Penalty under section 271(1)(c) fails without material proving concealment or inaccurate particulars; books-backed return discharges the burden.

Penalty under section 271(1)(c) cannot be sustained on the mere rejection of the assessee's explanation unless the Revenue adduces material showing concealment of income or furnishing of inaccurate particulars. The Tribunal found no such material and held that the amount credited in the books was a loan, not income. It also accepted that the assessee had discharged the burden under the Explanation by supporting the return with books of account and relevant records. On that basis, the penalty was held unsustainable and the questions were answered in favour of the assessee and against the Department.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the assessee's explanation was rejected, and whether the assessee had discharged the burden under the Explanation to that provision.

Analysis: The Tribunal found that there was no material, apart from rejection of the explanation, to establish concealment of income or furnishing of inaccurate particulars. It further held that the amount credited in the books represented a loan and not income, and that the assessee had discharged the negative onus under the Explanation since the return was supported by books of account. In a penalty matter, mere disbelief of the assessee's explanation is not enough unless the Revenue establishes the ingredients necessary for penalty.

Conclusion: The penalty was not sustainable and the questions referred were answered in favour of the assessee and against the Department.

Ratio Decidendi: Penalty under section 271(1)(c) cannot be upheld on mere rejection of the assessee's explanation unless there is material showing concealment or furnishing of inaccurate particulars, and the assessee may discharge the burden under the Explanation by supporting the return with relevant books and records.

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