Defective penalty notice under section 271(1)(c) can vitiate proceedings where the exact limb is not specified.

Penalty proceedings under section 271(1)(c) were treated as invalid where the show cause notice was a printed form that did not specify the exact limb and did not strike off the inapplicable portion. A later notice was mentioned, but its copy was not produced, so its contents could not be verified; the resulting uncertainty was resolved in favour of the assessee. Following the jurisdictional Full Bench view that such a defective notice vitiates penalty proceedings, the penalty could not be sustained.

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Issues: Whether penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 were vitiated because the show cause notice did not specify the exact limb and did not strike off the inapplicable portion.

Analysis: The notice issued for penalty was a printed format in which the irrelevant limb was not struck off. The record also referred to a later notice, but its copy was not produced, so its contents could not be verified. In these circumstances, the defect in the notice remained unexplained, and the benefit of that uncertainty had to go to the assessee. The jurisdictional Full Bench ruling holding that such a defect in the notice vitiates penalty proceedings was followed.

Conclusion: The penalty proceedings were held to be invalid, and the penalty could not be sustained.

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