Penalty for inaccurate claim fails where full disclosure exists and the wrong set-off arose from counsel's mistake.

Penalty under section 271(1)(c) was not justified where the assessee had fully disclosed the loss in the return and accompanying documents, and the incorrect set-off claim arose from counsel's mistake. The HC held that Dharmendra Textile Processors does not make every inaccurate claim penal; the provision still requires deliberate default or concealment of income, or furnishing of inaccurate particulars. On the Tribunal's factual finding that there was no concealment and no perversity was shown, deletion of penalty was upheld.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained where the assessee's claim for set-off was found to be only because of a mistake by counsel and the relevant facts had been fully disclosed in the return and accompanying documents.

Analysis: The Tribunal recorded a factual finding that the loss on sale of machinery had been disclosed, there was no allegation of incorrect disclosure of the loss itself, and the wrong set-off claim was the result of a counsel's mistake. The Court held that the decision in Dharmendra Textile Processors does not mean that every inaccurate claim automatically attracts penalty. Penalty under section 271(1)(c) still requires an element of deliberate default and cannot be imposed for a mere mistake where there is full disclosure and no attempt to conceal income.

Conclusion: The deletion of penalty was upheld, as the finding that there was no concealment or furnishing of inaccurate particulars was not shown to be perverse.

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