Estimated construction cost additions cannot, by themselves, justify concealment penalty without proof of hidden income.

Penalty for concealment was held unsustainable where the underlying addition rested on estimated construction cost rather than conclusive proof of hidden income. The variation between the valuer's report and the estimates adopted at different stages weakened any inference of deliberate concealment, and an estimated addition alone was insufficient to support penalty under section 271(1)(c). On these facts, cancellation of the penalty was upheld in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the addition rested on estimates of construction cost and varying valuation reports.

Analysis: The addition sustained in assessment was based on an estimate of the cost of construction and not on conclusive proof of concealed income. The record showed substantial variation between the valuer's estimate and the estimates adopted by the taxing authorities at different stages, which weakened the inference that the difference represented concealed income. On these facts, the mere sustenance of an estimated addition did not establish concealment for penalty purposes.

Conclusion: Penalty under section 271(1)(c) was not justified and its cancellation was in law; the finding was in favour of the assessee.

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