Penalty under section 271(1)(c) fails when the exact default limb is not clearly specified at initiation.

Penalty under section 271(1)(c) cannot be sustained unless the Assessing Officer clearly specifies at initiation the exact limb of default, namely concealment of income or furnishing of inaccurate particulars. A show-cause notice or penalty order that invokes both limbs without striking off the inapplicable portion is vague and does not record the required statutory satisfaction. On that basis, the penalty was held invalid and quashed in favour of the assessee.

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Issues: Whether the penalty under section 271(1)(c) of the Income-tax Act, 1961 was valid when the Assessing Officer initiated and levied penalty without specifying the exact limb, namely concealment of income or furnishing of inaccurate particulars of income.

Analysis: The penalty proceedings were initiated in the assessment order and the show-cause notice on both limbs without striking off the inapplicable portion. The penalty order also reflected uncertainty, as it referred to furnishing of inaccurate particulars as well as concealment of income. Since the statutory satisfaction must clearly indicate the precise default for which penalty is proposed, a vague or omnibus initiation cannot sustain a penalty under section 271(1)(c).

Conclusion: The penalty order was invalid and was quashed. The issue was decided in favour of the assessee.

Ratio Decidendi: Penalty under section 271(1)(c) cannot be sustained unless the Assessing Officer clearly specifies, at the stage of initiation, the exact limb of default on which the penalty is proposed.

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