Moraj Group Hospitalities Inc. v. Central Circle 5(2)

Case snapshot

Sections / provisions: 271(1)(c)

Questions before the Court / Tribunal

• Ambiguous penalty notice/limb: The reported case concerns penalty where the notice did not clearly identify the statutory charge/limb. The official order should be checked for the exact notice language and controlling precedent.

Material facts and background

Facts of the case are that assessee is a partnership firm. It filed

its return of income on 06.10.2015 reporting total income at nil. Income of the assessee was assessed at Rs.80 lakhs vide assessment order passed u/s.143(3) r.w.s. 147 dated 26.12.2017. Addition was made on account of loan taken by the assessee from Dhanvi Corporation. While passing the said order, in para-5.3, ld. Assessing Officer after making the addition noted that penalty proceedings u/s. 271(1)(c) are separately initiated for filing/furnishing inaccurate particulars of income. Similar noting was made in para-7 for issuing penalty notice u/s. 274 r.w.s. 271(1)(c).

4.1. While issuing notice u/s. 274 r.w.s. 271(1)(c) dated 26.12.2017, the charge mentioned by the ld. Assessing Officer is stated to be as “Have concealed the particulars of income and furnished inaccurate particulars/details”. Another notice was issued u/s.274 r.w.s. 271(1)(c), dated 11.02.2022 wherein again it was noted that “you have concealed the particulars of income and furnished inaccurate particular of such income”.

concluding to impose penalty in para-5, ld. Assessing Officer noted that the default of the assessee has elements of furnishing inaccurate

4 ITA No. 2047/Mum/2025 Moraj Group Hospitalities Inc. AY 2015-16

particulars and concealment of income. Similarly, in para-6(4), he noted that assessee has deliberately concealed its taxable income by making inaccurate claim. Thus, a penalty was imposed of Rs.24,72,000/- at the rate of 100% of tax sought to be evaded.

Assessee contended that penalty proceedings u/s.271(1)(c) were

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

“1. In the facts and circumstances of the case and in law, the Learned Assessing Officer had erred in initiating the penalty proceeding by issuing the impugned show cause notice dated 30.11.2017 under section 274 read with section 271(1)(c)- without striking off the irrelevant/inapplicable limb; thereby issuing a defective notice which is bad in the eyes of law as held by Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT [2021] 125 taxmann.com 253 (Bombay) and several other binding judicial precedents.” 3. The additional ground raised by the assessee is purely legal in nature and therefore is admitted for adjudication. We first take up this additional ground which is in respect of challenging the imposition of penalty of Rs.10,46,312/u/s.271(1)(c) of the Act, which liable to be quashed since Ld. Assessing Officer has failed to specify the charge in the notice issued u/s.274 r.w.s. 271(1)(c) as held by Hon’ble Jurisdictional High Court of Bombay in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021)125 taxmann.com 253(Bom)....... ……..5. The said notice is dated 30.11.2017. He thus, referring to the said notice submitted that no specific charge has been...

Court / Tribunal analysis and reasoning

initiated for the charge of furnishing of inaccurate particulars, however, later were culminated into levy of penalty on both the charge which were mentioned in the two notices also, though penalty can be initiated for either of the charge, i.e., for furnishing of inaccurate particulars of income or concealment of particulars of income. According to the assessee, notices issued using word “and” in place of “or” are bad in law. Using “and” for invoking the proceedings in a penalty notice u/s.271(1)(c) is not in accordance with the provisions of the law which explicitly uses “or” to denote two separate charges. He placed reliance on the decision of Hon'ble High Court of Gujarat in the case of New Sorathia Engineering vs. CIT in 155 taxman 513 (Guj) wherein it was held as under: “In paragraph 11, page 2 and 3, it was held that in the case of CIT v. Manu Engg. Works [1980] 122 ITR 306, this is what is laid down by this court: "We find from the order of the Inspecting Assistant Commissioner, in the penalty proceedings, that is, the final conclusion as expressed in para4 of the order I am of the opinion that it will have to be said that the assessee had concealed its income and/or that...

“1. In the facts and circumstances of the case and in law, the Learned Assessing Officer had erred in initiating the penalty proceeding by issuing the impugned show cause notice dated 30.11.2017 under section 274 read with section 271(1)(c)- without striking off the irrelevant/inapplicable limb; thereby issuing a defective notice which is bad in the eyes of law as held by Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT [2021] 125 taxmann.com 253 (Bombay) and several other binding judicial precedents.” 3. The additional ground raised by the assessee is purely legal in nature and therefore is admitted for adjudication. We first take up this additional ground which is in respect of challenging the imposition of penalty of Rs.10,46,312/u/s.271(1)(c) of the Act, which liable to be quashed since Ld. Assessing Officer has failed to specify the charge in the notice issued u/s.274 r.w.s. 271(1)(c) as held by Hon’ble Jurisdictional High Court of Bombay in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021)125 taxmann.com 253(Bom)....... ……..5. The said notice is dated 30.11.2017. He thus, referring to the said notice submitted that no specific charge has been...

7.1. He further pointed out from para 3 of the said order that the appeal was admitted by the Hon’ble Court by order dated 14.09.2004 on the substantial question of law raised therein. He further referred to para 4 to point out that during the pendency of the hearing, it was only by oral application that a technical plea of vagueness in the notice was raised before the Hon’ble Court, thereby the question was recorded by passing an order on 13.07.2023 which is almost 20 years after the admission of the appeal along with its substantial question of law. 7.2. Ld. Counsel then referred to para 34 on the observation made by the Hon’ble Court where the Court questioned itself as to“Should the Court now after more than 20 years of the order being passed by the Tribunal accept the contention as urged on behalf of the assessee that in these circumstances, the Court should accept the notice as issued to the assessee u/s.274 of IT Act was defective, and hence the proceedings would stand covered by the decision of the Coordinate Bench in this Court in Ventura Textiles Ltd. (Supra)”. 7.3. On this above questions raised by the Hon’ble Court unto itself, it expressed its opinion in para 35 to...

“a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity.” 9. We therefore, respectfully following the judicial precedent in the case of Hon’ble Jurisdiction High Court of Bombay in the case of Mohd. Farhan A. Shaikh (Supra) delete the penalty imposed in the present case, since similar facts are present in this appeal. Accordingly, grounds taken by the assessee in this respect are allowed.

Operative decision and relief

adopting judicial consistency in terms of the above decision of the Coordinate Bench, the penalty so imposed is deleted.

Sd/Sd/(Sandeep Gosain) (Girish Agrawal) Judicial Member Accountant Member Dated: 31 July, 2025 MP, Sr.P.S. Copy to : 1 2 3 4 5

Authorities and precedents appearing in the judgment

• Sorathia Engineering vs. CIT in 155 taxman 513 (Guj) wherein it was
• CIT v. Manu Engg
• Suseelan vs. ACIT
• Mohd. Farhan A. Shaikh vs. DCIT

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Ambiguous penalty notice/limb. The operative result is classified as Operative order controls. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Ambiguous penalty notice/limb. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Check the exact penalty charge in the show-cause notice, the assessment finding and the final penalty order; ambiguity or a changed statutory limb can be material.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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