Bona fide omission corrected during assessment does not justify penalty without concealment or inaccurate particulars

A bona fide or inadvertent omission corrected by the assessee during assessment proceedings does not attract penalty under section 271(1)(c) unless concealment of income or furnishing of inaccurate particulars is established. The record indicated persistent business losses, reduced manpower, and no deliberate intent to suppress income in relation to the disputed expenses. The revised computation was filed during assessment, and the assessment notices did not specifically cover those expenditures. On that basis, the penalty was held unsustainable and directed to be deleted.

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Issues: Whether the penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee filed a revised computation during assessment proceedings disallowing certain expenses and the omission was claimed to be inadvertent.

Analysis: The assessee had persistent business losses, had reduced manpower, and the disputed items were not shown to have been claimed with any deliberate intent to suppress income. The revised computation was filed during assessment proceedings, but the notice under section 143(2) of the Income-tax Act, 1961 and the notice under section 142(1) of the Income-tax Act, 1961 did not specifically cover these expenditures. The mere fact that assessment notices had been issued did not, by itself, make the later disclosure involuntary. The record also supported the explanation that the omission was a mistake and not a case of misrepresentation or concealment.

Conclusion: The penalty under section 271(1)(c) of the Income-tax Act, 1961 was not sustainable and had to be deleted.

Ratio Decidendi: A bona fide or inadvertent omission, corrected by the assessee during assessment proceedings, does not attract penalty under section 271(1)(c) of the Income-tax Act, 1961 unless concealment of income or furnishing of inaccurate particulars is established.

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