Penalty under section 271(1)(c) cannot rest on mere deduction variation absent concealment or inaccurate particulars.

Variation or disallowance of a deduction claim under section 10A, by itself, does not justify penalty under section 271(1)(c) unless concealment of income or furnishing of inaccurate particulars is established. The Tribunal noted that the appellate authority had enhanced income in quantum proceedings, but no penalty proceedings were initiated by that authority for the enhancement. On that basis, the penalty was held unsustainable and deleted.

---

---

Issues: Whether penalty under section 271(1)(c) was leviable on account of variation in the claim of deduction under section 10A, including the enhancement made by the appellate authority without initiation of penalty proceedings.

Analysis: The penalty was founded on adjustments to the deduction claimed under section 10A. The Tribunal noted that the claim had been varied in quantum proceedings and that the appellate authority had itself enhanced the income, yet no penalty proceedings were initiated by that authority in respect of the enhancement. It also applied the principle that a mere rejection or reduction of a claim does not, by itself, justify penalty under section 271(1)(c) unless concealment of income or furnishing of inaccurate particulars is established.

Conclusion: Penalty under section 271(1)(c) was not sustainable and the assessee succeeded.

Final Conclusion: The penalty addition was deleted and the appeal was allowed.

Ratio Decidendi: Mere disallowance or variation of a deduction claim does not attract penalty under section 271(1)(c) in the absence of concealment or furnishing of inaccurate particulars, and penalty must rest on the satisfaction of the authority dealing with the relevant enhancement.

---