Penalty under Section 271(1)(c) requires concealment or inaccurate particulars, not just rejection of a tax claim.

Penalty under Section 271(1)(c) of the Income-tax Act, 1961 is not sustainable merely because an assessee's claim is rejected in assessment. Penalty proceedings are distinct from quantum proceedings, and the Revenue must still establish concealment of income or furnishing of inaccurate particulars. Here, the dispute concerned only the head under which sale proceeds were taxable, and the facts did not show any concealment or inaccurate particulars. Where two views are possible on the tax treatment of a receipt, penalty is not justified. The Court therefore held that penalty under Section 271(1)(c) was not leviable.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable where the quantum addition was under challenge and the assessee's claim on the head of income had been rejected.

Analysis: Penalty proceedings are distinct from quantum proceedings, and a mere rejection of an assessee's claim in assessment does not automatically attract penalty. For penalty to be sustained, the conditions of concealment of income or furnishing of inaccurate particulars must be established. On the facts, the dispute was only about the head under which the sale proceeds were taxable, and there was no case made out that the assessee had concealed income or furnished inaccurate particulars. Where two views are possible on the tax treatment of the receipt, penalty is not justified.

Conclusion: Penalty under Section 271(1)(c) was not leviable.

Ratio Decidendi: A disallowance or rejection of a claim in assessment, without concealment of income or furnishing of inaccurate particulars, does not by itself justify penalty under Section 271(1)(c) of the Income-tax Act, 1961.

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