Penalty notice must specify the exact charge; a mechanical section 274 notice makes the resulting penalty unsustainable.

A penalty notice under section 274 must specify whether the alleged default is concealment of income or furnishing inaccurate particulars of income by striking off the inapplicable limb. A notice issued mechanically without identifying the exact charge reflects non-application of mind and is invalid. Penalty under section 271(1)(c) founded on such a defective notice cannot be sustained, so the consequential penalty order is unsustainable.

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Issues: Whether the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the notice under section 274 did not strike off the irrelevant limb or indicate the specific charge.

Analysis: The notice initiating penalty proceedings was issued in a mechanical manner without identifying whether the allegation was concealment of income or furnishing inaccurate particulars of income. Such omission showed non-application of mind and rendered the notice invalid. Since the penalty order was founded on that defective notice, the consequential penalty could not be sustained.

Conclusion: The penalty order was quashed as the notice under section 274 read with section 271(1)(c) was invalid.

Ratio Decidendi: A penalty notice that does not specify the exact charge by striking off the inapplicable limb is invalid, and any penalty order passed on the basis of such notice is unsustainable.

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