Penalty under section 271(1)(c) cannot rest only on section 50C valuation substitution without independent concealment evidence.

Penalty under section 271(1)(c) was held not sustainable where the capital gains addition arose only from substitution of the stated sale consideration under section 50C and valuation under section 50C(2). The reasoning was that section 50C operates through a statutory deeming fiction, and an enhancement made through that mechanism does not by itself establish concealment or furnishing of inaccurate particulars. The analysis followed the view that penalty is not automatic merely because an addition results from deeming valuation provisions; independent material showing deliberate inaccuracy is required. On these facts, the penalty order was quashed and the assessee obtained full relief.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained where the addition arose from application of the deeming fiction in section 50C and consequent valuation under section 50C(2).

Analysis: The addition to capital gains was made by substituting the stated consideration with the value determined through the statutory valuation mechanism. Such an adjustment rests on a deeming provision and may vary on reference to the valuation authority. On these facts, the position that the assessee disclosed the actual consideration and that the issue was only one of statutory substitution under section 50C did not justify a conclusion of concealment or furnishing of inaccurate particulars. The reasoning followed the coordinate bench view that penalty is not automatic merely because an addition is made under the deeming machinery of section 50C.

Conclusion: Penalty under section 271(1)(c) was not exigible on the addition made by applying section 50C.

Final Conclusion: The penalty order was quashed and the assessee obtained full relief.

Ratio Decidendi: Penalty for concealment or furnishing inaccurate particulars cannot be imposed merely because income is enhanced by a statutory deeming fiction governing capital gains valuation, unless independent material shows deliberate concealment or inaccuracy.

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