Levy of penalty under section 271(1)(c) challenged where satisfaction mismatched between limbs; penalty quashed for assessee.

Levy of penalty under section 271(1)(c) was challenged on the ground that the assessment order and notices reflected confusion between the distinct limbs of concealment of income and furnishing inaccurate particulars. The tribunal applied prior precedent distinguishing those two connotations and found that satisfaction for initiating penalty proceedings was recorded inconsistently and the penalty was imposed under a limb for which no proper satisfaction or initiation occurred; consequence: the penalty was held unsustainable and decided in favour of the assessee.

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Issues: Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 is sustainable where there is inconsistency or confusion in the limb of section 271(1)(c) (concealment of income v. furnishing inaccurate particulars of income) in the assessment record, notice and penalty order.

Analysis: The statutory scheme contemplates distinct connotations for "concealment of income" and "furnishing inaccurate particulars of income" under section 271(1)(c). A valid penalty proceeding requires a clear recording of satisfaction identifying the specific limb under which proceedings are initiated and consistent invocation of that limb in the notice and penalty order. Where the assessment order, the show-cause/penalty notice and the final penalty order reflect mismatches or uncertainty as to which limb of section 271(1)(c) is being proceeded under, the foundational requirement of a positive and specific satisfaction is absent. Reliance is placed on binding principles that differentiate the two limbs and require a clear finding identifying the applicable limb before imposing penalty; in the absence of such clarity the penalty cannot stand.

Conclusion: Penalty under section 271(1)(c) is unsustainable and is deleted; appeal allowed in favour of the assessee.

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