Penalty for concealment survives on undisclosed transfer receipt, but not on hypothetical capital gains from an uncrystallised development agreement.

Penalty under section 271(1)(c) could not be sustained on the accrual-based capital gains addition because the connected quantum addition had already been deleted on the basis that the joint development agreement had not resulted in a taxable transfer and the proposed income was only hypothetical. The penalty was therefore deleted on that component. However, the assessee had actually received part consideration under the registered transfer and failed to disclose that receipt in the return filed pursuant to notice under section 148. On that limited undisclosed amount, concealment was established and the penalty was sustained.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable in respect of capital gains computed on accrual basis from the joint development agreement and on the amount actually received from the registered sale deed.

Analysis: The quantum addition on accrual basis had already been deleted in the connected litigation on the footing that the joint development agreement had not matured into a taxable transfer and the proposed income was only hypothetical. Penalty could therefore not survive on that component. However, the assessee had actually received part consideration of Rs. 15,00,000 against the registered transfer, and even after reopening under section 148, that receipt was not disclosed in the return filed pursuant to notice. On that limited amount, the explanation was not accepted and the element of concealment was made out.

Conclusion: Penalty was deleted to the extent it related to the accrual-based addition, but sustained in relation to the undisclosed receipt of Rs. 15,00,000.

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