Bona fide explanation and concealed income: expired investment allowance claim can attract penalty when statutory support is absent.

A claim for expired brought-forward investment allowance was held not to be supported by the statutory framework or by the BIFR order, because neither extended the prescribed period beyond eight years. The assessee's explanation was not substantiated as bona fide, and in proceedings under Explanation 1 to section 271(1)(c), the disallowed amount was treated as concealed income when that statutory test was not met. The material also states that wilful concealment is not required for this civil penalty. The note therefore explains why concealment penalty is attracted where an assessee advances a claim barred by statute without a credible legal basis.

---

---

Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable for claiming an expired brought-forward investment allowance, and whether the assessee's explanation based on the BIFR order and section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 was bona fide.

Analysis: The claim related to investment allowance had already lapsed under the statutory limitation, and neither the BIFR order nor the scheme of amalgamation contained any direction extending the period beyond eight years. The statutory framework under sections 72A(1), 72(3) and 32A(6) of the Income-tax Act, 1961 did not support the assessee's claim, and the explanation offered was not substantiated or shown to be bona fide. In proceedings under Explanation 1 to section 271(1)(c), once the explanation fails to meet the statutory test, the amount disallowed is deemed to represent concealed income. Wilful concealment is not required for civil penalty of this nature.

Conclusion: Penalty under section 271(1)(c) was rightly attracted and the deletion of penalty was unsustainable, in favour of the Revenue.

Final Conclusion: The assessee's wrong claim of expired investment allowance, unsupported by law or the BIFR order, justified imposition of concealment penalty.

Ratio Decidendi: Where an assessee claims a deduction or allowance barred by the statute and fails to substantiate a bona fide explanation, Explanation 1 to section 271(1)(c) deems the disallowed amount to represent concealed income and penalty becomes leviable.

---