Penalty for debatable depreciation claims and loss set-off adjustments cannot stand without proof of concealment or inaccurate particulars.

Penalty for concealment or furnishing inaccurate particulars was held unsustainable where the depreciation claim on temporary wooden structures taken over on amalgamation had already been treated as debatable and the related rectification adjustment had been set aside. Once the underlying disallowance did not survive, the basis for penalty also disappeared. Penalty was likewise not leviable on the excess set-off of brought forward losses and unabsorbed depreciation, as the adjustment concerned amalgamated-entity losses and there was no material showing concealment or inaccurate particulars; the fact that the quantum issue was not pursued further did not establish penalty liability.

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Issues: (i) Whether penalty for concealment or furnishing of inaccurate particulars was leviable on the assessee's claim of 100% depreciation on temporary wooden structures taken over on amalgamation; (ii) Whether penalty was leviable on the disallowance relating to excess set-off of brought forward losses and unabsorbed depreciation.

Issue (i): Whether penalty for concealment or furnishing of inaccurate particulars was leviable on the assessee's claim of 100% depreciation on temporary wooden structures taken over on amalgamation.

Analysis: The claim for depreciation had already been held, in the quantum proceedings, to be a debatable issue. The underlying rectification order under section 154 of the Income-tax Act, 1961 had been quashed on the ground that the rate of depreciation could not be altered through rectification when the issue required examination of details and involved possible views. Once the disallowance itself did not survive, the basis for alleging concealment or inaccurate particulars also disappeared.

Conclusion: Penalty on this issue was not sustainable and was deleted.

Issue (ii): Whether penalty was leviable on the disallowance relating to excess set-off of brought forward losses and unabsorbed depreciation.

Analysis: The disallowance arose from the treatment of losses attributable to the amalgamated entity, and the first appellate authority had recorded that the adjustment did not amount to concealment or furnishing of inaccurate particulars by the assessee. The mere fact that the quantum issue was not pressed further did not by itself establish mens rea or justify penalty.

Conclusion: Penalty on this issue was also not leviable.

Final Conclusion: The assessee succeeded in challenging the penalty, and the Revenue's challenge to the relief granted by the first appellate authority failed. The penalty order did not survive.

Ratio Decidendi: Penalty under section 271(1)(c) of the Income-tax Act, 1961 cannot be sustained where the underlying adjustment is debatable or has been set aside, and the material does not show concealment of income or furnishing of inaccurate particulars.

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