Penalty for inaccurate particulars not leviable on fully disclosed expenditure claim disallowed for tax deduction default.

Penalty under section 271(1)(c) is not attracted where an expenditure claim is fully disclosed, genuine, and not found to be bogus, even if it is disallowed under section 40(a)(ia) for failure to deduct tax at source. A mere unsustainable claim in law does not amount to concealment of income or furnishing inaccurate particulars when all relevant facts are on record. On these facts, the deletion of penalty was rightly upheld.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the expenditure was disallowed under section 40(a)(ia) for failure to deduct tax at source on transportation hire charges, though the claim and surrounding facts were fully disclosed.

Analysis: The expenditure claimed by the assessee was not found to be false or bogus, and the department did not dispute its genuineness. The penalty was levied only because the claim was disallowed under section 40(a)(ia) for non-deduction of tax at source under section 194C. A mere unsustainable claim in law does not, by itself, amount to furnishing inaccurate particulars of income when all relevant particulars of the claim are disclosed. The principle that penalty cannot follow a bona fide, disclosed claim merely because it is disallowed applies to the facts of the case.

Conclusion: Penalty under section 271(1)(c) was not leviable, and the deletion of penalty was rightly upheld.

Ratio Decidendi: Disallowance of a genuinely disclosed expenditure claim under section 40(a)(ia) for non-deduction of tax at source does not, without more, establish concealment of income or furnishing of inaccurate particulars for penalty under section 271(1)(c).

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