Ambiguous penalty notice under income-tax law vitiates proceedings when the exact limb of default is not specified.

Penalty under section 271(1)(c) of the Income-tax Act is unsustainable where the section 274 notice does not clearly specify whether the charge is concealment of income or furnishing inaccurate particulars of income. Failure to strike off the inapplicable limb leaves the allegation ambiguous and denies the assessee effective opportunity to meet the charge. On that settled principle, the defective notice vitiates the penalty proceedings and the penalty is deleted.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the notice under section 274 did not specify the exact charge by striking off the inapplicable limb.

Analysis: The penalty was founded on a notice that did not clearly indicate whether the proposed action was for concealment of income or for furnishing inaccurate particulars of income. The omission to strike off the inapplicable portion rendered the charge ambiguous. Following the settled principle that a penalty notice must clearly and unambiguously specify the alleged default so that the assessee can meet the charge effectively, such defect vitiates the penalty proceedings.

Conclusion: The penalty was held unsustainable and was deleted; the issue was decided in favour of the assessee.

Final Conclusion: The Tribunal set aside the penalty orders in both appeals and directed deletion of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.

Ratio Decidendi: A penalty under section 271(1)(c) cannot be sustained where the notice under section 274 does not clearly specify the exact limb of default and leaves the charge ambiguous by not striking off the inapplicable portion.

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