DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-25 NEW DELHI, DELHI V. FJM CYLINDERS PVT LTD, DELHI

ITA 1536/DEL/2024

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax, Central Circle-25, New Delhi against FJM Cylinders Pvt. Ltd concerning a penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2015-16. The primary legal issue was whether the penalty notice was valid when it failed to specify which particular offense under section 271(1)(c) the penalty was being imposed for, i.e., concealment of income or furnishing of inaccurate particulars. The Income Tax Appellate Tribunal (ITAT) upheld the decision of the Commissioner of Income Tax (Appeals) to delete the penalty, referencing precedents that mandate clarity in penalty notices to avoid ambiguity and ensure fair application of justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470214 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: Mohd. Farhan A Shaikh vs DCIT, PCIT vs Sahara India Life Insurance Co. Ltd, CIT vs Manjunatha Cotton & Ginning Factory, CIT vs SSA's Emerald Meadows, Rajesh Kumar v. CIT, State of Orissa v. Dr. Binapani Dei
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: SALIL AGARWAL
• Keywords: Question of law; Principle of natural justice
• Section: 271(1)(c); 274; 73; 2

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ITA No. 1536/Del/2024 (Assessment Year: 2015-16) DCIT, Central Circle-25, New Delhi Vs. FJM Cylinders Pvt. Ltd, Khasara No. 172, Neel House, Lado Sarai, Opposite Qutab Minar, New Delhi-110030 (Appellant) (Respondent) PAN:AABCF6572C Assessee by : Shri Salil Agarwal, Adv Shri Shailesh Gupta, Adv Shri Uma Shankar, Adv Revenue by: Shri Surender Pal, CIT DR Date of Hearing 17/02/2025 Date of pronouncement 05/03/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1536/Del/2024 for AY 2015-16, arises out of the order of the Commissioner of Income Tax (Appeals)-29, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10251/2019-20 dated 31.01.2024 against the order of assessment passed u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 22.06.2018 by the Assessing Officer, ACIT, Circle-9 (1), New Delhi (hereinafter referred to as „ld. AO‟). 2. Though the revenue has raised several grounds of appeal before us, the only effective issue to be decided in this appeal is as to whether the Learned CITA was justified in deleting the penalty levied under ITA No. 1536/Del/2024 FJM Cylinders Pvt. Ltd Page | 2 section 271(1)(c ) of the Act in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. It is not in dispute that the ld. AO in the penalty notice under section 274 read with section 271(1) (c ) of the Act dated 15.12.2017 (enclosed in Page 34 of the Paper Book) and penalty notice under section 274 read with section 271(1) (c ) of the Act dated 22.5.2018 (enclosed in Page 35 of the Paper Book) had not struck off the inappropriate portion as to whether the assessee had concealed the particulars of income or furnished inaccurate particulars of income. Now the short question that arises is whether non-striking off of the irrelevant portion in the 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 ITA No. 1536/Del/2024 FJM Cylinders Pvt. Ltd Page | 3 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.” 4. 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. ITA No. 1536/Del/2024 FJM Cylinders Pvt. Ltd Page | 4 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.” 5. In the instant case, on perusal of the penalty notices placed on record dated 15.12.2017 and 22.5.2018, it is evident that the ld. AO had not struck off the irrelevant portion thereon mentioning the specific offence committed by the assessee. 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 do not find any infirmity in the action of the Learned CITA in deleting the penalty levied u/s 271(1)(c ) of the Act . Accordingly, the Grounds raised by the revenue are dismissed. Since the relief is granted on this preliminary ground, there is no need to separately adjudicate the other grounds raised by the revenue. 6. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 05/03/2025. -Sd/- -Sd/- (MADHUMITA ROY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 05/03/2025 A K Keot ITA No. 1536/Del/2024 FJM Cylinders Pvt. Ltd Page | 5 Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "