Allahabad HC: Penalty u/s 271AAB Validated Despite Incorrect Section Mention in Notice Caption

The Allahabad High Court has delivered a significant judgment regarding the validity of penalty proceedings in search and seizure cases. In the case of PCIT Vs Sandeep Chandak, the Court ruled that a penalty order passed under Section 271AAB of the Income Tax Act 1961 cannot be quashed merely because the notice issued to the assessee inadvertently mentioned Section 271 in its caption. The Court emphasized that if the body of the notice clearly communicates the charge and the assessee participates in the proceedings without objection, the curative provisions of Section 292BB apply.

Case Background and Facts

The dispute originated from a search and seizure operation conducted under Section 132 of the Income Tax Act 1961 on 24.10.2013 involving the Chandak group. During the search, the father of the assessee admitted to undisclosed income totaling Rs. 12 crores. This surrender was apportioned among family members, with Rs. 4 crores attributed specifically to the assessee, Mr. Sandeep Chandak.

This admission was recorded in a statement under Section 132(4). During the subsequent assessment proceedings, the assessee’s representative reiterated the surrender of Rs. 4 crores on 09.01.2015. The assessee clarified that this income was derived from trading in derivatives (F&O) and had been utilized for land advances.