Penalty notice must specify the exact charge; vague section 274 notice cannot sustain section 271(1)(c) penalty.

A penalty under section 271(1)(c) of the Income-tax Act could not be sustained where the section 274 notice failed to specify whether the alleged default was concealment of income or furnishing inaccurate particulars of income. The Tribunal treated the vague and ambiguous notice as a defect going to the root of the penalty initiation, because the assessee must know the exact charge to meet it effectively. On that basis, the penalty proceedings were held unsustainable and the penalty was deleted.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the notice under section 274 did not specify whether the charge was concealment of income or furnishing of inaccurate particulars of income.

Analysis: The notice initiating penalty proceedings was found to be vague and ambiguous because it did not clearly indicate the specific limb of section 271(1)(c) invoked against the assessee. The defect went to the root of the initiation of penalty proceedings. Relying on the settled position that a penalty notice must disclose the exact charge so that the assessee can meet it effectively, the Tribunal held that such an notice could not support valid penalty proceedings.

Conclusion: The penalty proceedings were held unsustainable and the penalty deleted.

Ratio Decidendi: A penalty under section 271(1)(c) of the Income-tax Act, 1961 cannot be sustained where the notice under section 274 fails to specify the precise charge, namely concealment of income or furnishing inaccurate particulars of income.

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