Bona fide disclosure defeats penalty where ESOP capital gains computation was based on a plausible view and full facts were disclosed.

Penalty under section 271(1)(c) is not attracted where the assessee has disclosed all primary facts, advanced a bona fide explanation, and taken a plausible view on computation of capital gains from ESOP shares. Penalty proceedings must be examined independently of the assessment, and a mere addition in assessment does not by itself prove concealment or furnishing of inaccurate particulars. As the ESOP transactions, exercise dates, market values, foreign tax paid, and the basis for adopting fair market value as cost were fully disclosed, the explanation was accepted as bona fide and penalty was held not leviable.

---

---

Issues: Whether penalty under section 271(1)(c) was leviable when the assessee had disclosed all primary facts and adopted a bona fide method for computing capital gains on sale of ESOP shares.

Analysis: Penalty proceedings are independent of the assessment and must be examined afresh on their own merits. A mere addition in assessment does not by itself establish concealment or furnishing of inaccurate particulars. Where the issue is debatable and two views are possible, penalty is not attracted, particularly when the assessee has placed all material facts before the Assessing Officer and the explanation offered is bona fide. The assessee had disclosed the ESOP transactions, the dates of exercise, the market values, the foreign tax paid, and the basis for taking fair market value as cost of acquisition. The claim, even if ultimately not accepted in assessment, was supported by disclosed facts and a plausible legal understanding.

Conclusion: Penalty under section 271(1)(c) was not leviable and the assessee's explanation was accepted as bona fide.

---