Penalty under section 271(1)(c) fails where the notice is vague and the addition rests only on estimate.

Penalty under section 271(1)(c) is unsustainable where the notice under section 274 does not specify whether the charge is concealment of income or furnishing inaccurate particulars, because failure to strike off the inapplicable limb vitiates the penalty proceedings. Penalty is also not leviable where the addition is made merely on estimate, such as estimation of profit element on alleged bogus purchases, and no concrete evidence of concealment is established. On both grounds, the penalty order was held unsustainable and the assessee succeeded.

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Issues: (i) Whether a penalty under section 271(1)(c) could be sustained when the notice under section 274 did not specify the exact charge. (ii) Whether penalty under section 271(1)(c) could be imposed where the addition was made purely on estimate.

Issue (i): Whether a penalty under section 271(1)(c) could be sustained when the notice under section 274 did not specify the exact charge.

Analysis: The notice did not strike off the inapplicable charge and therefore failed to clearly indicate whether the proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income. Such non-specification of the exact limb of penalty vitiates the penalty proceedings.

Conclusion: The penalty could not be sustained on the basis of the defective notice and is against the Revenue.

Issue (ii): Whether penalty under section 271(1)(c) could be imposed where the addition was made purely on estimate.

Analysis: The addition was made by estimating the profit element on alleged bogus purchases, and the entire addition rested on estimation rather than on concrete evidence of concealment. Penalty under section 271(1)(c) is not leviable where the addition is purely estimated and no specific concealment is established.

Conclusion: The penalty was not leviable on the estimated addition and is against the Revenue.

Final Conclusion: The penalty order under section 271(1)(c) was unsustainable on both grounds, and the assessee succeeded in the appeal.

Ratio Decidendi: A penalty under section 271(1)(c) cannot survive where the notice under section 274 does not specify the precise charge and where the underlying addition is made merely on estimation without concrete proof of concealment.

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