Penalty quashed as notice didn't specify default, making proceedings void ab initio.

The Tribunal quashed the penalty of Rs. 3,13,172/- imposed under Section 271(1)(c) due to the Assessing Officer's failure to specify the exact default in the show cause notice, violating statutory obligations. This rendered the penalty unsustainable, leading to the penalty proceedings being void ab initio. The appeal was allowed, and the penalty order was set aside without addressing the merits of the case or the limitation period issue.

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Issues Involved:
1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Adjudication on the limitation period for the penalty order.
3. Validity of the show cause notice issued by the Assessing Officer (AO).

Detailed Analysis:

1. Validity of the Penalty Imposed Under Section 271(1)(c):
The assessee filed a return of income for the assessment year 2008-09, which was later scrutinized, resulting in an addition to the income and initiation of penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) partially upheld the addition and the AO imposed a penalty of Rs. 3,13,172/- for concealment and furnishing inaccurate particulars of income. The assessee appealed, arguing that the AO failed to specify the exact default in the show cause notice, thus invalidating the penalty. The Tribunal agreed, noting that the AO did not clearly state whether the penalty was for concealment of income or furnishing inaccurate particulars, which are distinct defaults. This lack of specificity violated the statutory obligation to inform the assessee clearly, rendering the penalty unsustainable.

2. Adjudication on the Limitation Period for the Penalty Order:
The assessee contended that the penalty order was barred by limitation, but this ground was not adjudicated by the CIT(A). The Tribunal did not delve into this issue in detail as the penalty was quashed on the primary ground of invalid jurisdiction due to the defective show cause notice.

3. Validity of the Show Cause Notice Issued by the AO:
The Tribunal scrutinized the show cause notice issued under Section 274 read with Section 271(1)(c) and found it deficient. The AO failed to strike off irrelevant parts of the notice, leaving the assessee uncertain about the specific charge. This non-application of mind by the AO was seen as a serious procedural lapse. The Tribunal cited precedents from the Supreme Court and High Courts, emphasizing that specifying the exact charge is crucial for maintaining the principles of natural justice. The failure to do so invalidated the penalty proceedings.

Conclusion:
The Tribunal quashed the penalty of Rs. 3,13,172/- imposed under Section 271(1)(c) due to the AO's failure to specify the exact default in the show cause notice, thereby violating Section 274(1) of the Act. This rendered the penalty proceedings void ab initio. Consequently, the Tribunal did not address the merits of the case or the limitation period issue. The appeal was allowed, and the penalty order was set aside.

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