Penalty for unsustainable tax claim requires specific concealment or inaccurate particulars; mere withdrawal of rebate claim is not enough.

Penalty under Section 271(1)(c) of the Income-tax Act could not be sustained where the notice did not clearly allege concealment or furnishing of inaccurate particulars and the assessee had disclosed the relevant facts during assessment. The rebate claim, though later withdrawn after notice and ultimately not allowable, was not shown to be false or made with concealment of income. A mere unsustainable claim does not meet the statutory requirement for penalty unless there is a specific finding of concealment or inaccuracy in the particulars furnished. The Madras HC therefore held the penalty unsustainable and quashed it in favour of the assessee.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was validly leviable for an assessee's claim of rebate which was later withdrawn on issuance of notice.

Analysis: The notice initiating penalty did not contain a clear allegation of concealment or furnishing of inaccurate particulars. The assessee had disclosed the relevant facts, furnished the necessary materials during assessment, and filed a revised computation withdrawing the rebate claim after notice. The claim for rebate, though not ultimately allowable, was not shown to be false, erroneous, or made with concealment of income. Penalty under Section 271(1)(c) requires a specific finding that the assessee concealed particulars of income or furnished inaccurate particulars; a mere unsustainable claim does not satisfy that requirement.

Conclusion: The penalty was unsustainable and was quashed in favour of the assessee.

Ratio Decidendi: A penalty for concealment or furnishing inaccurate particulars cannot be imposed merely because an assessee makes an unsustainable claim; there must be a specific finding of concealment or inaccuracy in the particulars furnished.

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