each carrying different consequences (50% vs 200% penalty). Therefore, it is mandatory for the Assessing Officer to clearly and specifically mention the exact charge in the notice.
The Tribunal emphasized that a vague or omnibus notice mentioning both limbs reflects non-application of mind and violates principles of natural justice, as the assessee is left uncertain about the exact allegation to defend. It further observed that proper notice under section 274 is a sine qua non for valid penalty proceedings, and failure to do so renders the notice void-ab-initio.
On examining the actual notice, the Tribunal found that both limbs were mentioned without clarity, confirming that the notice was indeed defective and vague.
Accordingly, the ITAT held that since the foundation itself (notice) is invalid, the entire penalty proceedings collapse, and therefore penalty under section 270A was deleted.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 03.11.2025 for Assessment Year (AY) 2017-18.
