Penalty under section 271(1)(c) fails where full disclosure and bona fide explanation support the claim, and the charge shifts in the final order.

Penalty under section 271(1)(c) cannot be sustained where the assessee disclosed all primary facts, supported the claim for mine reclamation expenses with accounting and documentary material, and advanced a bona fide explanation based on a statutory obligation under the mining rules and the governing Act. The explanation was treated as sufficient to discharge the burden under section 273B, so the levy failed on merits. Penalty was also invalid because the proceedings and notice proceeded on furnishing inaccurate particulars, while the final order rested on concealment, creating a fatal mismatch in the operative charge. The deletion of penalty was therefore upheld.

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Issues: (i) whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the assessee had disclosed the relevant primary facts and supported the claim for mine reclamation expenses on the basis of a statutory obligation; (ii) whether the penalty was vitiated because the charge in the assessment proceedings and notice was for furnishing inaccurate particulars, while the penalty order proceeded on concealment.

Issue (i): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the assessee had disclosed the relevant primary facts and supported the claim for mine reclamation expenses on the basis of a statutory obligation.

Analysis: The assessee had furnished the working of the provision, the relevant accounting disclosure, and the basis of the claim during the assessment proceedings. The claim was founded on the statutory obligation under rule 34 of the Mineral Conservation and Development Rules, 1988 read with section 18 of the Mines and Minerals (Regulation and Development) Act, 1957, and was made under a bona fide belief that the liability was an ascertained business liability. The materials on record showed full disclosure of primary facts and supported the explanation by documentary evidence. The burden contemplated by section 273B of the Income-tax Act, 1961 was held to have been discharged.

Conclusion: Penalty was not leviable on merits and the issue was decided in favour of the assessee.

Issue (ii): Whether the penalty was vitiated because the charge in the assessment proceedings and notice was for furnishing inaccurate particulars, while the penalty order proceeded on concealment.

Analysis: The assessment proceedings and the notice under section 274 of the Income-tax Act, 1961 proceeded on the basis of furnishing inaccurate particulars of income, whereas the penalty order ultimately sustained the levy on the footing of concealment of income. The shift in the operative charge was held to be inconsistent with the foundation on which penalty proceedings had been initiated and noticed.

Conclusion: The penalty could not be sustained on this ground also, and the issue was decided in favour of the assessee.

Final Conclusion: The deletion of penalty was upheld and the revenue's challenge failed, as the claim was backed by disclosure and bona fide explanation and the penalty charge itself was not consistently maintained.

Ratio Decidendi: Penalty under section 271(1)(c) of the Income-tax Act, 1961 cannot be sustained where the assessee has made full disclosure of primary facts and offers a bona fide, supported explanation, and it also fails when the penalty is finally imposed on a charge different from the one on which proceedings were initiated.

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