Invalid penalty notice under section 274 vitiates section 271(1)(c) proceedings when the exact default is not specified.

A penalty notice under section 274 for section 271(1)(c) must clearly specify whether the charge is concealment of income or furnishing inaccurate particulars. Where a printed notice leaves the irrelevant limb unstruck and gives an omnibus allegation, it is vague, shows non-application of mind, and vitiates the penalty proceedings. On that basis, the penalty could not be sustained and the deletion of penalty was upheld in favour of the assessee; the revenue's challenge therefore failed.

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Issues: Whether a penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the notice under section 274 did not strike off the irrelevant limb and did not specify whether the charge was concealment of income or furnishing of inaccurate particulars of income.

Analysis: The penalty notices were issued in a printed form without deleting the inapplicable portion, leaving the assessee uncertain about the exact charge. The governing principle is that a notice initiating penalty proceedings must be precise and unambiguous, since section 271(1)(c) is a mandatory provision carrying civil consequences. An omnibus notice of this nature reflects non-application of mind and vitiates the penalty proceedings. The defect was held to be fatal, and the deletion of penalty by the first appellate authority was found to be justified.

Conclusion: The penalty could not be sustained. The deletion of penalty under section 271(1)(c) was upheld in favour of the assessee.

Final Conclusion: The revenue's appeal failed, and the penalty deletion stood confirmed on the ground of an invalid penalty notice.

Ratio Decidendi: A penalty notice under section 274 read with section 271(1)(c) must specifically disclose the exact limb of default; failure to strike off the inapplicable portion renders the notice vague and vitiates the penalty proceedings for non-application of mind.

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