Penalty under section 270A fails when notice and order do not specify the exact charge of under-reporting.

Penalty proceedings under section 270A of the Income-tax Act were held invalid because both the show-cause notice and the penalty order failed to specify the exact statutory limb under section 270A(2) invoked for under-reporting of income. The Tribunal applied jurisdictional High Court and coordinate bench authority to hold that the precise charge must be clearly stated; otherwise, the proceedings are arbitrary and unlawful. On that basis, the penalty notice and penalty order were quashed.

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Issues: Whether penalty proceedings under section 270A of the Income-tax Act, 1961 were valid when the notice and penalty order did not specify the exact clause of section 270A(2) invoked for under-reporting of income.

Analysis: The penalty was imposed for under-reporting of income, but the notice as well as the penalty order did not identify the specific limb or clause of section 270A(2) applicable to the case. The Tribunal followed the jurisdictional High Court and coordinate bench decisions holding that penalty proceedings must clearly specify the exact charge under section 270A, because omission to do so renders the proceedings arbitrary and unlawful.

Conclusion: The penalty notice and penalty order were held to be invalid and were quashed.

Ratio Decidendi: A penalty under section 270A of the Income-tax Act, 1961 cannot be sustained unless the notice and order clearly specify the precise statutory limb on which the charge of under-reporting or misreporting is founded.

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