Bona fide treaty claim and full disclosure defeated penalty; duplicate penalty on the same income was also impermissible.

Penalty under section 271(1)(c) was held unsustainable where the assessee disclosed the freight receipts, computed presumptive income, and claimed treaty exemption on the basis of a tax residency certificate and an exemption certificate earlier issued by the department. A mere failure of the legal claim in assessment did not establish concealment or furnishing of inaccurate particulars, and the Revenue did not show that the explanation was false or lacking bona fides. Penalty was also impermissible in the hands of both the principal and the agent for the same income, as the representative-assessee framework did not justify duplicate penal action.

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Issues: (i) Whether penalty under section 271(1)(c) was leviable when the assessee had disclosed the relevant receipts and claimed treaty-based exemption on the basis of a tax residency certificate and an exemption certificate issued by the department. (ii) Whether penalty could be sustained simultaneously in the hands of both the principal and the agent in respect of the same income.

Issue (i): Whether penalty under section 271(1)(c) was leviable when the assessee had disclosed the relevant receipts and claimed treaty-based exemption on the basis of a tax residency certificate and an exemption certificate issued by the department.

Analysis: The return disclosed the freight receipts, the presumptive income computed under section 44B, and the tax thereon. The claim of exemption was made on the footing of treaty entitlement and on the basis of a certificate earlier granted by the Assessing Officer. In penalty proceedings, the relevant enquiry is whether the particulars furnished were false or whether the explanation lacked bona fides. A mere rejection of the legal claim in assessment does not by itself establish concealment or furnishing of inaccurate particulars. The department did not discharge the burden of showing that the assessee's explanation was false or not bona fide.

Conclusion: Penalty under section 271(1)(c) was not leviable on the principal assessee.

Issue (ii): Whether penalty could be sustained simultaneously in the hands of both the principal and the agent in respect of the same income.

Analysis: The same income had already been subjected to substantive assessment and penalty proceedings in the hands of both the principal and the agent. The statutory scheme treating the agent as a representative assessee does not permit the department to proceed in both hands for the same income in the manner adopted here. The penalty order itself proceeded on the footing that, if any penalty was leviable, it ought to be levied on the principal and not on the agent.

Conclusion: Penalty in the hands of the agent was not legally sustainable.

Final Conclusion: The revenue's appeals were dismissed and the deletion of penalty was upheld, as the assessee's claim was supported by disclosed facts and a bona fide treaty-based position, and duplicate penalty on the same income was impermissible.

Ratio Decidendi: Penalty under section 271(1)(c) cannot be imposed where all primary facts are disclosed and the disputed claim is made under a bona fide legal belief; a mere unsustainable claim in law does not amount to concealment or furnishing inaccurate particulars, and the same income cannot attract duplicate penalty in the hands of both principal and agent.

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