Penalty for tax deduction error not automatic where full disclosure and bona fide expert advice were shown.

Penalty under Section 271(1)(c) was held not leviable where the disallowance arose from failure to deduct tax at source on a genuine foreign remittance, because the payment was disclosed in the return and Form 3CD. The court noted that a disallowance under Section 40(a)(ia) does not by itself prove concealment or furnishing of inaccurate particulars. Reliance on a Chartered Accountant's certificate and other expert advice supported the assessee's bona fide explanation, and the omission was treated as a genuine mistake regarding taxability. The penalty was therefore deleted and the revenue's challenge failed.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable where the disallowance arose from non-deduction of tax at source on payment made to a foreign party and the assessee had acted on a Chartered Accountant's certificate.

Analysis: The payment itself was genuine and was disclosed in the return and accompanying Form 3CD. The disallowance under Section 40(a)(ia) did not, by itself, establish concealment or furnishing of inaccurate particulars. The authorities found that the assessee had relied on expert advice and that the omission to deduct tax was a bona fide mistake arising from confusion on taxability of the foreign remittance. Penalty under Section 271(1)(c) is not automatic and can be imposed only when the statutory ingredients are satisfied on facts.

Conclusion: The penalty was not leviable and the finding in favour of the assessee was upheld.

Final Conclusion: The revenue's appeals failed, and the concurrent orders deleting the penalty were sustained.

Ratio Decidendi: A mere disallowance of expenditure or failure to deduct tax at source does not attract penalty under Section 271(1)(c) unless there is material to show concealment of income or furnishing of inaccurate particulars, particularly where the assessee has acted on bona fide expert advice and disclosed the relevant facts.

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