Penalty for concealment requires more than a false explanation; surrounding circumstances can still prove the statutory default.

In penalty proceedings for concealment under section 28(1)(c), a false explanation by the assessee is not by itself sufficient to establish the statutory default. The taxing authority may, however, rely on additional surrounding material, such as shifting explanations, undisclosed receipts, non-disclosure of commission income, and the improbability of the claimed source, to determine whether concealment or furnishing of inaccurate particulars is proved. The Tribunal's error was to treat falsity of the explanation as a complete answer and to ignore the further circumstances relied upon by the department.

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Issues: (i) Whether the Tribunal erred in law in setting aside the penalties by relying on the Bombay decision on the basis that falsity of the assessee's explanation by itself was insufficient; (ii) whether the Tribunal misapplied the legal principle governing penalty under section 28(1)(c) by failing to consider additional circumstances relied upon by the taxing authorities.

Issue (i): Whether the Tribunal erred in law in setting aside the penalties by relying on the Bombay decision on the basis that falsity of the assessee's explanation by itself was insufficient.

Analysis: Penalty under section 28(1)(c) is not attracted merely because an explanation offered by the assessee is found to be false. The governing principle is that, if the only material is the assessee's false explanation, that alone does not automatically establish concealment or false particulars. But the principle does not end there. Where there is other evidence or additional material, the taxing authority may act on it and determine whether the disputed amounts represent the assessee's income and whether concealment is made out.

Conclusion: The Tribunal was wrong in treating falsity of the explanation as a complete answer and in setting aside the penalties on that ground alone.

Issue (ii): Whether the Tribunal misapplied the legal principle governing penalty under section 28(1)(c) by failing to consider additional circumstances relied upon by the taxing authorities.

Analysis: The taxing authorities had relied not only on the falsity of the explanation but also on further circumstances, including shifting versions, undisclosed earnings from other parties, non-disclosure of commission income, and the improbability of the claimed sources. The Tribunal, however, did not examine whether these circumstances were established or whether they, together with the explanation, justified a finding of concealment. The proper course was to consider all such material and then decide whether the statutory default was proved.

Conclusion: The Tribunal misdirected itself in law by failing to consider the additional circumstances and by applying the earlier decision too narrowly.

Final Conclusion: The reference was answered against the assessee and in favour of the department, and the Tribunal's disposal of the penalty appeals was held to be legally erroneous.

Ratio Decidendi: In penalty proceedings for concealment, a false explanation by itself is not enough to establish the statutory default, but the authority may rely on other relevant material and circumstances to find concealment or furnishing of inaccurate particulars.

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