Unspecified penalty charges under Section 271(1)(c) render notices vague, undermining penalty proceedings and resulting in deletion

A penalty notice under Section 271(1)(c) must identify whether the allegation concerns concealment of income or furnishing inaccurate particulars. Where the notice leaves both limbs unselected, it fails to communicate the precise charge and is treated as vague. The defect is not cured merely because the assessment order records satisfaction for initiating penalty proceedings. The resulting penalty proceedings are therefore vitiated, and the penalty cannot be sustained. The material discusses deletion of the penalty in favour of the assessee under the jurisdictional Full Bench principle applied by the Tribunal.

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Issues: Whether a penalty notice under Section 271(1)(c) of the Income-tax Act, 1961, that does not specify whether the proceedings are for concealment of income or for furnishing inaccurate particulars of income, is valid and whether the resulting penalty can be sustained.

Analysis: The assessment order recorded satisfaction for initiation of penalty proceedings, but the penalty notice did not strike off the inapplicable limb and thus failed to inform the assessee of the precise charge. In the light of the jurisdictional Full Bench ruling applied by the Tribunal, an omnibus notice under Section 271(1)(c) read with Section 274 is vague and such defect is not cured by the assessment proceedings.

Conclusion: The penalty notice was invalid, the penalty proceedings were vitiated, and the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961, was deleted in favour of the assessee.

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