Notice Specificity in penalty proceedings must identify which limb of Section 271(1)(c) is relied on, or the penalty is unsustainable.

A penalty proceeding premised on a show cause notice must invoke the correct statutory provision and identify the specific alternative limb relied upon when a provision contains disjunctive limbs. Here, proceedings originally contemplated under Section 271AAA were converted into a penalty under Section 271(1)(c) but the notice queried both concealment and inaccurate particulars without specifying which limb was alleged, causing prejudice to the recipient. For that reason the penalty was held unsustainable and set aside: lack of specification of the particular limb and change in the statutory basis rendered initiation and continuation of penalty proceedings defective.

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Issues: Whether a penalty order passed under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained where the assessment record indicated that a show cause notice was to be issued under Section 271AAA of the Income-tax Act, 1961 and the subsequently issued notice did not specify which limb of Section 271(1)(c) (concealment of particulars of income or furnishing inaccurate particulars) was relied upon.

Analysis: The assessment order recorded an intention to issue a show cause notice under Section 271AAA of the Income-tax Act, 1961 but the notice ultimately issued and the penalty imposed were under Section 271(1)(c) of the Income-tax Act, 1961. Section 271(1)(c) has alternative limbs addressing concealment of particulars of income or furnishing inaccurate particulars of income; a notice under that provision must specify the particular limb alleged to be violated. The notice issued sought explanation on both limbs, creating an absence of specification and resulting in prejudice to the recipient. The origin of proceedings as proposing a notice under Section 271AAA and the subsequent change to Section 271(1)(c) without adequate specification renders the initiation and continuation of penalty proceedings defective.

Conclusion: The penalty order is set aside because the show cause notice was initially proposed under Section 271AAA of the Income-tax Act, 1961 but the ultimately issued notice and penalty were under a different provision (Section 271(1)(c)) and the notice failed to specify the particular limb of Section 271(1)(c), causing prejudice to the assessee.

Ratio Decidendi: A penalty proceeding must be initiated under the statutory provision for which the show cause notice is issued, and where Section 271(1)(c) is invoked the notice must specify which alternative limb of that provision is relied upon; failure to do so renders the penalty proceedings and resulting order unsustainable.

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