Full disclosure and a plausible deduction claim defeated penalty for alleged inaccurate particulars in employee compensation.

Penalty under section 271(1)(c) was not leviable where the assessee made a full disclosure of the workmen settlement and claimed the employee compensation as revenue expenditure under section 37 on a plausible legal view. The claim involved a dispute only over the correct characterisation of the payment, whether it fell within the voluntary retirement scheme under section 35DDA or was otherwise deductible as business expenditure. As there was no concealment of material particulars or furnishing of inaccurate particulars, a mere difference in legal treatment could not sustain penalty. The cancellation of penalty was therefore upheld 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 when the assessee, on full disclosure of facts, claimed the employee compensation as revenue expenditure under section 37 instead of deduction under section 35DDA.

Analysis: The assessee had disclosed the settlement with workmen under section 18(1) of the Industrial Disputes Act, 1947 and claimed deduction of the compensation as business expenditure. The dispute was whether the payment fell within the scheme of voluntary retirement under section 35DDA or was allowable as revenue expenditure under section 37. The claim was based on one of two plausible views, and the record showed no concealment of material particulars or furnishing of inaccurate particulars. In such a situation, a mere difference in the legal characterization of the expenditure did not justify penalty.

Conclusion: Penalty under section 271(1)(c) was not leviable and the finding cancelling the penalty was upheld in favour of the assessee.

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