INCOME-TAX OFFICER-8(3)(1), MUMBAI, MUMBAI V. VIBGYOR TEXOTECH LIMITED, MUMBAI

ITA 4705/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the order of the Ld. CIT(A) which deleted a penalty of Rs. 7,07,78,919 imposed on Vibgyor Texotech Ltd. for the assessment year 2009-10 under section 271(1)(c) of the Income-tax Act, 1961. The penalty was initially imposed following a reassessment under sections 143(3) and 147 of the Act. The main contention in the appeal was the vagueness of the penalty notice, which did not clearly specify the grounds for the penalty. The Tribunal, referencing several precedents including the Supreme Court's decision in CIT v. SSA's Emerald Meadows, upheld the deletion of the penalty, emphasizing the importance of clarity in penalty notices.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774688 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2025
• Other Referred Cases: CIT v. SSA's Emerald Meadows, Manjunatha Cotton & Ginning Factory, Mohd. Farhan A. Shaikh v. Deputy Commissioner of Income Tax, Central Circle-1, Belgaum
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings
• Section: 147; 148; 143(3); 271(1)(c)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. SUCHITRA RAGHUNATH KAMBLE (JUDICIAL MEMBER) ITA No. 4705/MUM/2025 Assessment Year: 2009-10 ITO-8(3)(1), Room No. 617, 6th Floor, Aayakar Bhavan, M.K. Road, Mumbai-400020. Vs. Vibgyor Texotech Ltd., 309, Navyug, 167 Tokersi Jivraj Road, Sewree, Mumbai-400015. PAN NO. AACCV 0752 D Appellant Respondent Assessee by : None Revenue by : Mr. Vivek Perampurna, CIT-DR Date of Hearing : 09/09/2025 Date of pronouncement : 09/09/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 22.05.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, in relation to penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’). The grounds raised by the Revenue are reproduced as under: (i) \"In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLETE the penalty levied u/s. Printed from counselvise.com 271(1)(c) of the I. T. Act, 1961 of Rs.7,07,78,919/ non-mentioning of relevant limb OR non limb in the penalty notice is proceedings.\" (ii) \"In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) solely on the basis of limb, without examining the merits of the case.\" (iii) In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that no prejudice was caused to the assessee, and the same is curable u/s 292B 2. Briefly stated, facts of the case are that in the r completed under section 143(3) read with section 147 of the Income-tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the total income of the assessee was determined at and penalty proceedings under section 271(1)(c) of the initiated. The quantum matter travelled up to the Tribunal, and pursuant to the order giving effect, the total income was finally determined at ₹21,02,57,100/ notice was issued to the assessee for levy of penalt considering its submissions, the Assessing Officer imposed penalty of ₹7,07,78,990/-. 2.1 In appeal before the Ld. CIT(A), the assessee raised a specific legal plea that the notice issued under section 274 read with section 271(1)(c) suffered from the vice of vagueness inasmuch as it did not specify whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of ITA No. 271(1)(c) of the I. T. Act, 1961 of Rs.7,07,78,919/- holding that the mentioning of relevant limb OR non-striking off of irrelevant limb in the penalty notice is a substantive defect in the initiating proceedings.\" (ii) \"In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) solely on the basis of limb, without examining the merits of the ) In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that no prejudice was caused to the assessee, and the same is curable u/s 292B of Briefly stated, facts of the case are that in the r completed under section 143(3) read with section 147 of the tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the total income of the assessee was determined at ₹28,34,12,447/ and penalty proceedings under section 271(1)(c) of the initiated. The quantum matter travelled up to the Tribunal, and pursuant to the order giving effect, the total income was finally 21,02,57,100/-. Consequent thereto, a show notice was issued to the assessee for levy of penalt considering its submissions, the Assessing Officer imposed penalty In appeal before the Ld. CIT(A), the assessee raised a specific legal plea that the notice issued under section 274 read with section from the vice of vagueness inasmuch as it did not specify whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of Vibgyor Texotech Ltd 2 ITA No. 4705/MUM/2025 holding that the striking off of irrelevant a substantive defect in the initiating (ii) \"In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in directing to DLEETE the penalty u/s 271(1)(c) solely on the basis of limb, without examining the merits of the ) In the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that no prejudice was caused of the Act.? Briefly stated, facts of the case are that in the reassessment completed under section 143(3) read with section 147 of the tax Act, 1961 (“the Act”) vide order dated 30.03.2016, the 28,34,12,447/-, and penalty proceedings under section 271(1)(c) of the Act were initiated. The quantum matter travelled up to the Tribunal, and pursuant to the order giving effect, the total income was finally . Consequent thereto, a show-cause notice was issued to the assessee for levy of penalty, and after considering its submissions, the Assessing Officer imposed penalty In appeal before the Ld. CIT(A), the assessee raised a specific legal plea that the notice issued under section 274 read with section from the vice of vagueness inasmuch as it did not specify whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of Printed from counselvise.com income. It was contended that such a defect rendered the penalty proceedings void ab initio. 2.2 The Ld. CIT(A), after considering the submissions of the assessee and examining the penalty notice, found that the relevant limb of section 271(1)(c) had not been struck off in the notice issued under section 274. Placing reliance on th Hon’ble Supreme Court in taxmann.com 248 (SC), the Hon’ble Karnataka High Court in Manjunatha Cotton & Ginning Factory Hon’ble jurisdictional High Court in (supra), the Ld. CIT(A) held that non charge is a substantive defect going to the root of jurisdiction, and therefore, the penalty order c accordingly deleted observing as under “4. Ǔन ण[य/ Decision The assessee company had not filed return of income for the A.Y. 2009 10. Proceedings u/s 147 of the Act were initiated and assessment order u/s 143(3) of the Act was passed on 30.03.2016 determining total income at Rs. 28,31,12,447/ order giving effect was passed determining total income at Rs. Rs. 21,02,57,100/-. Penal proceedings u/s 271(1)(c) of the Act was init and imposed at Rs 7,07,78,919/ Hence, this appeal. Ground No 1 As the notice u/s. 274 suffers from the vice of vagueness in view of the fact that the notice does not state whether notice issued for fling inaccurate particulars or for concealment of income, the notice u/s. 274 and consequent proceedings are legally in The appellant has submitted as under: ITA No. income. It was contended that such a defect rendered the penalty oid ab initio. The Ld. CIT(A), after considering the submissions of the assessee and examining the penalty notice, found that the relevant limb of section 271(1)(c) had not been struck off in the notice issued under section 274. Placing reliance on the binding precedents of the Hon’ble Supreme Court in CIT v. SSA’s Emerald Meadows taxmann.com 248 (SC), the Hon’ble Karnataka High Court in Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565, and the Hon’ble jurisdictional High Court in Mohd. Farhan A. Shaikh (supra), the Ld. CIT(A) held that non-specification of the precise charge is a substantive defect going to the root of jurisdiction, and therefore, the penalty order could not be sustained. The penalty was observing as under: / Decision: The assessee company had not filed return of income for the A.Y. 2009 10. Proceedings u/s 147 of the Act were initiated and assessment order f the Act was passed on 30.03.2016 determining total income at Rs. 28,31,12,447/-. The matter travelled upto ITAT and the order giving effect was passed determining total income at Rs. Rs. . Penal proceedings u/s 271(1)(c) of the Act was init and imposed at Rs 7,07,78,919/-. As the notice u/s. 274 suffers from the vice of vagueness in view of the fact that the notice does not state whether notice issued for fling inaccurate particulars or for concealment of income, the notice u/s. 274 and consequent proceedings are legally invalid. The appellant has submitted as under: Vibgyor Texotech Ltd 3 ITA No. 4705/MUM/2025 income. It was contended that such a defect rendered the penalty The Ld. CIT(A), after considering the submissions of the assessee and examining the penalty notice, found that the relevant limb of section 271(1)(c) had not been struck off in the notice issued e binding precedents of the CIT v. SSA’s Emerald Meadows [2016] 73 taxmann.com 248 (SC), the Hon’ble Karnataka High Court in CIT v. [2013] 359 ITR 565, and the Mohd. Farhan A. Shaikh specification of the precise charge is a substantive defect going to the root of jurisdiction, and ould not be sustained. The penalty was The assessee company had not filed return of income for the A.Y. 2009- 10. Proceedings u/s 147 of the Act were initiated and assessment order f the Act was passed on 30.03.2016 determining total . The matter travelled upto ITAT and the order giving effect was passed determining total income at Rs. Rs. . Penal proceedings u/s 271(1)(c) of the Act was initiated As the notice u/s. 274 suffers from the vice of vagueness in view of the fact that the notice does not state whether notice issued for fling inaccurate particulars or for concealment of income, the notice u/s. Printed from counselvise.com The notice of penalty is not clear whether for concealment or for inaccurate particulars. Hence entire proceedings are illegal in view of Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The Deputy Commissioner of Income Tax, Central Circle decision attached and copy of notice u/s. 271(1)(c) attached. In the order of penalty, the AO has concluded as under: As the reply of the assessee is not satisfactory, as no explanation documentary evidences in its support, for non imposition of penalty u/s 271(1)(c), has been given by the assessee. Considering the above facts and reply filed by the assessee, it has been proved that the assessee has deliberately submitted the inaccurat particulars of income in ITR filed in response to notice u/s 148 and during the assessment proceedings, to avoid payment of taxes. Penalty proceedings under section 271(1)(c) of the Income tax Act, 1961 were initiated for the A.Y. 2009 notice u/s 271(1)(c) of the Act issued on 30.03.2016. Therefore, after considering all facts and circumstances of the case, I am satisfied that the assessee has concealed its income and therefore is liable for penalty u/s 271(1)(c this case comes to Rs. 7,07,78,919/ Therefore, the minimum of penalty leviable in this case comes to Rs. 7,07,78,919/- @ 100% and maximum of penalty leviable in this case comes to Rs. 21,23,36,757/ circumstances of the case, I impose a penalty of Rs. 7,07,78,919/ is about 100% of the tax sought to be evaded in this case The penalty notice dated 30/03/2016 under section 274 rws 271( given by AO is reproduced as under: *have concealed the particulars of your Income as per order u/s 143(3) attached furnished inaccu particulars of such income. As such, from the extracts of the notice reproduced as above, it is clearly evident that the AO did not specify charge under which penalty proceedings had been initiated by him on the assessee. As such, initiation of penalty itself is bad in law. Copy of penalty notice issued under section 274 rws 271(1)(c) dated 30.03.2016 ITA No. The notice of penalty is not clear whether for concealment or for inaccurate particulars. Hence entire proceedings are illegal in view of Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The Deputy Commissioner of Income Tax, Central Circle-1, Belgaum. Copy of decision attached and copy of notice u/s. 271(1)(c) attached. In the order of penalty, the AO has concluded as under: As the reply of the assessee is not satisfactory, as no explanation documentary evidences in its support, for non imposition of penalty u/s 271(1)(c), has been given by the assessee. Considering the above facts and reply filed by the assessee, it has been proved that the assessee has deliberately submitted the inaccurat particulars of income in ITR filed in response to notice u/s 148 and during the assessment proceedings, to avoid payment of taxes. Penalty proceedings under section 271(1)(c) of the Income tax Act, 1961 were initiated for the A.Y. 2009-10 in the case of the assessee vide penalty notice u/s 271(1)(c) of the Act issued on 30.03.2016. Therefore, after considering all facts and circumstances of the case, I am satisfied that the assessee has concealed its income and therefore is liable for penalty u/s 271(1)(c) of the Act. The tax sought to be evaded in this case comes to Rs. 7,07,78,919/-(After deduction of prepaid tax). Therefore, the minimum of penalty leviable in this case comes to Rs. @ 100% and maximum of penalty leviable in this case to Rs. 21,23,36,757/- @ 300%. After considering all facts and circumstances of the case, I impose a penalty of Rs. 7,07,78,919/ is about 100% of the tax sought to be evaded in this case The penalty notice dated 30/03/2016 under section 274 rws 271( given by AO is reproduced as under: *have concealed the particulars of your Income as per order u/s 143(3) attached furnished inaccu particulars of such income. As such, from the extracts of the notice reproduced as above, it is clearly the AO did not specify charge under which penalty proceedings had been initiated by him on the assessee. As such, initiation of penalty itself is bad in law. Copy of penalty notice issued under section 274 rws 271(1)(c) dated 30.03.2016 is as under Vibgyor Texotech Ltd 4 ITA No. 4705/MUM/2025 The notice of penalty is not clear whether for concealment or for inaccurate particulars. Hence entire proceedings are illegal in view of Hon'ble jurisdictional HC in case of Mr. Mohd. Farhan A Shaikh Vs. The 1, Belgaum. Copy of As the reply of the assessee is not satisfactory, as no explanation or documentary evidences in its support, for non imposition of penalty u/s Considering the above facts and reply filed by the assessee, it has been proved that the assessee has deliberately submitted the inaccurate particulars of income in ITR filed in response to notice u/s 148 and during the assessment proceedings, to avoid payment of taxes. Penalty proceedings under section 271(1)(c) of the Income tax Act, 1961 were the assessee vide penalty Therefore, after considering all facts and circumstances of the case, I am satisfied that the assessee has concealed its income and therefore is ) of the Act. The tax sought to be evaded in (After deduction of prepaid tax). Therefore, the minimum of penalty leviable in this case comes to Rs. @ 100% and maximum of penalty leviable in this case @ 300%. After considering all facts and circumstances of the case, I impose a penalty of Rs. 7,07,78,919/-, which The penalty notice dated 30/03/2016 under section 274 rws 271(1)(c) *have concealed the particulars of your Income as per order u/s 143(3) As such, from the extracts of the notice reproduced as above, it is clearly the AO did not specify charge under which penalty proceedings had been initiated by him on the assessee. As such, initiation of penalty itself is bad in law. Copy of penalty notice issued under : Printed from counselvise.com From the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act, it is seen that the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case, I am of the view that non is a substantive defect and infirmity which goes to the root of the matter and is not curable at the later squarely covered by the decision of the Hon'ble Apex Court case of CIT vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said decision, the Hon'ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding the order of Hon'ble High Court wherei division bench of Hon'ble Karnataka High Court in the case of CIT Vs ITA No. m the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act, it is seen that the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case, I am of the view that non-mentioning of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter and is not curable at the later stage. The case of the assessee is squarely covered by the decision of the Hon'ble Apex Court case of CIT vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said decision, the Hon'ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding the order of Hon'ble High Court wherein the decision of the coordinate division bench of Hon'ble Karnataka High Court in the case of CIT Vs Vibgyor Texotech Ltd 5 ITA No. 4705/MUM/2025 m the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act, it is seen that the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case, I ing of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter case of the assessee is squarely covered by the decision of the Hon'ble Apex Court case of CIT vs. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC). In the said decision, the Hon'ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding n the decision of the coordinate division bench of Hon'ble Karnataka High Court in the case of CIT Vs Printed from counselvise.com Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been followed. The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar Agarwal ITAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: There is no merit in this intended appeal. The impugned notice under Section 271(1)(c) does not specify which of the two contraventions, the assessee is guilty of. For those reasons, the notice is b supported in our view by the decision of the Supreme Court in Amrit Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 SCC 419, a Division Bench of our Court in Principal Commissioner of Income Tax - 19, Kolkata Versus Dr. 2017 (so far unreported) decided on 18th July, 2018, judgements of the Karnataka and Bombay High Courts referred to in the preceding judgement and an unreported judgement of the Division Bench in Principal CIT1, Kolkata February, 2019 on the same point. We make it absolutely clear that we have only gone into the question of technical defect in the notice stated to have been issued under Section 271(1)(c) read with Section 274 of t Income Tax Act, 1961 and the consequences thereof. The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum [2021] 125 taxmann.com 253 (Bombay) held that:  As aptly pointed Court there are two sets of cases. One set of cases is led by CIT v. Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a decision earliest in point of time. The other set does not have a lead case; th Manjunatha (supra). For that reason, the Karnataka High Court's decision has been discussed in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: (1) CIT v. Samson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18 2019] and (4) Pr. Appeal No. 18 of 2019, dated 26 is Kaushalya (supra). All by co  The Tax Appeal No. 24/2019, decided on 11 Pr. CIT (Central) v that one, the Division Bench has held that the notice which is issued to the assessee must indicate whether the Assessing ITA No. Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar TAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: There is no merit in this intended appeal. The impugned notice under Section 271(1)(c) does not specify which of the two contraventions, the assessee is guilty of. For those reasons, the notice is b supported in our view by the decision of the Supreme Court in Amrit Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 SCC 419, a Division Bench of our Court in Principal Commissioner of 19, Kolkata Versus Dr. Murari Mohan Koley, ITAT No. 306 of 2017 (so far unreported) decided on 18th July, 2018, judgements of the Karnataka and Bombay High Courts referred to in the preceding judgement and an unreported judgement of the Division Bench in Principal CIT1, Kolkata Versus M/S. SRMB Srijan Ltd. made on 26th February, 2019 on the same point. We make it absolutely clear that we have only gone into the question of technical defect in the notice stated to have been issued under Section 271(1)(c) read with Section 274 of t Income Tax Act, 1961 and the consequences thereof. The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum [2021] 125 taxmann.com 253 (Bombay) held that: As aptly pointed out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by CIT v. Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a decision earliest in point of time. The other set does not have a lead case; they all have been cryptic but stand persuaded by Manjunatha (supra). For that reason, the Karnataka High Court's decision has been discussed in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: mson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18 2019] and (4) Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [TX Appeal No. 18 of 2019, dated 26-11-2019] On the opposite plank is Kaushalya (supra). All by co-equal Benches, though. [Para 162] The Tax Appeal No. 24/2019, decided on 11-11-2019, relates to Pr. CIT (Central) v. Goa Coastal Resorts & Recreation (P.) Ltd. In that one, the Division Bench has held that the notice which is issued to the assessee must indicate whether the Assessing Vibgyor Texotech Ltd 6 ITA No. 4705/MUM/2025 Manjunatha Cotton & Ginning Factory [2013] 339 ITR 565 has been The Hon'ble Calcutta High Court in the case of Pr. CIT vs. Bijoy Kumar TAT 272 of 2017, GA 245 of 2017 dtd 22/04/2019 held that: There is no merit in this intended appeal. The impugned notice under Section 271(1)(c) does not specify which of the two contraventions, the assessee is guilty of. For those reasons, the notice is bad. We are supported in our view by the decision of the Supreme Court in Amrit Foods Versus Commissioner of Central Excise, U. P. reported in (2005) 13 SCC 419, a Division Bench of our Court in Principal Commissioner of Murari Mohan Koley, ITAT No. 306 of 2017 (so far unreported) decided on 18th July, 2018, judgements of the Karnataka and Bombay High Courts referred to in the preceding judgement and an unreported judgement of the Division Bench in Versus M/S. SRMB Srijan Ltd. made on 26th February, 2019 on the same point. We make it absolutely clear that we have only gone into the question of technical defect in the notice stated to have been issued under Section 271(1)(c) read with Section 274 of the The Hon'ble Bombay High Court in the in the case of Mohd. Farhan A. Shaikh v.Deputy Commissioner of Income Tax, Central Circle 1, Belgaum out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by CIT v. Smt. Kaushalya [1994] 75 Taxman 549/216 ITR 660 (Bombay) a decision earliest in point of time. The other set does not have a ey all have been cryptic but stand persuaded by Manjunatha (supra). For that reason, the Karnataka High Court's decision has been discussed in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: mson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.) (2) Pr. CIT v. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) (3) Pr. CIT v. New Era Sova Mind [TX Appeal Nos. 70 of 2019 dated 18-6- CIT v. Goa Dourado Promotions (P.) Ltd. [TX 2019] On the opposite plank equal Benches, though. [Para 162] 2019, relates to . Goa Coastal Resorts & Recreation (P.) Ltd. In that one, the Division Bench has held that the notice which is issued to the assessee must indicate whether the Assessing Printed from counselvise.com Officer is satisfied that the case of the assessee involves concealment of particulars particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature o Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper applic penalty proceedings. In the present case, as well if the notice is perused, it is apparent that the relevant portions have not been struck off. This leaves no ground for interference with the impugned order. The i law laid down in the case of Samson Perinchery case (supra) and New Era Sova Mine case (supra) and, therefore, warrant no interference. [Para 169]  Question No. 1: If assessment order clearly records satisfaction fo imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), does a mere defect in notice striking off irrelevant matter TAX DEPARTMEN  It does. The primary burden lies on the revenue. proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274. True, the as proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. The proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. [Para 181]  More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. [Para 182]  Therefore, the first question is answered to the effect that Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, dated 26-11- more in consonance with the statutory scheme. That means it mus be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] ITA No. Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in a matter of initiation of penalty proceedings. In the present case, as well if the notice is perused, it is apparent that the relevant portions have not been struck off. This leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery case (supra) and New Era Sova Mine case (supra) and, therefore, warrant no interference. [Para 169] Question No. 1: If assessment order clearly records satisfaction fo imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), does a mere defect in notice-not notice striking off irrelevant matter-vitiate penalty proceedings? COME TAX DEPARTMEN It does. The primary burden lies on the revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274. True, the as proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. The proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice rom the vice of vagueness. [Para 181] More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. [Para 182] Therefore, the first question is answered to the effect that Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, 2019] and other cases have adopted an approach more in consonance with the statutory scheme. That means it mus be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] Vibgyor Texotech Ltd 7 ITA No. 4705/MUM/2025 Officer is satisfied that the case of the assessee involves of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with f the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of ation of mind in a matter of initiation of penalty proceedings. In the present case, as well if the notice is perused, it is apparent that the relevant portions have not been struck off. This leaves no ground for interference with the mpugned order are quite consistent by the law laid down in the case of Samson Perinchery case (supra) and New Era Sova Mine case (supra) and, therefore, warrant no Question No. 1: If assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in not notice-not vitiate penalty proceedings? COME In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be Therefore, the first question is answered to the effect that Pr. CIT v. Goa Dourado Promotions (P.) Ltd. [Tax Appeal No. 18 of 2019, 2019] and other cases have adopted an approach more in consonance with the statutory scheme. That means it must be held that CIT v. Smt. Kaushalya [1994] 75 Taxman 549/[1995] Printed from counselvise.com 216 ITR 660 (Bom.) does not lay down the correct proposition of law. [Para 183] Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'?  Indeed, Smt Kaushalya Case (supra) d prejudice. As already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, 'fully knew in detail the exact charge of the revenue agai the statutory notice suffered from neither non nor any prejudice. According to it, 'the so wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opport onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, 'it has to be established that prejudice is caused to the concerned person by the procedure followed'. Kaushalya closes the notice issuing 'is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. [Para 184] INC  No doubt, there can exist a case w in the notice can demonstrate non authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it on the grounds of non 185]  That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met acceptance. [Para 186] Question No. 3: What is effect of Suprem Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue of non-application of mind when irrelevant portions of printed notices are not struck off ?  In Dilip N. Shroff, case (supra) for the Supreme Court, it is of significance that in the standard Pro 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 facts, has felt that the Assessing Officer himself was not sure whether he had proceeded on the basis that the assessee had ITA No. 216 ITR 660 (Bom.) does not lay down the correct proposition of law. [Para 183] Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? Indeed, Smt Kaushalya Case (supra) did discuss the aspect of prejudice. As already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, 'fully knew in detail the exact charge of the revenue against him'. For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, 'the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard'. It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, 'it has to be established that prejudice is caused to the concerned person by the procedure followed'. Kaushalya closes the discussion by observing that the notice issuing 'is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. [Para 184] INC No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. [Para That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, it is reckoned, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met acceptance. [Para 186] Question No. 3: What is effect of Supreme Court's decision in Dilip N. Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue application of mind when irrelevant portions of printed notices are not struck off ? In Dilip N. Shroff, case (supra) for the Supreme Court, it is of 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 Vibgyor Texotech Ltd 8 ITA No. 4705/MUM/2025 216 ITR 660 (Bom.) does not lay down the correct proposition of Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? id discuss the aspect of prejudice. As already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, 'fully knew in nst him'. For Kaushalya, application of mind called ambiguous wording in the notice [has not] impaired or prejudiced the right of unity of being heard'. It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, 'it has to be established that prejudice is caused to the concerned person by the procedure discussion by observing that the notice issuing 'is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. [Para 184] INC here vagueness and ambiguity application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In set aside the penalty proceedings application of mind and prejudice. [Para That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, assessee. That is where, it is reckoned, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty e Court's decision in Dilip N. Shroff v. Jt. CIT [2007] 161 Taxman 218/291 ITR 519 (SC), on issue application of mind when irrelevant portions of printed notices In Dilip N. Shroff, case (supra) for the Supreme Court, it is of 'some 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 , 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 Printed from counselvise.com concealed his income or he had furnished inaccurate particulars. [Para 187]  It may, in this context, be respectful 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 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 notices. That practice certainly And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. [Para 188]  In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 the Supreme Court has encapsulated 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 mus case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest'. [Para 189]  Here, section 271(1)(c) is one such provision. With calamitous, albeit commerci brooks no trifling with or dilution. For a further precedential prop, Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to in which the Apex Court has quoted with approval its earlier judgment in State o 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 provisi 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. [Para 190]  As a result, it is held t omnibus show and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that ge In all the above decision, it has been held that non mentioning of relevant limb or non-striking off of irrelevant limb in the penalty notice is a substantive defect in the initiation of proceedings itself and the consequent penalty levied on the basis of such defective notice cannot be ITA No. concealed his income or he had furnished inaccurate particulars. It may, in this context, be respectfully observed 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 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. [Para 188] In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 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'. [Para 189] 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, Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to 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. [Para 190] As a result, it is held 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. [Para 191] In all the above decision, it has been held that non mentioning of relevant striking off of irrelevant limb in the penalty notice is a substantive defect in the initiation of proceedings itself and the ty levied on the basis of such defective notice cannot be Vibgyor Texotech Ltd 9 ITA No. 4705/MUM/2025 concealed his income or he had furnished inaccurate particulars. ly observed 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 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 application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. [Para 188] In State of U.P v. Sudhir Kumar Singh 2020 SCC Online SC 847 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. t 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'. [Para 189] Here, section 271(1)(c) is one such provision. With calamitous, al, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, Rajesh Kumar v. CIT [2007] 2 SCC 181, may be referred to in which the Apex Court has quoted with approval its earlier f 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 on 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 hat Dilip N. Shroff Case (supra) treats application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable In all the above decision, it has been held that non mentioning of relevant striking off of irrelevant limb in the penalty notice is a substantive defect in the initiation of proceedings itself and the ty levied on the basis of such defective notice cannot be Printed from counselvise.com sustained. In view of these facts and circumstances of the case, the AO is directed to delete the penalty levied u/s 271(1)(c) 3. When the matter came up for hearing before us, none appeared on behalf of the assessee, nor was any adjournment request filed. Accordingly, we proceeded to hear the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (“DR”). 4. We find that the Ld. CIT(A) has rightly deleted t the short legal ground that the Assessing Officer had failed to specify in the notice under section 274 whether the penalty was sought to be levied for concealment of income or for furnishing of inaccurate particulars of income. This issue is and stands squarely covered by the judgment of the Hon’ble Bombay High Court in has been held that failure to strike off the inapplicable portion in the statutory notice renders the entire p unsustainable in law. The decision of the Hon’ble Supreme Court in SSA’s Emerald Meadows Respectfully following the binding decision of the Hon’ble jurisdictional High Court, and finding no infirmity reasoned order of the Ld. CIT(A), we uphold the same. The grounds raised by the Revenue are accordingly dismissed. ITA No. sustained. In view of these facts and circumstances of the case, the AO is directed to delete the penalty levied u/s 271(1)(c) of the Act. When the matter came up for hearing before us, none eared on behalf of the assessee, nor was any adjournment request filed. Accordingly, we proceeded to hear the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (“DR”).. We find that the Ld. CIT(A) has rightly deleted t the short legal ground that the Assessing Officer had failed to specify in the notice under section 274 whether the penalty was sought to be levied for concealment of income or for furnishing of inaccurate particulars of income. This issue is no longer res integra and stands squarely covered by the judgment of the Hon’ble Bombay High Court in Mohd. Farhan A. Shaikh (supra), wherein it has been held that failure to strike off the inapplicable portion in the statutory notice renders the entire penalty proceedings unsustainable in law. The decision of the Hon’ble Supreme Court in SSA’s Emerald Meadows (supra) also supports the same view. Respectfully following the binding decision of the Hon’ble jurisdictional High Court, and finding no infirmity reasoned order of the Ld. CIT(A), we uphold the same. The grounds raised by the Revenue are accordingly dismissed. Vibgyor Texotech Ltd 10 ITA No. 4705/MUM/2025 sustained. In view of these facts and circumstances of the case, the AO is Act.” When the matter came up for hearing before us, none eared on behalf of the assessee, nor was any adjournment request filed. Accordingly, we proceeded to hear the appeal ex parte qua the assessee, after hearing the Ld. Departmental We find that the Ld. CIT(A) has rightly deleted the penalty on the short legal ground that the Assessing Officer had failed to specify in the notice under section 274 whether the penalty was sought to be levied for concealment of income or for furnishing of no longer res integra and stands squarely covered by the judgment of the Hon’ble (supra), wherein it has been held that failure to strike off the inapplicable portion in enalty proceedings unsustainable in law. The decision of the Hon’ble Supreme Court in (supra) also supports the same view. Respectfully following the binding decision of the Hon’ble jurisdictional High Court, and finding no infirmity in the well- reasoned order of the Ld. CIT(A), we uphold the same. The grounds Printed from counselvise.com 5. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court. Sd/- (SUCHITRA RAGHUNATH KAMBLE JUDICIAL MEMBER Mumbai; Dated: 09/09/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court. Sd/ (SUCHITRA RAGHUNATH KAMBLE) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Vibgyor Texotech Ltd 11 ITA No. 4705/MUM/2025 In the result, the appeal of the Revenue is dismissed. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "