Bona fide tax claim with full disclosure does not attract penalty when the dispute is only legal sustainability.

Penalty under Section 271(1)(c) was not leviable where the assessee had made full disclosure of material particulars and advanced a bona fide depreciation claim on leased assets. The disallowance of the claim in assessment did not, by itself, establish concealment or furnishing of inaccurate particulars, because the dispute concerned the legal sustainability of the deduction rather than suppression of income. The Bombay HC upheld deletion of the penalty and confirmed that a disclosed, bona fide claim rejected in law does not attract penal consequences.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable when the assessee had made a full disclosure of income and claimed depreciation on leased assets on a bona fide basis.

Analysis: The assessee had disclosed all material particulars and had advanced a bona fide claim of depreciation on leased assets. The mere fact that the claim was disallowed in assessment did not, by itself, justify penalty. Penalty proceedings were not attracted where the claim was supported by disclosed material and the dispute related to the legal sustainability of the claim rather than concealment or furnishing of inaccurate particulars.

Conclusion: Penalty under Section 271(1)(c) was not leviable; the deletion of penalty was upheld in favour of the assessee.

Final Conclusion: The Revenue appeals failed, and the penalty deletion stood confirmed.

Ratio Decidendi: A bona fide claim made with full disclosure of income and particulars does not attract penalty merely because the claim is rejected in law.

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