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Judgment
PER M. BALAGANESH, A. M.:
The appeal in ITA No.6735/Del/2025 for AY 2021-22, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 14.08.2025 against the order of assessment passed u/s 270A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.06.2023 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’).
The only issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the levy of penalty u/s 270A of the Act when the penalty notice had not struck off the inappropriate portion as to whether the assessee had under-reported his income or misreported his income. The assessee vide Ground Nos. 2& 3 had raised a preliminary issue as to whether penalty u/s 270A of the Act could at all be levied by the ld AO in the facts and circumstances of the instant case for want of mentioning of specific charge of offence committed by the assessee in the notice. This goes to the root of the matter and hence we proceed to take up the same first for adjudication.
We have heard the rival submissions and perused the material available on record. The Learned AR placed on record the show cause notice issued u/s 270A of the Act on 08.12.2022 wherein, it is very clear that the Learned AO had stated that the assessee had under reported income which is in consequence of misreporting thereof as per details given in the assessment order. We find that the assessment order under Section 143(3) read with Section 144B of the Act was framed on 8-12-2022 after making the disallowance on account of foreign travel expenses of Rs 6,75,318 and disallowance of depreciation of Rs 7,44,810 and thereafter determining the assessed loss at Rs 74,30,092. However, in the quantum assessment proceedings, the penalty in respect of both the disallowances, the Learned AO had mentioned that penalty proceedings under Section 270A of the Act are initiated for under-reporting of income in consequence of misreporting. Ultimately the penalty u/s 270A of the Act has been levied only for mis-reporting of income vide order dated 22-6-2023. It is pertinent to note that the penalty initiated for under-reporting of income is eligible for grant of immunity subject to satisfaction of conditions stipulated in section 270A(6) of the Act. For mis-reporting of income u/s 270A(9) of the Act, there are six clauses provided thereon. We find that the show cause notice issued by the ld AO does not contain any specific clause of violation committed by the assessee herein. Hence it could be safely concluded that the show cause notice issued for penalty is vague without clearly mentioning the specific charge of offence committed by the assessee, thereby vitiating the entire penalty proceedings.
Now the short question that arises is whether the vague penalty notice by not specifically mentioning the offence committed by the assessee, would become fatal to the penalty proceedings ? This issue is no longer res integra in view of the Full Bench Decision of Hon’ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs DCIT reported in 434 ITR 1 (Bom)(FB) dated 11.3.2021. The relevant operative portion of the said judgement is reproduced hereunder:-
“Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ?
187.In Dilip N. Shroff case (supra), for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars.
188.We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.
189.In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest".
190.Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution.
191.As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice.
Conclusion:
We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication.”
Similar view was taken by the Hon’ble Jurisdictional High Court in the case of PCIT vs Sahara India Life Insurance Co. Ltd reported in 432 ITR 84(Del) wherein it was held as under:-
“21.The Respondent had challenged the upholding of the penalty imposed under section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250/218 Taxman 423/359 ITR 565 and observed that the notice issued by the AO would be bad in law if it did not specify which limb of section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in CIT v. SSA's Emerald Meadows [2016] 73 taxmann.com 241, the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.
22.On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises.
23.The appeals are accordingly dismissed.”
Though the aforesaid decisions were rendered in the context of penalty levied u/s 271(1)(c ) of the Act, the same analogy would apply to the penalty levied u/s 270A of the Act and the Learned AO is duty bound to specifically mention the offence committed by the assessee in the show cause notice itself as the said section contains various limbs. The penalty rate also varies depending upon the offence committed by the assessee. Hence the ratio laid down in the aforesaid decision of Hon’ble High Courts squarely applies to the facts of the instant case before us. Hence we direct the Learned AO to delete the penalty levied u/s 270A of the Act . Accordingly, the Grounds 2 & 3 raised by the assessee are allowed. Since the relief is granted on these grounds, the adjudication of other grounds of assessee become academic and they are left open.
In the result, the appeal of the assessee is allowed.