Shree Krishna Vanaspati Industries Pvt. Ltd. vs. ITO
Case Title: Shree Krishna Vanaspati Industries Pvt. Ltd. vs. ITO
ITA No.: 2526/Del/2022
Assessment Year: 2012–13
Bench: Delhi ‘G’ Bench – Shri Anubhav Sharma (Judicial Member) & Shri Manish Agarwal (Accountant Member)
Date of Order: 21.02.2025
Background
Shree Krishna Vanaspati Industries Pvt. Ltd. challenged a penalty of ₹15.64 lakh levied under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2012–13. The Assessing Officer had levied penalty on the grounds of furnishing inaccurate particulars of income. However, the penalty notices issued failed to specify the charge — whether the alleged default was for “concealment of income” or “furnishing inaccurate particulars.”
The assessee contended that this defect in the notice rendered the penalty unsustainable.
Key Legal Issue
Whether a penalty under Section 271(1)(c) is valid when the penalty notice fails to strike off the irrelevant limb and does not clearly state whether it is for:
- Concealment of income, or
- Furnishing inaccurate particulars of income.
Assessee’s Arguments
- The AO’s notices (dated 30.03.2015 and 31.08.2015) were vague and issued in a stereotyped format, without specifying the exact charge.
- The defect violated the principle laid down by the Karnataka High Court in Manjunatha Cotton & Ginning Factory [(2013) 359 ITR 565] and approved by the Supreme Court in SSA’s Emerald Meadows [(2016) 73 taxmann.com 248 (SC)].
- The assessee had no clear notice of the exact default alleged, which denied them a fair opportunity to respond.
Revenue’s Arguments
- The AO had recorded satisfaction in the assessment order for furnishing inaccurate particulars.
- Penalty was also levied on that basis.
- The omission to strike off the irrelevant limb in the notice was a technical error and should not vitiate the penalty proceedings.
Tribunal’s Findings
- Defective Notice Invalidates Penalty:
- The penalty notice did not clarify which of the two limbs under Section 271(1)(c) was invoked.
- Such ambiguity makes the notice legally unsustainable, as per judicial precedents.
- Non-Application of Mind:
- The AO issued a standard proforma notice without application of mind.
- This procedural lapse affects the validity of the entire penalty order.
- Key Reliance:
- CIT vs. Manjunatha Cotton & Ginning Factory – Karnataka HC
- CIT vs. SSA’s Emerald Meadows – SC dismissed SLP, upholding Karnataka HC ruling
- Dilip N. Shroff vs. JCIT (291 ITR 519) – SC held such non-specific notices indicate lack of satisfaction.
Conclusion & Decision
- The ITAT held that penalty proceedings were vitiated from the beginning due to a defective notice under Section 274.
- Accordingly, the penalty of ₹15.64 lakh under Section 271(1)(c) was quashed.
- Assessee’s appeal allowed.