Penalty notice must specify the exact limb under section 271(1)(c), or the resulting penalty cannot stand.

A penalty notice under section 274 read with section 271(1)(c) of the Income-tax Act was held defective because it did not strike off either limb, namely concealment of income or furnishing of inaccurate particulars. The charge in penalty proceedings must be clear and unambiguous so the assessee knows the precise allegation to meet. A notice that leaves both limbs open is vague and cannot validly sustain penalty under section 271(1)(c). The penalty based on such notice was quashed in favour of the assessee.

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Issues: Whether the penalty notice issued under section 274 read with section 271(1)(c) of the Income-tax Act, 1961 was invalid for not specifying the exact limb of penalty, and whether the penalty sustained on that basis could stand.

Analysis: The notice did not strike off either of the two limbs, namely concealment of particulars of income or furnishing of inaccurate particulars of income. In penalty proceedings, the charge must be clear and unambiguous so that the assessee receives proper notice of the specific allegation to be met. A notice which clubs both limbs without identification of the precise default is defective and cannot validly support penalty under section 271(1)(c) of the Income-tax Act, 1961.

Conclusion: The penalty notice was invalid and the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 was quashed in favour of the assessee.

Ratio Decidendi: A penalty notice under section 271(1)(c) of the Income-tax Act, 1961 must clearly specify the exact limb invoked; a vague notice that leaves both limbs open is unsustainable and vitiates the penalty.

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