Defective penalty notice invalidates section 271(1)(c) proceedings where the precise charge is not clearly specified.

A penalty notice under section 274 read with section 271(1)(c) must clearly specify whether the charge is concealment of income or furnishing inaccurate particulars by striking off the irrelevant limb. A stereotyped, omnibus notice that leaves both limbs intact is vague, shows non-application of mind, and denies the assessee fair opportunity in penalty proceedings. The defective notice therefore vitiates the penalty proceedings, and the penalty order cannot be sustained.

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Issues: Whether a penalty under section 271(1)(c) of the Income-tax Act, 1961 is sustainable when the notice issued under section 274 read with section 271(1)(c) does not strike off the irrelevant limb and does not specify the exact charge.

Analysis: The notice was found to be in a stereotyped form without indicating whether the proposed penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. Reliance was placed on binding precedent holding that the assessee must be informed of the precise grounds of penalty through the statutory notice itself, and that an omnibus or vague notice reflects non-application of mind and violates the requirement of fair opportunity in penalty proceedings.

Conclusion: The defective notice vitiated the penalty proceedings, and the penalty order as affirmed by the appellate authority could not be sustained.

Ratio Decidendi: A penalty notice under section 274 read with section 271(1)(c) of the Income-tax Act, 1961 must specifically state the charge by striking off the irrelevant limb; otherwise, the notice is vague and the resulting penalty is liable to be quashed.

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