Penalty for share-trading loss disallowance fails where all primary facts were disclosed and only loss characterisation was disputed.

Penalty under section 271(1)(c) was held unsustainable where the assessee had disclosed all primary facts about share transactions and the dispute was only over whether the resulting loss fell within Explanation to section 73 as a speculative loss. Recharacterisation of the loss by the Assessing Officer did not, by itself, establish concealment of income or furnishing of inaccurate particulars. The penalty order was also weakened by lack of clarity on whether the charge was concealment or inaccurate particulars. The penalty was deleted 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 share-trading loss as business loss but the loss was treated as speculative loss under Explanation to section 73.

Analysis: The assessee had disclosed all primary facts, including the purchase and sale of shares, and the dispute arose from the treatment of the loss under Explanation to section 73. Merely because the Assessing Officer recharacterised the loss as speculative loss did not, by itself, establish concealment of income or furnishing of inaccurate particulars. The penalty order also showed lack of clarity as to whether the charge was concealment or inaccurate particulars, which weakened the levy of penalty.

Conclusion: The penalty was not sustainable and was deleted in favour of the assessee.

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