Vague penalty notice under section 274 invalidates section 271(1)(c) proceedings when the charge is unclear.

A penalty under section 271(1)(c) of the Income-tax Act was found unsustainable because the section 274 notice did not clearly specify whether the charge was concealment of income or furnishing of inaccurate particulars. By failing to strike off the inapplicable limb, the notice did not give the assessee a clear and unambiguous allegation, which impaired the defence and went to the root of the penalty proceedings. Applying the settled view that a vague notice under section 274 invalidates such proceedings, the Tribunal held the penalty bad in law and directed deletion in favour of the assessee.

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

Analysis: The penalty notice did not strike off the inapplicable limb and therefore did not convey a clear and unambiguous charge to the assessee. The defect went to the root of the penalty proceedings, and the issue was covered by the Tribunal's earlier decision on the same legal question, which followed the settled view that a vague notice under section 274 invalidates penalty proceedings under section 271(1)(c). The omission prevented proper defence and offended the requirement of a specific charge in penalty proceedings.

Conclusion: The penalty proceedings were held bad in law and the penalty was directed to be deleted in favour of the assessee.

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