Tribunal upholds CIT(A)'s penalty cancellation, citing revised returns filed in good faith. Assessment differences viewed as legal disagreement.

The Tribunal upheld the CIT(A)'s decision to cancel the penalties imposed by the AO, finding that the revised returns were filed based on judicial rulings and a bona fide belief, with no concealment of inaccurate particulars. The assessment differences were deemed a legal question disagreement. Consequently, all revenue appeals were dismissed.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessees filed revised returns treating securities income as business income on the basis of advance rulings, and whether such claim amounted to concealment of income or furnishing of inaccurate particulars.

Analysis: The revised returns were filed after the assessees relied on advance rulings holding, on similar facts, that such income could be treated as business income and that no permanent establishment existed in India. The returns and covering letters disclosed the factual basis and legal ground for the revised position. No material fact was found to have been withheld or shown false, and the assessment turned on a difference of legal opinion as to the correct head of income and treaty consequence. The mere fact that the claim ultimately failed in law did not, by itself, establish concealment or inaccurate particulars. Applying the settled rule that penalty cannot rest merely on an unsustainable claim when particulars supplied are not false or erroneous, the claim was held to be bona fide and penalty was not warranted.

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

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