Defective penalty notice under section 271(1)(c) cannot sustain penalty when the exact charge is not clearly specified.

Penalty under section 271(1)(c) requires a clear notice specifying whether the charge is concealment of income or furnishing of inaccurate particulars. Where the notice leaves both limbs intact and fails to strike off the inapplicable portion, the assessee is not properly informed of the exact allegation, and the defect is not cured by the assessment or penalty order. On that basis, the penalty notice was held defective and the penalty could not be sustained.

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Issues: Whether the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the notice did not strike off the inapplicable limb between concealment of income and furnishing of inaccurate particulars.

Analysis: The levy of penalty under Section 271(1)(c) depends on a clear and specific notice indicating the exact charge. Where the notice leaves both limbs intact and does not delete the inapplicable portion, the assessee is not properly informed of the precise allegation. The defect is not cured by the assessment or penalty order if the notice itself is vague on the foundational charge.

Conclusion: The penalty notice was defective and the penalty order could not be sustained. The issue was decided in favour of the assessee.

Ratio Decidendi: A penalty under Section 271(1)(c) cannot be sustained where the notice fails to clearly specify the exact limb on which penalty is proposed, because non-striking of the inapplicable charge vitiates the penalty proceedings.

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