Penalty for concealed income fails when omitted gain is disclosed before reassessment and the notice omits the exact charge.

Penalty under Section 271(1)(c) was held unsustainable where the assessee disclosed the omitted capital gain before issuance of notice under Section 148, paid tax and interest on the admitted differential income, and the additional income was assessed on that basis. The disclosure was made before any final finding of concealment, so the preconditions for penalty for concealment or furnishing inaccurate particulars were not established, and Explanation 1 did not assist the Revenue. The penalty notice was also defective because it did not specify whether the charge was concealment of particulars or furnishing inaccurate particulars. The penalty was cancelled and the Revenue's challenge failed.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 could be sustained where the assessee disclosed the omitted capital gain before issuance of notice under Section 148 and paid the tax and interest on the admitted differential income; and whether the penalty notice was vitiated for not specifying the exact charge.

Analysis: The assessee's omission in the original return was admitted during the Revenue's investigation, before any final finding of concealment was reached, and the differential income was voluntarily offered and later assessed pursuant to proceedings under Section 148. On those facts, the preconditions for invoking penalty for concealment or furnishing inaccurate particulars were not established. Explanation 1 to Section 271(1)(c) also did not assist the Revenue, because the disclosure was made and accepted before the reassessment and the additional income was brought to tax on that basis. The notice initiating penalty was independently defective because it did not clearly specify whether the allegation was concealment of particulars or furnishing inaccurate particulars.

Conclusion: Penalty under Section 271(1)(c) was not sustainable and the challenge to the penalty notice also succeeded. The decision was in favour of the assessee.

Final Conclusion: The penalty was rightly cancelled and the Revenue's appeal failed.

Ratio Decidendi: Penalty for concealment under Section 271(1)(c) cannot be imposed where the assessee has made a bona fide disclosure of the omitted income before reassessment and the notice itself fails to specify the exact limb of the charge.

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