Often, for assessment year 2016-17 and earlier. Section 274(1) now says no penalty order under Chapter XXI may be made unless you have been heard or given a reasonable opportunity of being heard "by way of a show cause notice to that effect" - words inserted by the Finance Act 2026 and deemed to have been there since 1 March 2026, so the show-cause notice is a statutory requirement and not merely a practice. Concealment of particulars and furnishing inaccurate particulars are two different charges under s.271(1)(c), so a printed form that keeps both tells you nothing you can answer; Manjunatha Cotton held such a notice bad in law and the Bombay Full Bench in Mohd. Farhan A. Shaikh agreed, while Kaushalya, Sundaram Finance and s.292B are the other side and the point has to be taken early and with prejudice shown. Be careful with SSA's Emerald Meadows - the Supreme Court dismissed the Revenue's special leave petition on 5 August 2016 in a few lines without reasons, which on Kunhayammed lays down no law at all. For AY 2017-18 onwards the charge is s.270A, where there are no two limbs to strike out: what the notice must name is whether misreporting under s.270A(9) is alleged, and under which clause.
Start with what s.274 actually says, in the version that applies to you. Sub-section (1) reads: "No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard by way of a show cause notice to that effect." The closing words - "by way of a show cause notice to that effect" - were inserted by clause 22(a) of the Finance Act 2026 (Act No. 4 of 2026, assented to on 30 March 2026) and are deemed to have been inserted with effect from 1 March 2026. Before that date the sub-section ended at "reasonable opportunity of being heard", which is the version every reported decision on this page was decided under. Chapter XXI is the whole penalty chapter, so the sub-section governs a penalty under s.271(1)(c), a penalty under s.270A and every other penalty in the chapter. Sub-section (2) adds an approval layer: the Income-tax Officer cannot impose a penalty above Rs 10,000, and an Assistant or Deputy Commissioner cannot impose one above Rs 20,000, except with the prior approval of the Joint Commissioner. Sub-sections (2A) to (2C) carry the faceless penalty scheme. Clause 22(b) of the same Finance Act inserted two more sub-sections, also deemed from 1 March 2026 but biting later. Sub-section (4) provides that where a draft of the proposed order of assessment under s.144C, or an assessment under s.143 or a reassessment under s.147, is made on or after 1 April 2027 in respect of AY 2026-27 or any earlier year, "the penalty under section 270A, if any" shall form part of that draft or be imposed as part of that order - note "if any", which takes in a misreporting penalty as well as an under-reporting one - and that a reference anywhere in the Act to the assessment order or to the s.270A penalty order is to be read as a reference to that combined order. Sub-section (5) provides that where the Joint Commissioner's approval is taken for passing an assessment or reassessment order on or after 1 April 2027, that approval is deemed to be the approval for the s.270A penalty forming part of it - which is how the sub-section (2) approval requirement is satisfied once the two orders become one.
The defect itself is a piece of stationery. The standard s.274 form for a s.271(1)(c) penalty recites that you "have concealed the particulars of your income or furnished inaccurate particulars of such income", with an instruction that the inapplicable words be deleted. Officers issue it with nothing deleted. You are then told, in the alternative, that you did one of two things, and you cannot tell which. The two answers are not the same answer. To a concealment charge you say that nothing was withheld - the receipt, the asset, the transaction was all on the record. To an inaccurate-particulars charge you say that what you stated was accurate, or that the claim was a view openly taken on disclosed facts. Preparing one reply does not prepare the other, and the officer who could not choose between the charges has not applied his mind to either. For every year decided so far the section prescribed no form, and that was where the department's argument started: no form, no defect. The answer the courts gave was that an opportunity to answer a charge you have not been told is not an opportunity, so the section carried a content requirement even though it did not print one. Since 1 March 2026 it prints one.
Dilip N. Shroff is where the vocabulary comes from. The Supreme Court (S.B. Sinha and P.K. Balasubramanyan JJ, 18 May 2007) held at para 67 that "'Concealment of income' and 'furnishing of inaccurate particulars' are different", and at para 68 that had they not been different concepts Parliament would not have used different terminology. "Particulars" means the details you supplied in the return, and putting a valuation on an asset that the officer later disagrees with is not by itself furnishing inaccurate particulars. On the notice, the Court recorded at para 83 that the standard proforma used by the Assessing Officer postulated that inappropriate words and paragraphs were to be deleted and that this had not been done - which it treated as non-application of mind. Two cautions before you cite it. Union of India v Dharmendra Textile Processors (Supreme Court, three judges, 29 September 2008, (2008) 306 ITR 277) held the s.271(1)(c) penalty to be a civil liability for which wilful concealment is not an essential ingredient, and said in terms that Dilip N. Shroff was not correctly decided on that point - so do not run the guilty-mind line on its authority. And s.271(1)(c) is spent from AY 2017-18, so the case reaches only the older years.
Manjunatha Cotton is the authority that actually decides the point. It is a Division Bench of the Karnataka High Court - N. Kumar and Aravind Kumar JJ - decided on 13 December 2012 and reported in the 2013 volumes; it is not a Full Bench, and calling it one in a submission invites a correction you do not need. Seven Revenue appeals were dismissed. The Court held that the notice must specifically state which limb of s.271(1)(c) is invoked; that penalty proceedings begun on one limb cannot end in a finding of guilt on the other; and, at para 59, that "The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences are serious". At para 61 it put the consequence in one line: "The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." The same judgment holds that penalty is not automatic on an agreed addition, and that where an appellate authority sustains an addition on a ground the Assessing Officer never found, it is that authority and not the Assessing Officer who must initiate the penalty.
Now SSA's Emerald Meadows, and be precise, because most submissions overstate it. Below, the Karnataka High Court gave no reasoning of its own (its appeal number and date are given in the gaps note, and were not re-verified for this page): it recorded that the Tribunal had followed Manjunatha Cotton, held the matter covered by it, and dismissed the Revenue's appeal because no substantial question of law arose. The Revenue then petitioned the Supreme Court. On 5 August 2016 Anil R. Dave and L. Nageswara Rao JJ disposed of Petition for Special Leave to Appeal (C) CC No. 11485 of 2016 in an order with no reasons and no numbered paragraphs: delay was condoned, and "We do not find any merit in this petition. The special leave petition is, accordingly, dismissed." Leave was never granted, so the Court never exercised appellate jurisdiction. On Kunhayammed v State of Kerala a refusal of special leave, speaking or not, does not attract the doctrine of merger, and a refusal without reasons declares no law under Article 141. So this is not a Supreme Court ruling that an unstruck notice is bad. It establishes that the Revenue's challenge to Manjunatha Cotton failed at both levels, and that is worth saying - but say that, not more.
Mohd. Farhan A. Shaikh is the Full Bench in this line - Bombay High Court sitting at Goa, Dama Seshadri Naidu, Bharati Dangre and M.S. Jawalkar JJ, 11 March 2021. Know its shape before you cite it: it answered a reference and directed that the two tax appeals go back to the Division Bench, so it decided no appeal and set aside no penalty. On the first question it answered that a mere defect in the notice - not striking off the irrelevant matter - vitiates the penalty proceedings. At para 181 it held that the opinion formed in the assessment translates into action only through the statutory notice, that assessment and penalty proceedings are not composite and neither cures a defect in the other, that the assessee must be informed of the grounds only through the statutory notice, and that "An omnibus notice suffers from the vice of vagueness". At para 182 it held that a penal provision, even one with civil consequences, is construed strictly and ambiguity resolved in the assessee's favour. At para 183 it held that Kaushalya "does not lay down the correct proposition of law". Where it left the question is set by a later Division Bench of the same Court: in Veena Estate (P) Ltd v CIT the Bombay High Court held, by an order of 11 January 2024 refusing to let the notice defect in as an additional ground in a s.260A appeal admitted twenty years earlier, that the Full Bench did not displace the Supreme Court's test of prejudice and did not decide whether the plea can be raised belatedly. The appeal itself was dismissed later and the penalty upheld, so read the two orders together.
The department's answer has four parts and you should expect all of them. First, Kaushalya (Bombay at Nagpur, 14 January 1992): s.274 prescribes no particular form, and "Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice." Read the whole judgment before conceding anything to it - it quashed one of the three penalties before it, because that notice went out before the assessment order, used "or" between the charges and used the word "deliberately" which had been out of s.271(1)(c) since 1 April 1964, and it held that notice to show non-application of mind and prejudice. Within Bombay its notice limb no longer stands after Mohd. Farhan. Second, Sundaram Finance (Madras, 23 April 2018), which the department cites as a case where a defective notice was excused. It is not: the Court found on perusal that the relevant columns of the notice had in fact been marked, treated the point as one of fact, and rejected the additional question as not arising. Its observations that the assessee understood the purport and import of the notice, and that the plea was taken for the first time ten years later, are additional. The assessee's own special leave petition was dismissed without reasons on 26 October 2018, which affirms nothing. Third, s.292B: no notice is invalid "merely by reason of any mistake, defect or omission" if it is "in substance and effect in conformity with or according to the intent and purpose of this Act". The answer given in Mohd. Farhan is that a notice which does not convey the charge is not in substance and effect in conformity with the intent of a penal provision, and that ambiguity in a penal provision goes to the assessee. Fourth, s.271(1B), which deems an assessment order containing a direction to initiate penalty under s.271(1)(c) to be the officer's satisfaction. Read what it does: it answers an objection that the officer never recorded his satisfaction. It says nothing about what the notice that follows has to contain, and a deemed satisfaction is not a communicated charge.
One curative provision the department sometimes reaches for does not reach this at all. Section 292BB is about service. It stops you saying that a notice was not served on you, or not served in time, or served in an improper manner, once you have co-operated in the proceeding - and its proviso takes it away if you objected before the assessment or reassessment was completed. It says nothing about what a notice must contain. A notice that reached you promptly and told you nothing is still a notice that told you nothing, and s.292BB does not convert it.
Two things about where the point stands today, 22 September 2026. First, it is before the Supreme Court. On 7 November 2025 the Revenue's petition in PCIT v Ennoble Constructions (SLP (C) Diary No. 20179 of 2024) was admitted, against a Karnataka High Court decision quashing a generic notice, and listed for 16 February 2026; the question it raises is whether a notice that does not specify the limb is valid. As at today nothing has been reported after that listing, and the particulars of that order come from a single trade-press report of it, so treat this as a High Court line under a pending apex challenge rather than as settled law, and check the current position before you file. Second, and more immediately, the ground has shifted under the case law itself. Every decision on this page was given on a s.274(1) that stopped at "reasonable opportunity of being heard". From 1 March 2026 the sub-section requires that opportunity to be given "by way of a show cause notice to that effect". The Full Bench's proposition in Mohd. Farhan - that you must be informed of the grounds only through the statutory notice, and that the assessment order cannot supply what the notice left out - is now much closer to the words of the section than to an inference from them, and the department's answer that s.274 prescribes no form is correspondingly weaker for any penalty order made from that date. Do not overstate it: the inserted words require a show cause notice, not a particular content, so the fight over what the notice must say is still a fight. But cite the amended sub-section, with its date, and make the department argue against the text.
Now the part that is most often got wrong. Section 271 does not apply to any assessment for assessment year 2017-18 or later - s.271(7), inserted by the Finance Act 2016 with effect from 1 April 2017. From AY 2017-18 the charge is s.270A, and s.270A is not built like s.271(1)(c). It has one charge: under-reporting. Misreporting is not a second limb; it is under-reporting brought about by one of six things listed in s.270A(9), and its effect is to lift the penalty from fifty per cent of the tax on the under-reported income under s.270A(7) to two hundred per cent under s.270A(8). So asking the officer to strike out the inapplicable limb of a s.270A notice is asking for the wrong thing, and an appeal drafted that way invites the answer that there is nothing to strike. What the notice has to tell you is which clause of s.270A(2) makes the amount under-reported income, and whether misreporting is alleged, under which clause of s.270A(9), and on what facts. Section 274(1) reaches that notice because s.270A sits in the same Chapter XXI. The courts have applied it in that form: in Schneider Electric the Delhi High Court found "not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied"; in Prem Brothers Infrastructure LLP the same Court quashed the penalty and directed immunity; in Mithibai College Employees the Tribunal deleted a penalty where the notice charged under-reporting and the order imposed misreporting with no clause named. Since 1 March 2026 there is less riding on it than there was, because s.270AA as substituted by the Finance Act 2026 lets you buy out even a misreporting penalty on payment of additional income-tax of one hundred per cent - but the limb still decides whether you pay nothing extra, or an amount equal to the tax again, or two hundred per cent. One further change is coming: under the new s.274(4), where the s.144C draft, the s.143 assessment or the s.147 reassessment is made on or after 1 April 2027 for AY 2026-27 or any earlier year, the s.270A penalty is imposed as part of that order rather than by a separate penalty order. What the Act does not say is whether a separate show-cause under s.274(1) still has to precede it. The amended sub-section (1) suggests it must, since it requires the opportunity to be given by way of a show cause notice, but the point is untested.
This is the one defence you can assess before you know anything about the merits. It is visible on the face of the paper, it costs nothing to check, and where it works it disposes of the penalty without the addition ever being argued.
It is also the defence most often lost by being taken late. Veena Estate and Sundaram Finance both turned on that, not on the notice. And for AY 2017-18 onwards the argument has to be re-framed for s.270A or it fails on its own terms - which is why practitioners who have run it for years on the old section keep losing it on the new one.
Additions were made to my book profits in earlier years. Can I use that money to explain a cash credit or an unexplained payment in a later year?
The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
My explanation for a cash deposit was rejected in the assessment and an addition was made — does that by itself mean penalty for concealment follows?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
My return declared a loss and even after the addition the assessed figure is still a loss. Can concealment penalty under section 271(1)(c) be levied when no tax is payable?
The assessment in which the s.271E satisfaction was recorded has been set aside. Can the penalty stand?
Additions were made to my income and confirmed on appeal. The penalty order simply relies on the reasons in the assessment. Is that enough to sustain a concealment penalty?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
