Concealment penalty requires cogent proof of deliberate suppression; assessment additions alone cannot justify section 271(1)(c) penalty.

Penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained only where the department proved, by cogent material, concealment of income or deliberate furnishing of inaccurate particulars. An assessment addition, or rejection of the assessee's explanation as false, was not by itself enough to establish the penal charge. The material had to show both that the disputed amount was income and that the assessee consciously concealed it or deliberately gave inaccurate particulars. On the stated facts, the explanation that the stock figure shown to the bank was inflated was not disproved by sufficient penal evidence, so penalty was not legally imposable.

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Issues: Whether, on the facts and in the circumstances of the case, penalty was legally imposable on the assessee under section 271(1)(c) of the Income-tax Act, 1961.

Analysis: Penalty under section 271(1)(c) was attracted only if the department proved concealment of income or deliberate furnishing of inaccurate particulars. Mere addition of an amount as income from undisclosed sources, or rejection of the assessee's explanation as false, did not by itself establish the penal charge. The material had to show, beyond the assessment finding, that the disputed amount was in fact income and that the assessee consciously concealed it or deliberately furnished inaccurate particulars. On the findings recorded, the explanation that the stock figure shown to the bank was inflated was not shown to be disproved by cogent penal evidence sufficient to sustain penalty.

Conclusion: Penalty was not legally imposable on the assessee under section 271(1)(c) of the Income-tax Act, 1961, and the answer to the reference was in favour of the assessee and against the department.

Ratio Decidendi: In penalty proceedings for concealment, the department must establish by cogent material that the disputed amount was income and that the assessee deliberately concealed it or deliberately furnished inaccurate particulars; a false explanation or an assessment addition alone is insufficient.

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