Penalty notice under section 271(1)(c) invalid for failing to specify limb, resulting in dismissal of revenue appeals

Notice under section 271(1)(c) read with section 274 failed to specify which limbconcealment of particulars of income or furnishing inaccurate particularswas the basis for proposed penalty, a mandatory requirement for imposing penalty. Because the assessing officer did not indicate or mark the relevant limb on the notice, the statutory foundation for levy of penalty was lacking and the notice was invalid. Consequently the penalty could not be sustained and the revenue appeals were dismissed by ITAT.

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Issues: Whether the notice issued under section 274 read with section 271(1)(c) of the Income-tax Act, 1961 is invalid for failing to specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) the penalty proceedings were initiated under, and whether the penalty imposed by the Assessing Officer should therefore be sustained or deleted.

Analysis: The Tribunal examined the penalty notices on record and relevant precedents addressing the requirement that a notice initiating proceedings under section 271(1)(c) must specify the particular limb under which penalty is proposed. The Tribunal noted that the notices did not indicate or mark which limb of section 271(1)(c) was invoked, creating a foundational defect in the proceedings. The Tribunal considered binding decisions holding that absence of such specificity renders the notice bad in law and found that the Assessing Officer had not cured this deficiency.

Conclusion: The notice under section 274 read with section 271(1)(c) is invalid for lack of specific charge; the penalty founded on that notice cannot be sustained and the Revenue's appeals are dismissed in favour of the assessee.

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