Notice specificity for section 271(1)(c): ambiguity between concealment and inaccurate particulars vitiates penalty; penalty quashed.

A penalty under section 271(1)(c) cannot stand where the initiating notice under section 274 fails to specify which limb-concealment of particulars of income or furnishing inaccurate particulars-is relied upon; the article applies the principle that a show cause notice must be clear and unambiguous to afford the assessee a fair opportunity of defence, and holds that ambiguity vitiates the penalty proceedings. Applying that principle to the facts, the penalty order was quashed and the appeal allowed in favour of the assessee.

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Issues: Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 can be sustained where the notice under section 274 read with section 271(1)(c) did not specify which limb-concealment of particulars of income or furnishing inaccurate particulars of income-was being invoked.

Analysis: Section 271(1)(c) imposes penalty for concealment of particulars of income or furnishing inaccurate particulars of income; section 274 prescribes issuance of notice initiating penalty proceedings. The notice must specify the particular ground relied upon so that the assessee has a clear and unambiguous charge and fair opportunity to defend. The notice in the present case did not strike out either of the twin charges and thereby remained ambiguous as to whether concealment or furnishing inaccurate particulars was the basis for penalty. Reliance was placed on the jurisdictional High Court decision in PCIT vs. Smt. Baisetty Revathi which held that ambiguity in a show-cause notice under section 271(1)(c) vitiates the penalty proceedings because the penal charge must be unequivocal and specific. Applying that principle to the facts where the AO did not specify the particular limb, the penalty proceedings lack the required clarity and procedural fairness.

Conclusion: The penalty order under section 271(1)(c) of the Income-tax Act, 1961 is quashed. The appeal is allowed in favour of the assessee.

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