Penalty notice must specify the exact charge; omnibus section 274 notice and unclear satisfaction invalidated penalty proceedings.

Penalty proceedings under section 271(1)(c) of the Income-tax Act could not be sustained where the section 274 notice was issued in a pre-printed omnibus format without striking off irrelevant portions and the assessment order did not record a definite satisfaction on the exact limb invoked. The notice failed to specify whether the proposed penalty was for concealment of income, furnishing inaccurate particulars, or both, leaving the basis of initiation ambiguous. On this defect in charge and recorded satisfaction, the penalty notice and consequential proceedings were held invalid, and the penalty orders for all assessment years were set aside.

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Issues: Whether penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 were valid where the notice under section 274 read with section 271 was issued in a pre-printed omnibus format without striking off irrelevant portions and the satisfaction recorded in the assessment order did not clearly specify the exact charge.

Analysis: The notice did not clearly indicate whether the proposed penalty was for concealment of particulars of income, furnishing of inaccurate particulars of income, or both. The assessment order also failed to record a definite satisfaction on the specific limb of section 271(1)(c). The absence of a clear charge in the notice and in the recorded satisfaction rendered the penalty initiation ambiguous. In view of the defect in the notice and the uncertain basis for initiation, the penalty proceedings could not be sustained.

Conclusion: The penalty notice and the consequential penalty proceedings were held invalid, and the relief was granted to the assessee on this ground.

Final Conclusion: The penalty orders for all the assessment years were set aside and the appeals were allowed.

Ratio Decidendi: A penalty notice under section 274 read with section 271 of the Income-tax Act, 1961 must clearly specify the exact charge and cannot sustain penalty proceedings when issued in an omnibus form without deletion of irrelevant portions and without definite recorded satisfaction on the precise limb invoked.

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