Bona fide income recognition method defeats concealment penalty where project income was already recorded in the books.

Penalty under section 271(1)(c) was held not leviable where the assessee consistently recognised project income on receipt of occupation certificate, that method had been accepted in earlier assessments, and the relevant project entries were already reflected in the books. The additional income disclosed during search was treated as a bona fide disclosure made to avoid litigation after the Department proposed a different year of taxation. On those facts, Explanation 5A(ii) was found inapplicable because the income was not treated as undisclosed income falling within its scope. The order deleting penalty was sustained and the Revenue's challenge failed.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable in respect of income disclosed during search and returned in proceedings under section 153A, and whether Explanation 5A(ii) applied on the facts.

Analysis: The assessee had consistently followed the method of offering project income on receipt of occupation certificate, and that method had been accepted in earlier scrutiny assessments as well as in assessments made under section 153A for prior years. The additional income was disclosed during search to avoid litigation after the Department suggested a different year of recognition, and the entries relating to the projects were already reflected in the books of account. On these facts, the explanation for non-disclosure in the original return was treated as bona fide, and the deeming fiction in Explanation 5A(ii) was held inapplicable because the income was linked to the year in which occupation certificates were received, not to undisclosed income belonging to an earlier previous year within the mischief of the provision.

Conclusion: Penalty under section 271(1)(c) was not leviable, and the Revenue's challenge failed.

Final Conclusion: The order deleting penalty was sustained and the Revenue's appeal remained dismissed.

Ratio Decidendi: Where an assessee's non-disclosure in the original return arises from a bona fide and consistently accepted method of accounting or recognition of income, and the income is otherwise recorded in the books, penalty for concealment is not attracted merely because the income was later offered during search proceedings.

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