Debatable legal claim on interest from enhanced compensation defeated concealment penalty despite later rejection of exemption claim.

Penalty for concealment is not leviable where the assessee's exemption claim on interest received on enhanced compensation turned on a debatable question of law that was unsettled when the return was filed. The later non-filing of an appeal against the addition did not by itself establish concealment or justify penalty. The operative point is that an ultimately unsuccessful claim does not attract penalty merely because the legal position was later resolved against the assessee. The deletion of penalty was therefore upheld.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee had claimed exemption under section 10(37) on interest received on enhanced compensation and the issue was debatable at the time of filing the return.

Analysis: The claim related to taxability of interest on enhanced compensation, an issue that was unsettled when the return was filed. The legal position then favoured the assessee, and the subsequent acceptance of the addition by not filing an appeal did not by itself establish concealment. In the circumstances, the case was treated as one involving a debatable legal issue, and the penalty could not be sustained merely because the exemption claim was ultimately not accepted.

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

Final Conclusion: The Revenue's challenge failed, and the order deleting the concealment penalty remained undisturbed.

Ratio Decidendi: Penalty for concealment is not leviable where the assessee's claim turns on a debatable issue of law that was open when the return was filed.

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