Bona fide deduction claim later withdrawn does not attract penalty absent concealment or inaccurate particulars.

Penalty under section 271(1)(c) was held unsustainable where the assessee claimed deduction under section 35(2AB) on the basis of letters from the Ministry of Science and Technology and later withdrew the claim during scrutiny assessment. The disallowance in quantum proceedings did not, by itself, establish concealment of income or furnishing of inaccurate particulars. As there was no finding that the scientific research and development expenditure was not genuine, the claim was treated as made on a bona fide belief. In these circumstances, the withdrawal of the deduction claim did not convert it into concealment, and the issue was answered in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee claimed deduction under section 35(2AB) on the basis of letters from the Ministry of Science and Technology and later withdrew the claim in scrutiny assessment.

Analysis: The claim was made on the basis of material furnished by the assessee and there was no finding that the expenditure on scientific research and development was not genuine. The disallowance of the deduction in the quantum proceedings did not, by itself, establish concealment or furnishing of inaccurate particulars. The assessee's conduct was treated as founded on a bona fide belief, and the withdrawal of the claim during scrutiny assessment in the given background did not convert the claim into concealment.

Conclusion: Penalty under section 271(1)(c) was not sustainable, as the case did not involve concealment of income or furnishing of inaccurate particulars and the issue was answered in favour of the assessee.

Ratio Decidendi: A bona fide, unsupported deduction claim, later withdrawn in assessment, does not attract penalty under section 271(1)(c) absent concealment of income or furnishing of inaccurate particulars.

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