Penalty for alleged concealment fails where unrealised capital gains under a development arrangement are not taxable.

Penalty under section 271(1)(c) could not be sustained where the disputed capital gain arose from an unrealised consideration under a joint development arrangement and the underlying transaction had already been held not to attract tax. The prior binding decision found that the development agreement did not satisfy section 53A of the Transfer of Property Act, so section 2(47)(v) of the Income-tax Act did not apply and no capital gains arose on the unrealised portion. As the taxable gain itself was absent, the foundation for concealment or inaccurate particulars disappeared. The penalty was therefore not exigible and its deletion was upheld.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee had not offered the entire capital gain arising from the joint development arrangement and the question of taxability of the underlying transaction had already been answered against the assessee in the earlier proceedings.

Analysis: The issue was concluded by the earlier binding decision on the same transaction, which held that no capital gains could be brought to tax on unrealised amounts where the development agreement did not satisfy the requirements of section 53A of the Transfer of Property Act, 1882 and, consequently, section 2(47)(v) of the Income-tax Act, 1961 did not apply. Since the taxable capital gain itself did not arise on the unrealised portion, the foundation for penalty under section 271(1)(c) disappeared. The Revenue was unable to dislodge the applicability of that decision to the present facts.

Conclusion: The penalty was not exigible and the deletion of penalty was upheld in favour of the assessee.

Ratio Decidendi: Where no capital gains accrue on unrealised consideration from an unregistered development arrangement that does not attract section 53A, penalty for concealment or furnishing inaccurate particulars under section 271(1)(c) cannot be sustained.

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