Penalty for non-disclosure of capital gains upheld where transfer by part performance and incomplete disclosure triggered deemed concealment.

Penalty under section 271(1)(c) was held leviable where the assessee failed to disclose capital gains arising from transfer of development rights and described receipt as an advance despite handing over possession and receiving part consideration, bringing the transaction within section 2(47)(v). The Tribunal found that the explanation of bona fide belief was not substantiated because the relevant law was clear, later legal opinions were obtained only after departmental action, and the material facts were not truly and fully disclosed. Under Explanation 1 to section 271(1)(c), such failure gives rise to deemed concealment, so acceptance of the underlying assessment addition did not prevent penalty.

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Issues: Whether penalty under section 271(1)(c) was leviable for not offering capital gains in the return for the relevant assessment year on transfer of development rights under the agreement.

Analysis: The assessee had received part consideration and handed over possession in the relevant year, and the transaction fell within section 2(47)(v) as a transfer by part performance. The assessee had not disclosed the capital gain in the original return and had described the receipt of Rs. 6 crores as an advance, which the Tribunal found to be misleading. The explanation of bona fide belief was rejected because the jurisdictional law was clear, the later legal opinions were obtained after departmental action, and the material facts relating to transfer and receipt of consideration were not truly and fully disclosed. Under Explanation 1 to section 271(1)(c), failure to substantiate a bona fide explanation and full disclosure results in deemed concealment, and penalty is not avoided merely because the assessment addition was accepted.

Conclusion: Penalty was rightly leviable and the deletion of penalty by the first appellate authority was unsustainable.

Ratio Decidendi: Where an assessee does not truly and fully disclose material facts and fails to establish a bona fide explanation for non-disclosure of taxable income, concealment is deemed under Explanation 1 to section 271(1)(c) and penalty is attracted.

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