Bona fide explanation defeats penalty under section 271(1)(c) where TDS issues and interest disclosure gaps lacked concealment.

Penalty under section 271(1)(c) was held unsustainable where salary income had been subjected to TDS by the employer, the return was delayed because the employer failed to deposit tax and issue the certificate, and the assessee had pursued the matter with the employer and tax authorities; the absence of deliberate concealment led to deletion of the penalty on that component. On the short disclosure of interest income, the small difference and the assessee's bona fide belief that tax was payable only on yearly interest, not cumulative past interest, negatived concealment and inaccurate particulars, so the penalty was also deleted. The article states that bona fide explanation and surrounding facts can defeat penalty exposure under section 271(1)(c).

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Issues: (i) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable in respect of salary income where tax was deducted at source by the employer but not fully deposited and the return was not filed in time; (ii) whether penalty under section 271(1)(c) was sustainable in respect of the short disclosure of interest income.

Issue (i): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable in respect of salary income where tax was deducted at source by the employer but not fully deposited and the return was not filed in time.

Analysis: The salary income stood subjected to tax deduction at source by the employer, and the non-filing of the return was explained as arising from the employer's failure to deposit the deducted tax and issue the relevant tax certificate. The record showed that the assessee had repeatedly pursued the employer and the tax authorities regarding the non-credit of TDS and the matter not reflecting in Form 26AS. On these facts, the element of deliberate concealment was not established.

Conclusion: The penalty on salary income was deleted and the finding is in favour of the assessee.

Issue (ii): Whether penalty under section 271(1)(c) was sustainable in respect of the short disclosure of interest income.

Analysis: The interest difference was small, and the explanation that the assessee acted under a bona fide impression that tax was payable only on the yearly interest and not on cumulative interest for earlier years was accepted. The explanation negatived any conclusion of furnishing inaccurate particulars or concealment on the facts found.

Conclusion: The penalty on the interest income component was deleted and the finding is in favour of the assessee.

Final Conclusion: The penalty addition did not survive on either component, and the assessee obtained complete relief against the impugned penalty order.

Ratio Decidendi: Penalty under section 271(1)(c) is not exigible where the surrounding facts establish a bona fide explanation and do not show deliberate concealment or furnishing of inaccurate particulars.

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