M/s Asian Global Ltd vs Income Tax Officer

PER SUDHIR PAREEK, JM:

The captioned appeal has been preferred by the appellant against the order of the learned Commissioner of Income Tax (Appeals) Delhi [“Learned CIT(A)”, for short] dated 18.02.2026 passed u/s 250of the Income Tax Act, 1961 (for short ‘the Act’) by which the appeal of the appellant was dismissed.

Facts of the case may be summarized as that the appellant company filed its declaring total income of Rs.67,740/- thereafter the case was selected for complete scrutiny assessment and accordingly notice u/s 143(2) of the Act was issued and in the course of assessment proceedings, the Learned AO has taken gross profit rate of Rs. 34,27,020/- @ 3.76% of total turnover of Rs. 9,11,44,152/- and added it to the total income of the appellant company for the year under consideration. The appellant further assails the order by way of appeal before the Learned CIT(A) in which appellant could not succeeded and so present appeal.

Heard rival submissions and carefully scanned the materials available on record.

Reiterating the grounds of appeal, the Learned AR expressed grievance that the impugned order against the fact of case and intent of legislature and quite perverse in law and facts and also has been passed in a biased manner by confirming imposition of penalty at the higher side and ignored the true position of fact that the appellant has not violated any of the provisions of the law u/s 271(1)(c) of the Act and has not made any concealment or furnished inaccurate particulars of its income and addition which has finally been made it by estimation of profit @ 4.5% instead of 3.66% declaring as per the financial accounts. It is also submitted that while initiating the penalty proceedings under above provisions, the Learned Authority has not arrived at any conclusion under which limb of the above section 271(1)(c) of the penalty was to be initiated whether concealed the particulars of income or furnishing inaccurate particulars of such income.

The Learned AR further submitted that factual aspect of this case may be narrated as that the appellant company filed its return of income and same was processed within the ambit of section 143(1)(a) of the Act and assessment was completed at a total income of Rs. 34,74,770/- by addition of Rs. 34,27,020/- and despite of the submissions and materials available on record, The Learned AO resorted to the addition by enhancing the gross profit by 3.76% on estimate basis instead of gross profit added declared by the appellant company at 3.66% as per the financial accounts. Also submitted that against the addition, appellant previously filed an appeal before the Learned CIT(A) which was dismissed and aggrieved thereupon, the appellant preferred an appeal before Tribunal in ITA No. 1669/Del/2024 in which co-ordinate bench of Tribunal order as under:

In the course of hearing, the Learned AR relied upon the order of the Tribunal in ITA No. 1974/Del/2021 dated 31^st Jan., 2025, of which relevent extract is as under:

Per Contra, the Learned DR relied upon the order passed by lower authority.

As per provision of section 271(1)(c) of the Act, in the course of any proceedings under the Act, the Learned AO, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, may direct that such person shall pay by way of penalty as provided therein.

The Learned AR further vehemently submitted that the notice dated 27-12-2017 issued by the Learned AO u/S 271(1)(c) of the Act, not specify that in which of the reasons penalty was proposed to impose i.e. whether for concealment the particulars of the income or furnishing inaccurate particulars of such income as it is mandatory to specify that which limbs of section 271(1)(c) of the Act, the penalty proceedings been initiated. Notice in question reproduced as under;

In this regard, the Learned AR submitted that the notice dated 27.12.2017 issued by the Learned AO u/s 271(1)(c) of the Act not specified with the knowledge of the reasons, penalty was proposed to impose that is whether the concealment of particulars of income or furnishing inaccurate particulars of such income whereas it was incumbent upon the Learned AO, should specify the reason clearly that which limbs of section 271(1)(c) of the Act, the penalty proceedings has been initiated.

On the basis of foregoing fact situation and in consonance with the view expressed as above cited order and respectfully following the binding legal position, we are considered opinion that notice u/s 271(1)(c) r/w 274 of the Act itself bad in law as it was unable to specify that in which limb of section 271(1)(c) penalty processed to be imposed and in that case foundation of imposing of penalty in question legally missing, which is mandatory requirement of law. In the instant case, a simple glance of notice placed on record, evident the Learned AO had not struck off or ticked the relevant portion thereon mentioning the specific offence committed by the appellant and such a legal infirmity is can be ignored only at the cost of law.

Resultantly, there is material substance in the submission advanced on behalf of the appellant that notice in question issued u/s 274 r/w 271(1)(c) is illegal and bad in law as same lacks specific charge and accordingly, issues raised by the appellant is deserves to be allowed by deleting the penalty in question.

Consequently, the appeal is hereby allowed as stated above.