Defective penalty notice under section 274 invalidated proceedings where the specific charge under section 271(1)(c) was not identified.

A penalty notice under section 274 read with section 271 of the Income-tax Act was defective because it did not specify the exact limb of section 271(1)(c). The pre-printed notice left the relevant portions intact and failed to show whether the proposed penalty was for concealment of income, furnishing inaccurate particulars, or both. The assessment order also did not record clear satisfaction on the specific charge. On that basis, the notice and the ensuing penalty proceedings were held invalid, and the penalty was deleted.

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Issues: Whether the penalty notice under section 274 read with section 271 of the Income-tax Act, 1961 was defective for not specifying the exact limb of section 271(1)(c), and whether such defect vitiated the penalty proceedings.

Analysis: The notice was issued in a pre-printed, omnibus format and the irrelevant portions were not struck off. It did not clearly indicate whether the proposed penalty was for concealment of particulars of income, furnishing inaccurate particulars of income, or both. The assessment order also failed to record a clear satisfaction on the specific charge. In such circumstances, the notice and the resulting penalty proceedings were held to be invalid.

Conclusion: The penalty notice was held to be defective and the penalty proceedings were vitiated. The penalty was deleted and the assessee succeeded.

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