Penalty notice under section 271(1)(c) invalidated where notice fails to specify specific charge, appeal allowed

Issue concerns validity of a penalty notice under section 271(1)(c) for failing to specify the precise charge, where the notice mechanically retained both limbs of the provision without striking the inapplicable portion. The legal basis is that a notice must clearly inform the addressee of the exact allegation; failure to do so renders the notice fatally defective and vitiates the penalty proceedings. Reliance on precedent establishing that non-specification of particular charge in a notice under the relevant penalty provision nullifies the penalty process results in allowance of the appeal.

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Issues: Whether the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 is vitiated where the notice issued under section 274 fails to specify the precise charge and mechanically retains both limbs of section 271(1)(c) without striking off the inapplicable limb.

Analysis: The Tribunal examined the penalty notice dated 24.11.2016 and found that it called upon the assessee to show cause for penalty under section 271(1)(c) on the broad allegation of concealment or furnishing of inaccurate particulars of income but did not specify which specific limb of section 271(1)(c) was invoked. The notice retained both limbs of section 271(1)(c) without striking off the inapplicable portion and thus failed to inform the assessee of the exact allegation. The Tribunal followed binding and persuasive precedents holding that a notice lacking specification of the precise charge under section 274 renders the penalty proceedings invalid, and that recent decisions (including the Supreme Court and High Court authorities cited) require specificity in the notice for sustaining penalty proceedings.

Conclusion: The penalty proceedings are vitiated by the defective notice and the penalty imposed under section 271(1)(c) is unsustainable; the appeal is allowed in favour of the assessee.

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