Penalty Invalid Where AO Issues Stereotypical Notice Without Specifying Charge: ITAT Delhi

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 25 February quashed an income tax penalty imposed on an taxpayer, after finding that the Assessing Officer issued a stereotypical penalty notice without specifying the exact charge under the Income Tax Act.

A Tribunal Bench comprising Judicial Member Yogesh Kumar U.S. and Accountant Member Renu Jauhri held that a notice issued must clearly state whether the penalty proceedings are initiated for “concealment of income” or “furnishing inaccurate particulars of income.” Failure to specify the charge renders the penalty proceedings invalid.

The Bench held:

“On verifying the above notice issued u/s 274 read with Section 271 of the Act, it is found that the said notice is a stereotypical one and the AO has not specified any limb or charge for which the notice was issued, i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income.”

Ms. Deepti Goel had challenged the penalty order dated 12 February 2022 for Assessment Year 2013-14. The penalty had earlier been confirmed by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre.

Before the Tribunal, she argued that the penalty proceedings were initiated through a defective notice that did not mention the specific limb of Section 271(1)(c). The notice, issued on 2 March 2016, was a standard printed format in which the Assessing Officer failed to strike off the inapplicable portion to indicate the precise charge.

After examining the notice, the Tribunal observed that it was a “stereotypical” notice and did not specify whether the allegation related to concealment of income or furnishing inaccurate particulars.

The Bench noted that such ambiguity violates the requirement that an assessee must be clearly informed of the grounds on which penalty proceedings are initiated.

Relying on the Bombay High Court decision in Mohd. Farhan A. Shaikh v. ACIT, which held that an omnibus notice without striking off irrelevant portions suffers from vagueness and reflects non-application of mind by the tax authority, the Bench quashed the penalty order passed by the AO.

Accordingly, the Tribunal set aside the order of the CIT(A) and allowed the appeal.