Penalty notice must specify the exact limb of default; vague section 274 notice makes section 271(1)(c) penalty unsustainable.

Penalty under section 271(1)(c) cannot be sustained unless the notice under section 274 clearly specifies the exact limb of default, namely concealment of income or furnishing of inaccurate particulars. Where the notice fails to strike off the irrelevant portion and does not disclose a definite charge, the assessee is not put to proper notice of the allegation. On that basis, the penalty initiation and the resulting penalty order are treated as unsustainable in law, and the penalty stands quashed in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained where the notice under section 274 did not specify the exact limb of default and did not strike off the irrelevant portion.

Analysis: The penalty was founded on the allegation of concealment of income and furnishing of inaccurate particulars, but the notice issued under section 274 did not clearly indicate which limb was invoked. The omission to specify the exact charge, coupled with the failure to strike off the inapplicable portion, rendered the initiation and continuation of penalty proceedings unsustainable in law.

Conclusion: The penalty notice and the consequent penalty order were invalid and were quashed in favour of the assessee.

Final Conclusion: The assessee's penalty was annulled because the statutory notice did not disclose a definite charge, and the appeal succeeded.

Ratio Decidendi: A penalty under section 271(1)(c) cannot be sustained unless the notice under section 274 clearly specifies whether the allegation is concealment of income or furnishing of inaccurate particulars, so that the assessee is put to a definite charge.

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