Defective penalty notice under Income-tax law cannot sustain penalty when the exact charge is not specified.

A penalty under Section 271(1)(c) of the Income-tax Act cannot be sustained where the Section 274 notice is vague and does not specify whether the charge is concealment of income, furnishing inaccurate particulars, or both. Applying the co-ordinate bench view and jurisdictional High Court principle, a defective notice vitiates the penalty proceedings. The penalty notice was therefore bad in law and the penalty order was unsustainable in favour of the assessee.

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Issues: Whether a penalty under Section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the notice initiating penalty proceedings did not specify the exact limb of the charge.

Analysis: The notice under Section 274 was found to be vague because it did not clearly state whether the proposed penalty was for concealment of income, furnishing inaccurate particulars of income, or both. Following the binding co-ordinate bench view and the jurisdictional High Court principle that such a defective notice vitiates the penalty proceedings, the penalty could not be legally sustained.

Conclusion: The penalty notice was bad in law and the penalty order was unsustainable, in favour of the assessee.

Ratio Decidendi: A penalty under Section 271(1)(c) of the Income-tax Act, 1961 cannot be sustained where the notice under Section 274 does not specify the precise charge on which penalty is proposed.

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