Inaccurate particulars claim upheld where double deduction lacked legal basis despite disclosure in return.

Penalty under section 271(1)(c) was upheld where the assessee claimed capital expenditure as revenue expenditure under the Indo-Mauritius DTAA and also sought depreciation on the same assets, creating a double deduction. The Tribunal treated the claim as lacking a reasonable legal foundation because the treaty-based explanation was unsupported by contrary judicial authority or any other legal basis, and held that disclosure of the claim in the return did not by itself establish bona fides. It further held that the quantum outcome did not control penalty proceedings, which had to be tested on the explanation advanced in the penalty matter. The claim therefore amounted to furnishing inaccurate particulars.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee claimed capital expenditure as revenue expenditure under the Indo-Mauritius DTAA and also claimed depreciation on the same assets.

Analysis: The assessee had disclosed the claim in the return, but the claim was for deduction of capital expenditure together with depreciation on the same fixed assets, resulting in a double deduction. The explanation based on treaty interpretation was found to be unsupported by any contrary judicial authority or legal basis. The Tribunal held that a mere disclosure in the return does not by itself establish bona fides, and that a claim made without a reasonable legal foundation amounts to furnishing inaccurate particulars. It further held that the outcome of the quantum proceedings did not control the penalty proceedings, which must be tested on the explanation offered in the penalty proceedings.

Conclusion: Penalty under section 271(1)(c) was rightly imposed; the issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: A claim for deduction that is patently untenable and results in double deduction, when made without a bona fide legal basis, amounts to furnishing inaccurate particulars and attracts penalty under section 271(1)(c) of the Income-tax Act, 1961.

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