Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act, 1961 challenging a common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal in ITA Nos. 1427/Del/2019, 1441/Del/2019, 1437/Del/2019, 1438/Del/2019 and 1283/Del/2019 relating to Assessment Years 2007–08 and 2008–09. One of the respondents was Om Shiv Buildtech Pvt. Ltd.

The ITAT had allowed the assessees’ appeals and deleted penalties imposed under Section 271(1)(c) on the ground that the statutory notices initiating penalty proceedings were issued in a printed format without specifying whether the penalty was proposed 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—concealment of income or furnishing of inaccurate particulars—is valid in law, and whether deletion of penalty by the ITAT raised any substantial question of law.

Appellant’s Arguments

The Revenue contended that the ITAT erred in deleting penalties on a technical ground and that the assessment records clearly indicated the basis for initiation of penalty proceedings. It was argued that mere non-striking of inapplicable portions in the printed notice should not invalidate the penalty.

Respondent’s Arguments

The assessee submitted that the issue was no longer res integra and stood conclusively settled by the Delhi High Court in Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., following the Karnataka High Court judgment in CIT vs. Manjunatha Cotton & Ginning Factory and affirmed by the Supreme Court in SSA’s Emerald Meadows. It was argued that failure to specify the limb of Section 271(1)(c) renders the notice vague and invalid, vitiating the entire penalty proceedings.

Court Order / Findings

The Delhi High Court recorded the Revenue’s fair concession that the issue involved was covered by the earlier decision of the Court in Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., which had been consistently followed in subsequent judgments including Pr. Commissioner of Income Tax vs. M/s Corteva Agriscience Pvt. Ltd., Pr. Commissioner of Income Tax vs. Gragerious Projects Pvt. Ltd., Pr. Commissioner of Income Tax vs. Blackroak Securities Pvt. Ltd., and Pr. Commissioner of Income Tax vs. Unitech Reliable Projects Pvt. Ltd.

The Court reiterated that Section 271(1)(c) contains two distinct limbs and a notice that does not specify which limb is invoked is vague and bad in law. Following binding precedent, the Court held that the ITAT was justified in deleting the penalties and that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that a valid penalty proceeding under Section 271(1)(c) must be preceded by a clear and unambiguous notice specifying the precise charge. A printed notice without striking off the irrelevant limb fails to meet the statutory requirement and vitiates the penalty.

Final Outcome

The appeals filed by the Revenue were dismissed. The Delhi High Court upheld the common order dated 08.02.2023 passed by the ITAT deleting penalties imposed under Section 271(1)(c) for Assessment Years 2007–08 and 2008–09 and decided the matter in favour of Om Shiv Buildtech Pvt. Ltd. and other assessees and against the Revenue.

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