Voluntary disclosure before reassessment notice defeats concealment penalty under the Income-tax Act.

Penalty under section 271(1)(c) was held unsustainable where the assessee had voluntarily disclosed the correct income before initiation of proceedings under section 148. The Court noted that the return had been filed on the basis of PWD certificates, and the assessee himself later informed the Department of the discrepancy in declared receipts. Because the disclosure of correct receipts preceded the reassessment notice, the facts did not justify an inference of concealment of income. The Tribunal was found to have failed to examine the legal significance of the voluntary disclosure, and the issue was answered in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was justified where the assessee had voluntarily disclosed the correct income before initiation of proceedings under section 148.

Analysis: The assessee had filed returns on the basis of PWD certificates and later himself brought the discrepancy in the declared income to the notice of the Department. The material placed before the Court showed that the disclosure of the correct receipts preceded the initiation of proceedings under section 148. In these circumstances, the fact situation did not support an inference of concealment of income warranting penalty. The Tribunal had not properly examined the significance of the voluntary disclosure.

Conclusion: Penalty was not justified; the question was answered in the negative and in favour of the assessee.

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