TaxTMI 
TaxTMI 
2026 (6) TMI 329
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....r section 271(1)(c) amounting to Rs. 55,21,032 for the impugned reason that the appellant has concealed the particulars of income. 2.2 The learned CIT(A) erred in concluding that the disclosure or the admission of deemed dividend on loan cannot be said to be voluntary. 2.3 The learned CIT(A) erred in not appreciating that levy of penalty is not automatic even if the Appellant has not challenged the assessment order and has paid the demand. 2.4 The learned CIT(A) erred in not appreciating that no penalty can be levied under section 271(1)(c) read with Explanation 1 thereto since the Explanation offered by the Appellant was bona fide, all facts relating to the same and material to the computation of total income was disclosed and the same was accepted by the AO in the assessment order and not found to be false by the AO. 2.5 The learned CIT(A) erred in not appreciating that deeming fiction under section 2(22)(e) for making addition in respect of loan or advance cannot be extended for levying penalty under section 271(1)(c). 2.6 The decisions relied on by the learned CIT(A) are not applicable and they are distinguishable to the present case....
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.... by the learned AO under section 271(1)(c) of the Income Tax Act, 1961. The Appellant further wishes to raise additional legal grounds of appeal as under: 1. Background 1.1. The Appellant, an individual and director in M/s. Featherlite Products Pvt. Ltd. and M/s. Featherlite Singapore Pte. Ltd. (FSP), filed his original return of income for AY 2015-16 on 30.11.2015 declaring total income of Rs. 10,31,03,370. A search under section 132 of the Act was conducted on 14.11.2019 in the case of Featherlite Office Systems Pvt. Ltd., pursuant to which certain documents were seized. 1.2. Consequent thereto, a notice under section 153C was issued on 14.06.2021. The Appellant filed return on 11.10.2021 declaring total income of Rs. 11,96,38,920, which included additional income of Rs. 1,62,22,654 offered as deemed dividend under section 2(22)(e). 1.3. During FY 2014-15, FSP had transferred USD 10,00,000 to a joint Singapore bank account held by the Appellant and his brothers (also directors of FSP) for overseas investments. Out of this, USD 2,36,569 was remitted back towards share application money and the balance USD 7,63,431 constituted loan carrying inter....
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.... 2.5. The learned DCIT Central Circle-1(1), Bangalore therefore erred in not complying with the provisions of section 282A which is a mandatory requirement and not merely a ministerial act, or an empty formality which can be dispensed with. 2.6. The co-ordinate bench of Bangalore tribunal in the case of Yeshoda Electricals V. ACIT [2023] 154 taxmann.com 677 held that the proceedings framed on the basis of an unsigned notice is bad in law and cannot be sustained in the eyes of law thereby quashing all the orders and allowing the appeal. . 2.7. The aforementioned stand of the co-ordinate bench is also affirmed by various decisions as under: • Reuters Asia Pacific Ltd. V. DCIT, International Tax - [2023] 157 taxmann.com 705 (Mumbai ITAT) • Outsystems Singapore Pte. Ltd. V. DCIT, International Tax - [2025] 176 taxmann.com 954 (Delhi ITAT) • Danieli and C Officine Meccaniche SPA V. ACIT - [2025] 180 taxmann.com 403 (Kolkata ITAT) wherein it was held that signing of an assessment order by Assessing Officer is a mandatory requirement and not merely a procedural formality. 2.8. The High Courts, in the following d....
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....facts are on record. 3.4. In view of the above, the Appellant prays that the additional grounds (enclosed herewith) be admitted and adjudicated along with the other grounds of appeal in the course of hearing of the appeal. 3.5. The appellant requests the Hon'ble Bench to kindly consider and decide the additional grounds of appeal enclosed herewith on merits. The appellant prays accordingly. The Appellant prays accordingly. DHIREN GOPAL Encl :- As above BEFORE THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL A BENCH, BANGALORE IN THE CASE OF APPELLANT RESPONDENT ITA NO ASSESSMENT YEAR DHIREN GOPAL DCIT, CENTRAL CIRCLE-1(1), BANGALORE ITA 2571/BANG/2025 2015-16 Posted for hearing on 17.02.2026 ADDITIONAL GROUNDS OF APPEAL With regard to the above appeal, the Appellant wish to submit the below additional grounds for the kind consideration of the Hon'ble Tribunal: 1. On the facts and the circumstances of case, the notice under section 274 r.w.s. 271(1)(c) dated 30.03.2022 initiating the penal proceedings is issued without a valid signature as mandated under section 282A of the Act.....
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....s necessary to consider that question in order to correctly assess the tax liability of an assessee. Accordingly, we are inclined to admit the additional legal grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and these are critical for a fair adjudication of the matter. 5. Now the brief facts of the case are that the assessee, along with his brothers Mr. Jawahar Gopal and Mr. Manohar Gopal is the managing director of the Featherlite Group which was in the business of manufacturing and marketing of office and home furniture across the country. The assessee filed his original return of income on 30/11/2015 by declaring total taxable income of Rs. 10,31,03,370/-. A search and seizure action u/s. 132 of the Act was carried out on 14/11/2019 in the case of Featherlite Office Systems Pvt Ltd. During the search proceedings, office of M/s. Featherlite Office Systems Pvt Ltd. situated at No.16/A, Millers Road, Next to Ambedkar Bhavan, Vasanthnagar, Bangalore-560052 was searched and documents as per panchanama were seized which pertain to Sri. Dhiren Gopal. 5.1 During the course of search proceedings, it was found that the ass....
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....ived from the foreign entity. Since the assessee has concealed the interest and dividend income, the AO observed in the assessment order that the penalty u/s. 271(1)(c) of the Act is initiated separately for concealment of income. 6. The AO, thereafter, issued unsigned show cause notice u/s. 274 r.w.s 271(1)(c) of the Act on 30/03/2022 by alleging that the assessee has concealed the particulars of income and directed the assessee to show cause as to why an order imposing a penalty should not be made u/s. 271(1)(c) of the Act. Further, as there was a change of incumbent, a notice u/s. 129 of the Act dated 29/06/2022 was issued and served on the assessee by e- mail. Subsequently, the AO had also issued one more signed show cause notice on 18/08/2022 referring to a penalty notice issued on 30/03/2022 granting final opportunity to explain as to why penalty u/s. 271(1)(c) of the Act for AY 2015-16 should not be levied. 6.1 The assessee vide his reply dated 29/04/2022 filed on 04/05/2022 as well as vide reply dated 29/08/2022, submitted that the income accepted during the search relating to dividend income and income from investments earned outside India has been offered to tax in ....
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....of the provisions of deemed dividend u/s. 2(22)(e) of a bonafide was under a bonafide belief that loan taken from Featherlite Singapore would not amount to deemed dividend. On being confronted during the search proceeding about the same, the assessee offered the deemed dividend voluntarily by filing return u/s. 153C of the Act. It was also contended that the penalty cannot be levied on such deeming provisions. The ld. Pr.CIT(A)-11, Bengaluru however held that the deemed dividend u/s. 2(22)(e) of the Act was admitted during the course of search proceedings on being unearthed by the department and hence the disclosure or admission of deemed dividend on the loan cannot be said to be voluntary. The contention of the assessee that it was wrongly advised and hence it was under a bonafide belief that the deemed dividend income need not be offered to tax was also not acceptable as the assessee is one of the directors of the company. The ld. Pr.CIT(A)-11, Bengaluru was of the opinion that there can be one excuse for ignorance of law in such cases. Since the filing of return u/s. 153C was not voluntary but pursuant to the search, the ld. Pr.CIT(A)-11, Bengaluru was also of the opinion that t....
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....uld not be levied. Lastly, the ld. A.R. of the assessee also contended that the deeming fiction u/s. 2(22)(e) of the Act is limited and cannot be extended to penalty. 11. The ld. D.R. on the other hand, supported the order of the Authorities below and vehemently submitted that had there not been a search proceedings u/s. 132 of the Act, there was no intentions of the assessee to disclose the concealed income. Further, with regard to legal ground as raised by the assessee, the ld. D.R. vehemently submitted that every notice issued, served given for the purpose of this act by any income tax authority shall be deemed to be authenticated if the name and office of a designated income tax authority is printed, stamped or otherwise written thereon. Further, the ld. D.R. submitted that no notice issued shall be invalid merely by reason of any mistake, defect or omission if such notice is in substance and effect in conformity with or according to the intend and purpose of this Act. As the assessee responded to the notice u/s. 274 r.w.s 271(1)(c) of the Act by filing his reply on 29/04/2022 and participated in the proceedings before the AO, now at this stage the assessee shall be preclude....
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....itiating penalty is unsigned. 12.1 Before us, the ld. DR fervently submitted that the Penalty show cause notice issued u/s. 274 r.w.s. 271(1)(c) of the Act contains the name, designation of the competent authority as well as the details of the office of the competent authority. Further, it is also argued by the ld. DR that as per the provisions of section 282A(2) of the Act, a notice or any other documents shall be deemed to be authenticated if the name and the office of the designated authority is printed, stamped or otherwise written. In this case, the show cause notice dated 30/03/2022 duly contains all the relevant details as envisaged under the provisions of section 282A(2) of the IT Act. Before proceeding further, it is apposite here to reproduce the relevant provision of section 282A of the Act for ease of convenience & reference- Authentication of notices and other documents. 282A. (1) Where this Act requires a notice or other document to be issued by any income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.....
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....ufficient to cure the inherent defects, lacunae, omissions and deficiency in the show cause notice u/s. 274 r.w.s. 271(1)(c) of the Act. In holding so, we take support & guidance from the decision of the Hon'ble Jurisdictional High Court in the case of the Deputy Commissioner of Income Tax Circle- 4 (2) (1), Bengaluru. V. M/s. Yeshoda Electricals, reported in (KAR-HC) 2025 ITL 7637, the relevant paragraph are reproduced below- "7. On consideration of the submissions of the respective counsels for the parties, the record indicates the undisputed fact that a notice under Section 148 of the Act was issued on 22.03.2012 for the Assessment Year 2007-08, and the said notice was not signed by the Assessing Officer. 7.1 It is well settled that any notice issued without the requisite signature of the issuing authority cannot constitute a valid notice under law. The mere fact that the Assessee did not raise an objection cannot, by itself, validate a notice that is otherwise invalid. The notice under Section 148 of the Act is a jurisdictional notice, and any defect therein cannot be ignored. Non-signing of a jurisdictional notice is a serious defect, which renders the no....
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....ed in (1982) 136 ITR 330, the relevant paragraph are reproduced below- "The first question for consideration is whether the Tribunal was right in holding that the notice issued to the assessee under section 271(1)(a) of the Act was a valid notice. Now, the Tribunal has found that that notice was not signed by the ITO. Section 282 of the Act provides that a notice under the Act may be served on the person named therein as if it were a summons issued by a court under the Code of Civil Procedure, 1908. Sub-rule (3) of rule 1 of O. 5, CPC, provides that every summons shall be signed by the judge or such officer, as he appoints. In view of this provision, it must be held that the notice to show cause why penalty should not be levied issued by the ITO should have been signed by the ITO and the omission to do so invalidated the notice. In B.K. Gooyee v. CIT [1966] 62 ITR 109 (Cal.), the question for consideration was whether the absence of the signature of the ITO on the notice under section 34 of the Indian Income-tax Act, 1922, was a mere irregularity or a clerical mistake. Dealing with this question, Datta J. Observed as follows (p. 119) : "In the present case, there ....
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....tory requirement. It is not a ministerial act or an empty formality which can be dispensed with. "Signed" means to sign one's name; to signify assent or adhesion to by signing one's name; to attest by signing or when a person is unable to write his name then affixation of "mark" by such person. The document must be signed or mark must be affixed in such a way as to make it appear that the person signing it or affixing his mark is the author of it. Therefore, a notice or other document as referred in s. 282A(1) of the Act, 1961 will take legal effect only after it is signed by that IT authority, whether physically or digitally. The usage of the word "shall" make it a mandatory requirement. 26. In the case of Chhugamal Rajpal vs. S.P. Chaliha & Ors. (1971) 1 SCC 453 (para-5) : AIR 1971 SC 730 : (1971) ITR 603, Hon'ble Supreme Court considered the validity of recording satisfaction under s. 151 by the CIT for the purposes of issuance of notice under s. 148 of the Act, 1961 and held as under : "5. In his report the ITO does not set out any reason for coming to the conclusion that this is a fit case to issue notice under s. 148. The material that he had bef....
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....able to tax has escaped assessment for that year. We are not satisfied that the ITO had any material before him which could satisfy the requirements of either cl. (a) or (b) of s. 147. Therefore he could not have issued a notice under s. 148. Further the report submitted by him under s. 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under s. 148. We are also of the opinion that the CIT has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under s. 148. To question No. 8 in the report which reads 'Whether the CIT is satisfied that it is a fit case for the issue of notice under s. 148', he just noted the word 'yes' and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under s. 148. The important safeguards provided in ss. 147 and 151 were lightly treated by the ITO as well as by the CIT. Both of them, appear to have taken the duty imposed on them under those pro....
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....e AO to the petitioner there was no valid satisfaction recorded by the Prescribed Authority i.e. the Principal Chief CIT or Chief CIT or Principal CIT or CIT. Subsequent to issuance of the notice under s. 148 of the Act, 1961 by the AO, the satisfaction under s. 151 was digitally signed by the Prescribed Authority. Therefore, the point of time when the AO issued notices under s. 148, he was having no jurisdiction to issue the impugned notices under s. 148 of the Act, 1961. Consequently the impugned notices issued by the AO under s. 148 of the Act, 1961 were without jurisdiction. The questions No. (a) and (b) are answered accordingly. 30. Since we have come to the conclusion that there was no valid satisfaction under s. 151, therefore, the question whether Principal Chief CIT or Chief CIT or Principal CIT or CIT for the purposes of recording of satisfaction under s. 151 is a designated IT authority under s. 282A of the Act 1961, is left open." 12.7 Thus, respectfully following the above decisions of the Jurisdictional High Court as well as Other Hon'ble High Courts, we are of the considered opinion that as in the present case, the notice initiating the penalty under ....