Penalty for concealment sustained where stock discrepancies were unexplained and composite concealment-inaccurate particulars charge caused no infirmity.

Penalty proceedings initiated during assessment were treated as valid and not terminated by a later order giving effect to appellate directions, with a subsequent notice regarded as redundant. Describing the default as both concealment of income and furnishing inaccurate particulars did not vitiate the penalty because the same non-disclosure of stock-related figures formed the basis of initiation and levy. The Tribunal also applied the principle that penalty is governed by the law and default in force when the return was filed, and rejected reliance on a later decision involving a different default. On the facts, the assessee failed to explain the discrepancy between returned and assessed income, so concealment was inferred and the penalty was sustained.

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Issues: (i) whether the penalty proceedings were validly initiated and kept alive till the penalty order was passed; (ii) whether the penalty order was vitiated because the charge was stated as both concealment of income and furnishing of inaccurate particulars; (iii) whether the penalty had to be computed on the basis of income concealed as assessed under the governing law; and (iv) whether the assessee had explained the difference in the returned and assessed income so as to escape penalty.

Issue (i): whether the penalty proceedings were validly initiated and kept alive till the penalty order was passed

Analysis: The initiation of penalty proceedings was made during the pendency of assessment proceedings when the assessment order was first passed, and that initiation was held to be in order. The later order passed to give effect to appellate directions on a limited issue did not amount to withdrawal or discontinuance of the earlier penalty proceedings. The subsequent notice was treated as redundant and not as terminating the already initiated proceedings. The proceedings were regarded as governed by the statutory scheme permitting completion of penalty action after assessment.

Conclusion: The penalty proceedings were validly initiated and the objection failed, in favour of the Revenue.

Issue (ii): whether the penalty order was vitiated because the charge was stated as both concealment of income and furnishing of inaccurate particulars

Analysis: The facts were held capable of falling within both descriptions, since non-disclosure of the correct closing stock and related figures could amount to concealment as well as furnishing inaccurate particulars. The decision distinguished authority where penalty had been levied on a wholly different basis from the one on which proceedings were initiated. Here, the same item formed the foundation of both initiation and levy, so no legal infirmity arose from describing the default in composite terms.

Conclusion: The penalty order was not vitiated on the ground of vagueness, in favour of the Revenue.

Issue (iii): whether the penalty had to be computed on the basis of income concealed as assessed under the governing law

Analysis: The contention that a later law should apply in a manner altering the basis of penalty was rejected. The governing principle applied was that penalty is attracted with reference to the law and default in force when the return was filed and the concealment occurred. The cited later decision dealing with a different type of default did not displace the earlier binding principle relied upon by the Tribunal.

Conclusion: The penalty was correctly imposed on the basis applied by the authorities below, in favour of the Revenue.

Issue (iv): whether the assessee had explained the difference in the returned and assessed income so as to escape penalty

Analysis: The Tribunal found that the assessee had not produced the stock inventory, had changed the figures of purchases, closing stock, sundry creditors and sundry debtors without convincing support, and had taken shifting and contradictory stands. The explanation based on voluntary disclosure was rejected insofar as it was sought to be used for the firm, because the declarations belonged to the individual declarants and did not establish that the original closing stock figure was correct. The explanation regarding alleged consignment stock was also rejected for want of evidence. The assessee failed to discharge the burden under the penalty provision and adverse inference was drawn from the surrounding conduct.

Conclusion: Concealment was established and the penalty was justified, in favour of the Revenue.

Final Conclusion: The penalty imposed for concealment was sustained and the assessee's challenge failed in entirety.

Ratio Decidendi: Where the assessee fails to explain the discrepancy in returned and assessed income and does not discharge the statutory burden under the penalty provision, concealment may be inferred and penalty upheld even if the offending conduct is described as both concealment and furnishing inaccurate particulars.

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