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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 can be sustained for alleged concealment of income or furnishing inaccurate particulars in respect of amount received from a foreign trust where the receipt was disclosed and its taxability was a debatable question.
Analysis: The assessee disclosed the receipt from the foreign trust in the return and in accompanying notes and furnished detailed particulars during assessment proceedings. The assessee advanced a legal view, supported by professional advice and pending references, that the receipt constituted a capital receipt not chargeable to tax. Relevant authorities recognise that where material facts are disclosed and a claim is made under a bona fide legal view, mere non-acceptance of that view by the revenue does not automatically attract penalty under section 271(1)(c). The taxability of distributions from the trust had attracted divergent judicial opinions and had been referred to a Special Bench, indicating the issue was debatable. The department did not produce material to show the assessee's explanation was false or lacked bona fides.
Conclusion: Penalty under section 271(1)(c) is not sustainable; the penalty of Rs. 82,91,261/- is deleted and the appeal is allowed in favour of the assessee.
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