Penalty for concealed income sustained where exempt agricultural income claim was unsubstantiated and disclosure came only after reopening.

A claim that an addition represented exempt agricultural income did not protect the assessee from penalty under section 271(1)(c) where the income was omitted from the original return and from the return filed after notice under section 148, and the explanation remained unsupported by any documentary evidence. The Tribunal noted that a bare assertion of having made the disclosure to buy peace with the Department was insufficient. In the absence of proof that the explanation was bona fide and fully substantiated, Explanation 1 to section 271(1)(c) applied and deemed the addition to be concealed income, so the penalty was sustained.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee claimed that the addition represented exempt agricultural income, the explanation remained unsubstantiated, and the disclosure was made only after reopening of assessment.

Analysis: The assessee did not disclose the impugned income in the original return or in the return filed in response to notice under section 148 of the Income-tax Act, 1961. The claim that the amount represented agricultural income was not supported by any documentary evidence even before the lower authorities or the Tribunal. The explanation that the addition was agreed to buy peace with the Department could not, by itself, excuse the default. In the absence of proof that the explanation was bona fide and fully supported, Explanation 1 to section 271(1)(c) of the Income-tax Act, 1961 operated to deem the addition as concealed income.

Conclusion: The penalty under section 271(1)(c) of the Income-tax Act, 1961 was rightly sustained and is not liable to be deleted.

Ratio Decidendi: A claim of exempt income will not defeat penalty under section 271(1)(c) of the Income-tax Act, 1961 unless the assessee substantiates the explanation and proves it to be bona fide; an unsubstantiated disclosure made after detection attracts Explanation 1 and constitutes concealed income for penalty purposes.

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