TaxTMI 
TaxTMI 
2026 (2) TMI 1445
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....issioner of Income-tax v. SSA'S Emerald Meadows [2016] 73 taxmann. com 248 (SC) to render relief to the assessee without taking cognizance of the decision of the Hon'ble Supreme Court of India in Gangotri Textiles Ltd. v. Deputy Commissioner of Income-tax [2022]137 taxmann.com 198 (SC) wherein it has dismissed the SLP filed by the assessee against the order of the Hon'ble High Court of Madras on the contention that notice issued under section 274 read with section 271(1)(c) was defective on the ground that the Assessing Officer did not apply his mind while issuing the notice on the ground that the grounds for penalty are clearly dealt in the assessment order. 4. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing Officer may be restored. 3. Brief facts of the case are as follows: The assessee is a private limited company engaged in the business of manufacturing and trading of granite and marbles. The business premises of the assessee was subjected to search u/s.132 of the Act on 12.02.2025, in consequence o....
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....A)). 6. Aggrieved by the order of the AO imposing penalty u/s.271AAB(1)(c) of the Act, amounting to Rs.69,71,783/-, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, assessee had taken up the contention that notice issued u/s.274 r.w.s 271AAB of the Act does not state the clause under which the penalty has been initiated, hence, the notice being defective, the order imposing penalty is bad in law. In support of the contentions raised, the assessee relied on various judicial pronouncements which are listed in para 7.1 of the impugned order of the FAA. The FAA after extracting the notice issued u/s.274 r.w.s.271AAB of the Act held that it is necessary for the AO to specify under which clause in section 271AAB(1) of the Act, he intends to proceed against the assessee and in the absence of mentioning the same in the penalty notice, the notice is defective. Accordingly, the CIT(A) held that consequent penalty order is bad in law and deleted the penalty imposed amounting to Rs. 69,71,783/-. The CIT(A) specifically relied on the judgment of the Hon'ble Jurisdictional High Court in the case of PCIT vs. Shri R. Elangovan in TCA No. 770 & 771 of 2018 (judgm....
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....erent matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, 3 when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. 17. Thus, for the above reasons, Substantial Questions of law Nos. 1 and 2 are answered against the assessee and in favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts the said question does not arise for consideration as well as for the reasons set out by us in the preceding pa....
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....rtained a plea regarding the defective show cause notice for the very first time in the appeal filed before the Tribunal, when it was never raised by the assessee at any earlier point of time" In this case also, the assessee could also not establish that his interest was jeopardized because assessee has not produced any evidence that this issue was raised by the assessee before Assessing Officer during penalty proceedings. Had there been any prejudice to the assessee due to non-striking of the limb in the penalty notice, the same should have been brought to the knowledge of the Assessing Officer, thus giving him/her an opportunity to clarify/rectify the issue. II. Further, following submissions may kindly be considered with regard to levy of penalty in light of decision of Karnataka High Court in CIT V. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 and Hon'ble Supreme Court in case of CIT Vs SSA's Emerald Meadows [2016] 73 Taxmann.com 248 (SC)/[2016] 242 Taxman 180 (SC) A. Issuance of notice is an administrative device 1. CIT Vs Smt. Kaushalya [1994] 75 Taxman 549 (Bombay)/[1995] 216 ITR 660 (Bombay) After all, section 2....
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....tiating the proceedings of imposing the penalty. The assessee had sufficient notice of the action of imposing penalty. It was thus concluded, that there was no jurisdictional error or unjust exercise of power by the authority." III. To sumamrise, following points may also kindly be considered in this case: 1. The requirement of issuing a notice u/s 274 is merely to give effect to the principles of natural justice and not a jurisdictional necessity. 2. A distinction has to be made between a case of no notice and a case of improper notice. 3. Test of prejudice As laid down in the State Bank of Patiala & Ors vs. S.K. Sharma (supra) violation of any and every procedural provision cannot be said to automatically vitiate the proceedings or the order. The consequences for violation of the procedural provisions would be as under:- A. In case of no notice, no opportunity or no hearing, there is obviously a violation of the principles of natural justice and hence the order would get vitiated. B- In other cases the test of prejudice has to be applied. In case the assessee has not suffered any prejudice on account of the procedural....
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....entioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB." [Para 27] It is also useful to refer to the observations made by Hon'ble Delhi High Court in the case of The CIT vs. M/s Sudev Industries Limited Income Tax Appeal No. 805/2005 [2018] [2018] 405 ITR 325 (Delhi) as under: - "16. Section 292B was introduced by Taxation Laws (Amendment) Act, 1975 with effect from 1st October, 1975. The object and purpose of introducing the said section as explained in Commissioner of Income Tax versus M/s Jagat Novel Exhibitors Private Limited, [2013] 356 ITR 562 (Del) is as under. - 29. Object and purpose behind Section 292-B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings. The primary requirement is to go into and ex....
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....here is clear application of mind by AO. Hence, notice is valid following Gangotri Textiles (SC). 271AAB is a complete code distinct from 271(1)(c). The two limbs ("concealment" vs "inaccurate particulars") do not apply to 271AAB. Penalty u/s 271AAB(1)(c) @ 60% is levied only when undisclosed income is not covered under clauses (a) or (b) i.e., not admitted in 132(4) statement or manner not properly substantiated and tax not paid timely. The notice clearly states penalty u/s 271AAB. Assessee knew exactly that it was the 60% slab (non-cooperation/non-admission). The assessee understood the notice, replied to the notice and no prejudice caused. Several ITATs have held that Manjunatha Cotton line does not strictly apply to 271AAB notices (or applies in diluted form). The assessee 1. Never raised the issue of defective notice before the AO. Therefore, objection raised for the first time before CIT(A) is afterthought and liable to be rejected (consistent view of ITAT & High Courts). 2. Satisfaction validly recorded in assessment order and Jurisdiction properly assumed. 3. No prejudice to Assessee (Key point from Gangotri & later cases): ....
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....otice u/s. 274 r.w.s.217AA of the Act, without specifying the limb under which he proposes to proceed against the assessee, the assessee shall be left uninformed of the charge he must defend, which is nothing but violation of Principles of Natural Justice. This proposition of law was laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory reported in (2013) 359 ITR 565 (Karnataka) and confirmed by the Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows reported in (2016) 73 Taxmann.com 248 (SC) and subsequently followed by the Hon'ble High Court of Madras in the case of Babuji Jacob vs. ITO reported in (2021) 430 ITR 259 (Mad). 11. The Hon'ble Jurisdictional High Court in the case of PCIT v. R. Elangovan (TCA. Nos. 770 & 771 of 2018) had followed the above proposition of law, wherein the Court while dealing with a Penalty Notice issued u/s. 271AAB of the Act held that Penalty Notice which does not specifically mention the provision of law under which the Assessing Officer proposes to levy penalty is nothing but a defective Penalty Notice and upheld the order of Tribunal which deleted the penalty imposed. The rele....
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....l/2024, dated 30.12.2024] ix. DCIT vs. Ethirajulu Vajravel Kumaran [ITA Nos.1650 to 1655/CHNY/2025, dated 21.10.2025] 13. The Ld.DR had strongly relied on the judgment of the Hon'ble Jurisdictional High Court in the case of Gangotri Textiles Ltd., (supra). The facts of the case of Gangotri Textiles Ltd vs DCIT (supra) is distinguishable. The Assessee in the said case had raised the issue of defective notice at a belated stage. The contention of the defective notice was raised for the first time before the Hon'ble High Court which lead to dismissal of the said case. Relevant portion of the Judgment is reproduced below for ready reference:- "8. After elaborately hearing the learned counsels on either side and carefully perusing the materials placed before this Court including the decisions relied on by the learned counsels on either side, the first issue to be considered is whether the notice dated 12.03.2015 issued under Section 274 r/w. 271(1)(c) of the Act is defective. The argument of M/s. S. Yogalakshmi, learned counsel for the appellant is that the notice stated that it appears to the Assessing Officer that the assessee concealed the particulars of inco....