Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961, being ITA No. 548/2025, against Gobind Kumar Goyal, challenging a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal. The ITAT had allowed the assessee’s appeal and deleted the penalty imposed under Section 271(1)(c) of the Act for the relevant Assessment Years 2007-08 and 2008-09.

The penalty proceedings arose from notices issued under Section 274 read with Section 271(1)(c), which were in a printed format and did not specify whether the penalty was sought to be imposed for concealment of income or for furnishing inaccurate particulars of income.

Issues Involved

Whether a penalty notice issued under Section 271(1)(c) without specifying the exact limb invoked is valid in law, whether such vagueness vitiates the penalty proceedings, and whether any substantial question of law arose from the ITAT’s decision deleting the penalty.

Appellant’s Arguments (Revenue)

The Revenue challenged the ITAT’s order contending that the Tribunal erred in deleting the penalty and that the defect in the notice was not fatal. During the course of hearing, however, the Revenue fairly conceded that the issue stood covered by earlier binding decisions of the Delhi High Court, including Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd.

Respondent’s Arguments (Assessee)

The assessee relied upon settled judicial precedents holding that a notice under Section 271(1)(c) must clearly specify the charge against the assessee. It was contended that failure to indicate whether the allegation was concealment of income or furnishing of inaccurate particulars renders the notice vague and invalid, thereby vitiating the entire penalty proceedings.

Court Order / Findings

The Delhi High Court noted that the issue involved was squarely covered by its earlier judgments, including Sahara India Life Insurance Co. Ltd., Gragerious Projects Pvt. Ltd., Blackroak Securities Pvt. Ltd., Unitech Reliable Projects Pvt. Ltd., and the Karnataka High Court decision in CIT vs. Manjunatha Cotton & Ginning Factory, which was affirmed by the Supreme Court in SSA’s Emerald Meadows.

The Court reiterated that Section 271(1)(c) contains two distinct limbs and that the assessee must be made aware of the precise charge. A printed or omnibus notice which does not strike off the inapplicable limb or otherwise specify the exact charge is vague and unsustainable in law.

Applying the principle of parity of reasoning, the Court held that the ITAT was justified in deleting the penalty.

Important Clarification

The High Court clarified that where a notice under Section 274 read with Section 271(1)(c) fails to clearly indicate the specific limb under which penalty proceedings are initiated, such notice is invalid, and no penalty can be sustained on the basis of such defective notice.

Final Outcome

The appeal filed by Pr. Commissioner of Income Tax-4 against Gobind Kumar Goyal was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the ITAT’s order deleting the penalty imposed under Section 271(1)(c) on the ground that the penalty notice was vague and invalid. The appeal was disposed of in favour of the assessee and against the Revenue.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505958_PR.COMMISSIONEROFINCOMETAX4VsGOBINDKUMARGOYAL.pdf

 

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