The 271AAB notice does not say which clause or what rate. Can the penalty survive?
No. Section 271AAB contains clauses (a), (b) and (c) with different conditions and different rates, so an omnibus show-cause notice that names neither the clause nor the rate leaves the assessee unable to know the case to be met and denies a real opportunity under s.274. The Tribunal also held, independently, that the levy had no foundation where no statement was recorded under s.132(4) and the returned income was accepted under s.143(3) without any addition.
Decided by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench — J. Sudhakar Reddy (Accountant Member) and Aby T. Varkey (Judicial Member); ITA No. 326/Kol/2020) on 2020-09-30, reported as (2020) 83 ITR 19 (SN) (Kol.)(Trib.); ITA No. 326/Kol/2020 (AY 2013-14). It bears on section 271AAB, section 271AAB(1)(a), section 271AAB(1)(c), section 132(4), section 274, section 143(3) of the Income Tax Act 1961, in Search, Survey & Block Assessment and Penalty matters.
It gives two separate routes out of a s.271AAB penalty, and the notice route is jurisdictional, so it can be raised at any stage even if it was not taken before the Assessing Officer or the first appellate authority. The second route matters in the common situation where the search yields nothing, the return is accepted in full, and penalty is nonetheless initiated: if no undisclosed income was found in the search and no s.132(4) statement exists, the statutory foundation is missing.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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A search under s.132 was carried out at the assessee's residence on 13 December 2012. She filed a return declaring income of Rs 3,17,25,160, which included commodity profits of Rs 3,10,00,000. The Assessing Officer accepted the returned income in the assessment under s.143(3) without any addition, but separately initiated penalty proceedings under s.271AAB, issuing a show-cause notice on 31 March 2015 which merely said that it appeared to him that the assessee had not satisfied the conditions, without identifying which clause of s.271AAB was invoked or whether the rate proposed was 10, 20 or 30 per cent. A penalty of Rs 31,00,000 was levied on 22 September 2015. No statement under s.132(4) had in fact been recorded from the assessee.
The Tribunal quashed the penalty. It held that the show-cause notice was fatally defective because it failed to state the charge or charges — the specific clause of s.271AAB and the rate of penalty — and, independently, that penalty under s.271AAB could not stand at all where no statement had been recorded under s.132(4), that being a pre-condition to the levy.
The Tribunal treated the validity of the notice as jurisdictional, relying on the principle in P.V. Doshi v. CIT that arguments on the validity of a notice go to the root of the matter and can be taken at any stage. Section 271AAB is not a single charge but contains clauses (a), (b) and (c), each with different conditions and a different quantum, so an assessee served with an omnibus notice cannot know the case he has to meet and is denied a meaningful opportunity under s.274. The Tribunal followed the Jaipur line of decisions, including Ravi Mathur v. Dy. CIT, Padam Chand Pungliya v. ACIT and Ashok Bhatia v. Dy. CIT, requiring the specific charge to be spelt out. Separately, since the definition of 'undisclosed income' in the Explanation to s.271AAB is tied to income found in the course of a search, and here the returned income was accepted under s.143(3) with no undisclosed income unearthed and no s.132(4) statement recorded, the statutory foundation for the levy was absent. The penalty was accordingly cancelled.
we have no other alternative but to hold that the penalty in question is bad in law as the showcause notice issued by the Assessing Officer does not specify the charge/s against the assessee for levy of penalty, as required by law
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Handle my notice → Ask a CA on WhatsAppNo. Section 271AAB contains clauses (a), (b) and (c) with different conditions and different rates, so an omnibus show-cause notice that names neither the clause nor the rate leaves the assessee unable to know the case to be met and denies a real opportunity under s.274. The Tribunal also held, independently, that the levy had no foundation where no statement was recorded under s.132(4) and the returned income was accepted under s.143(3) without any addition. This was decided by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench — J. Sudhakar Reddy (Accountant Member) and Aby T. Varkey (Judicial Member); ITA No. 326/Kol/2020) and bears on section 271AAB, section 271AAB(1)(a), section 271AAB(1)(c), section 132(4), section 274, section 143(3) of the Income Tax Act 1961. It is reported as (2020) 83 ITR 19 (SN) (Kol.)(Trib.); ITA No. 326/Kol/2020 (AY 2013-14). It gives two separate routes out of a s.271AAB penalty, and the notice route is jurisdictional, so it can be raised at any stage even if it was not taken before the Assessing Officer or the first appellate authority. The second route matters in the common situation where the search yields nothing, the return is accepted in full, and penalty is nonetheless initiated: if no undisclosed income was found in the search and no s.132(4) statement exists, the statutory foundation is missing. If it applies to you, the first step is this: Pull the show-cause notice from the file and check whether it identifies the clause of s.271AAB and the rate proposed, whether 10, 20 or 30 per cent, before drafting anything else.
A search under s.132 was carried out at the assessee's residence on 13 December 2012. She filed a return declaring income of Rs 3,17,25,160, which included commodity profits of Rs 3,10,00,000. The Assessing Officer accepted the returned income in the assessment under s.143(3) without any addition, but separately initiated penalty proceedings under s.271AAB, issuing a show-cause notice on 31 March 2015 which merely said that it appeared to him that the assessee had not satisfied the conditions, without identifying which clause of s.271AAB was invoked or whether the rate proposed was 10, 20 or 30 per cent. A penalty of Rs 31,00,000 was levied on 22 September 2015. No statement under s.132(4) had in fact been recorded from the assessee. The matter was decided on 2020-09-30 by the ITAT (Income Tax Appellate Tribunal, Kolkata Bench — J. Sudhakar Reddy (Accountant Member) and Aby T. Varkey (Judicial Member); ITA No. 326/Kol/2020). On those facts the ITAT held as follows. The Tribunal quashed the penalty. It held that the show-cause notice was fatally defective because it failed to state the charge or charges — the specific clause of s.271AAB and the rate of penalty — and, independently, that penalty under s.271AAB could not stand at all where no statement had been recorded under s.132(4), that being a pre-condition to the levy.
The Tribunal treated the validity of the notice as jurisdictional, relying on the principle in P.V. Doshi v. CIT that arguments on the validity of a notice go to the root of the matter and can be taken at any stage. Section 271AAB is not a single charge but contains clauses (a), (b) and (c), each with different conditions and a different quantum, so an assessee served with an omnibus notice cannot know the case he has to meet and is denied a meaningful opportunity under s.274. The Tribunal followed the Jaipur line of decisions, including Ravi Mathur v. Dy. CIT, Padam Chand Pungliya v. ACIT and Ashok Bhatia v. Dy. CIT, requiring the specific charge to be spelt out. Separately, since the definition of 'undisclosed income' in the Explanation to s.271AAB is tied to income found in the course of a search, and here the returned income was accepted under s.143(3) with no undisclosed income unearthed and no s.132(4) statement recorded, the statutory foundation for the levy was absent. The penalty was accordingly cancelled. In the words reproduced by the source cited on this page: "we have no other alternative but to hold that the penalty in question is bad in law as the showcause notice issued by the Assessing Officer does not specify the charge/s against the assessee for levy of penalty, as required by law" The decision followed or applied P.V. Doshi v. CIT; Ravi Mathur v. Dy. CIT; Padam Chand Pungliya v. ACIT; Ashok Bhatia v. Dy. CIT.
It was decided by the ITAT on 2020-09-30 and is reported as (2020) 83 ITR 19 (SN) (Kol.)(Trib.); ITA No. 326/Kol/2020 (AY 2013-14). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271AAB, section 271AAB(1)(a), section 271AAB(1)(c), section 132(4), section 274, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Tribunal quashed the penalty. It held that the show-cause notice was fatally defective because it failed to state the charge or charges — the specific clause of s.271AAB and the rate of penalty — and, independently, that penalty under s.271AAB could not stand at all where no statement had been recorded under s.132(4), that being a pre-condition to the levy. It arises in Search, Survey & Block Assessment and Penalty matters, on section 271AAB, section 271AAB(1)(a), section 271AAB(1)(c), section 132(4), section 274, section 143(3) of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Kolkata Bench — J. Sudhakar Reddy (Accountant Member) and Aby T. Varkey (Judicial Member); ITA No. 326/Kol/2020. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take the defective-notice point even if it was not raised below, since validity of the notice goes to the root and can be argued at any stage. Check whether any statement under s.132(4) was in fact recorded and whether any undisclosed income was unearthed in the search, because the Explanation ties 'undisclosed income' to income found in the course of the search. Where the s.143(3) assessment accepted the returned income with no addition, say so squarely in the reply, as that was central to the second ground.
Still good law. A separate search for later treatment shows the defective-notice line has been carried forward — see Laxmi Narayan Agarwal v. ACIT, 2026 TAXSCAN (ITAT) 885 (ITAT Delhi, 4 June 2026, Mahavir Singh VP and S. Rifaur Rahman AM), holding that a s.271AAB notice must clearly specify the applicable clause and deleting the penalty, following Jaina Marketing & Associates v. DCIT. The same search surfaced the contrary High Court current in CIT v. Sandeep Chandak (2018) 405 ITR 648 (All), where the Allahabad High Court held that once the assessee admitted undisclosed income in a s.132(4) statement and specified its derivation, 'the provisions of S.271AAB were automatically attracted', and the assessee's SLP was dismissed. That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order itself could not be found in a subscription research database. Three searches were run - on the party name, on the appeal number ITA No. 326/Kol/2020, and on the surname together with the section - and none returned it; the party-name search returned only matters where the two names appear separately in appearance lines. The citation is therefore unconfirmed and everything recorded here about what the Bench said comes from a digest of the order rather than from the order. The defective-notice line has been carried forward at Tribunal level since, including Laxmi Narayan Agarwal v ACIT (ITAT Delhi, 4 June 2026) following Jaina Marketing & Associates v DCIT, so it is not an isolated order. Note also that the two grounds here are separable: the second one depends on there being no s.132(4) statement at all, and where the notice is defective but an admission was in fact made under s.132(4), benches have not spoken with one voice. The order could not be located in a subscription research database on three searches, so the citation, the bench and the paragraph numbering are unconfirmed and the holding rests on a digest. Whether the Revenue appealed was not verifiable. The position where the notice is defective but the assessee has in fact made a s.132(4) admission remains contested across benches. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Tribunal quashed the penalty. It held that the show-cause notice was fatally defective because it failed to state the charge or charges — the specific clause of s.271AAB and the rate of penalty — and, independently, that penalty under s.271AAB could not stand at all where no statement had been recorded under s.132(4), that being a pre-condition to the levy.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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My return was only processed under 143(1). Does that stop the department reopening it later?
No s.143(2) notice was issued at all. Does s.292BB save the assessment?
They recorded your statement in a survey. Can the addition rest on that alone?