Late Mr. Davinder Kumar (through Geeta Kumar) vs DCIT (ITA Nos. 2536 to 2539/DEL/2024)
In a recent significant ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) in the case of Late Mr. Davinder Kumar (through Geeta Kumar) vs DCIT (ITA Nos. 2536 to 2539/DEL/2024), quashed penalty orders under Section 271(1)(c) of the Income-tax Act, 1961 for Assessment Years 2008–09 to 2011–12. The reason? The penalty notices issued by the Assessing Officer (AO) were found to be defective and vague.
Background:
The penalty orders were passed for concealment of income or furnishing of inaccurate particulars. However, the notices issued under Section 274 read with Section 271 were in a pre-printed format, and the AO failed to strike off the irrelevant limb — whether the penalty was for “concealment” or “inaccurate particulars”. This made the notices ambiguous and legally unsustainable.
Legal Ground Raised:
In the appeals, the assessee raised a legal ground challenging the validity of the penalty notice itself, contending it was issued in a mechanical manner without application of mind. Importantly, this ground went to the root of the penalty proceedings and was therefore admitted by the Tribunal even at a late stage.
Tribunal’s Observations:
- Notice Was Vague: The ITAT found that the AO did not clarify whether the penalty was for concealment of income or furnishing of inaccurate particulars. This violated the principles laid down by the Hon’ble Bombay High Court in Mohd. Farhan A. Shaikh v. DCIT [125 taxmann.com 253 (FB)] where it was held that omnibus notices without striking off irrelevant parts are defective and invalid.
- No Proper Satisfaction Recorded: The AO also failed to record a clear satisfaction in the assessment order, which is a pre-requisite for valid penalty proceedings under Section 271(1)(c).
- Identical Defects Across Years: The ITAT noted that for all four assessment years under appeal (AY 2008–09 to AY 2011–12), the notices were verbatim, with only the assessment year changed. Thus, the defect was consistent across years, warranting quashing of all penalties.
Conclusion:
The Tribunal held that penalty proceedings were vitiated due to defective notices and lack of clarity on the nature of default. All four appeals were allowed, and the penalty orders were set aside.