Penalty under section 271(1)(c) fails where a section 10A disallowance stems from legal interpretation, not concealment.

Penalty under section 271(1)(c) was not sustainable where the disallowance arose from an assessee's claim under section 10A and there was no material to show concealment of income or furnishing of inaccurate particulars. The Tribunal accepted that the quantum addition stemmed from interpretation of law and followed the assessee's earlier year decision on the same issue; the HC found no error in that approach and held that no substantial question of law arose. The deletion of penalty was therefore upheld in favour of the assessee.

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Issues: Whether the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the disallowance arose from the assessee's claim under section 10A and there was no material to establish concealment or furnishing of inaccurate particulars.

Analysis: The assessment addition was made by excluding certain items from the section 10A claim, but the penalty was deleted by the appellate authority and the Tribunal. The Tribunal relied on an earlier decision in the assessee's own case for a different assessment year on the same issue, where it was found that no material had been brought forward to prove concealment or furnishing of inaccurate particulars and that the additions in quantum had arisen from interpretation of law. The Court found no error in the Tribunal's approach and no substantial question of law arose.

Conclusion: The deletion of penalty under section 271(1)(c) was upheld and the issue was decided in favour of the assessee.

Ratio Decidendi: Penalty under section 271(1)(c) cannot be sustained in the absence of material showing concealment of income or furnishing of inaccurate particulars, particularly where the disallowance turns on interpretation of law.

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