Bona fide omission and non-taxability in the relevant year defeated concealment penalty for undisclosed capital gains.

Penalty under section 271(1)(c) of the Income-tax Act was held unsustainable where the assessee's omission to disclose long-term capital gain was based on a bona fide belief that taxability would arise only on completion of the project. The transaction was examined under section 2(47)(v) of the Income-tax Act and section 53A of the Transfer of Property Act, and it was found that the transfer had occurred in an earlier assessment year, so the gain was not chargeable in the year under appeal. As the omission was not deliberate and there was no concealment of income or furnishing of inaccurate particulars, the penalty was deleted.

---

---

Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable for non-disclosure of long-term capital gain in the return where the omission was claimed to be bona fide and the income was held not taxable in the relevant year.

Analysis: The assessee had not offered the capital gain in the return on the stated belief that taxability would arise only on completion of the project. The transaction was examined in the light of section 2(47)(v) of the Income-tax Act, 1961 and section 53A of the Transfer of Property Act, 1882, and it was held that the transfer took place in an earlier assessment year, so the amount was not chargeable in the year under appeal. Penalty can arise only where there is concealment of income or furnishing of inaccurate particulars. On the facts, the omission was not found to be deliberate or wilful, and the explanation of bona fide mistake was not rejected.

Conclusion: Penalty under section 271(1)(c) was not sustainable, and the addition was directed to be deleted.

Ratio Decidendi: Penalty for concealment or furnishing of inaccurate particulars cannot be imposed where the omission is bona fide and the income is not chargeable to tax in the relevant year.

---