The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a penalty of ₹6,25,86,306 imposed under Section 271AAB of the Income-tax Act, 1961, holding that the penalty could not be sustained when the notices issued by the Assessing Officer failed to specify the particular limb or charge under which the penalty proceedings were being initiated.
The Bench of Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) has observed that a penalty notice must sufficiently communicate the exact charge against the assessee. The underlying principle is that a notice cannot remain vague as to the statutory provision or particular limb under which the taxpayer is proposed to be penalised.
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The dispute arose from penalty proceedings initiated against the assessee under Section 271AAB of the Income-tax Act, a provision dealing with penalties in cases involving undisclosed income detected in the course of search proceedings.
The Assessing Officer had imposed a penalty of ₹6,25,86,306 through an order dated March 30, 2025. The penalty was subsequently upheld by the Commissioner of Income Tax (Appeals)-24, New Delhi, prompting the assessee to approach the ITAT.
The assessee’s principal challenge before the Tribunal was not merely to the quantum of penalty but to the legal validity of the penalty notices themselves.
The assessee drew the Tribunal’s attention to the penalty notices issued by the Assessing Officer on July 18, 2024, September 2, 2024 and November 4, 2024.
According to the assessee, none of these notices specified the corresponding limb or clause under Section 271AABpursuant to which the assessee was alleged to be liable for penalty.
The assessee argued that such a defect was fatal to the penalty proceedings because the taxpayer must be made aware of the precise charge that it is required to meet. The assessee relied upon the Delhi ITAT’s earlier decision in DCIT v. Sanjay Singh, ITA No. 6942/Del/2019, decided on November 28, 2019.
The Tribunal considered the earlier decisions cited on behalf of the assessee, including the decision in DCIT v. Sanjay Singh, where failure to specify the precise statutory charge in a penalty notice was treated as fatal to the penalty proceedings.
The Tribunal’s order reproduces judicial observations stressing that a taxpayer should have a reasonable opportunity to understand and contest the precise allegation forming the basis of the proposed penalty. The discussion also refers to the requirement that the Assessing Officer examine the relevant statutory conditions before imposing a penalty.
The reasoning reflected in the precedents reproduced by the Tribunal places considerable emphasis on principles of natural justice.
A penalty proceeding has consequences for the taxpayer and, therefore, the assessee must know the precise case it has to answer. Merely issuing a general or standard-form notice without identifying the applicable statutory limb may deprive the taxpayer of a meaningful opportunity to defend itself.
The Tribunal’s discussion also records judicial observations that a notice under the relevant penalty provisions must be sufficiently clear to convey the charge and cannot be treated as a valid notice merely because the underlying section has been mentioned.
After considering the material on record and the judicial precedents, the Delhi ITAT adopted the reasoning of the coordinate bench and concluded that the penalty imposed against Amrit Bottlers was not sustainable in law.
The Tribunal specifically recorded that the Revenue’s arguments in support of the penalty were rejected.
Since the penalty itself failed on the legal ground concerning the defective notice, the Tribunal found that the other issues raised in the appeal had effectively become academic and did not require adjudication.
The ITAT accordingly allowed the assessee’s appeal, effectively setting aside the penalty of ₹6,25,86,306 imposed under Section 271AAB.
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