Penalty for a bona fide tax claim fails where all primary facts are disclosed and no inaccurate particulars are shown

Penalty under section 271(1)(c) was held unsustainable where the assessee disclosed all primary facts, filed a revised return with an explanatory note, and made a bona fide legal claim based on advance rulings and treaty interpretation. The income from securities was fully disclosed, and the assessment turned only on a different view of the same facts. As no concealment or furnishing of inaccurate particulars was shown, rejection of the claim alone did not justify penalty. The deletion of penalty was therefore upheld in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) was leviable where the assessee had disclosed the full particulars of income, revised its return on the basis of advance ruling decisions, and made a claim that was ultimately not accepted by the Assessing Officer.

Analysis: The assessee had disclosed the income from sale of securities in the original return and, after relying on advance rulings and the applicable treaty position, filed a revised return with an explanatory note claiming the income as business income not taxable in India in the absence of a permanent establishment. The assessment was completed on a different view of the same disclosed facts. No material fact was found to be false or concealed, and the claim was made on a bona fide legal basis. Penalty under section 271(1)(c) requires concealment or furnishing of inaccurate particulars, which is not satisfied merely because a claim is rejected. The principle that a disallowed claim does not by itself attract penalty squarely applied.

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

Ratio Decidendi: A penalty for concealment or furnishing inaccurate particulars cannot be sustained where all primary facts are disclosed and the addition arises only from a bona fide but unsuccessful legal claim.

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