Penalty for disallowed claim deleted where no concealment or inaccurate particulars were proved; delay condoned on medical grounds.

The ITAT Chennai condoned the filing delay after accepting the assessee's explanation of serious illness and cancer treatment as sufficient cause. On penalty under section 271(1)(c) of the Income-tax Act, the Tribunal held that mere disallowance of a claim does not, by itself, establish concealment or furnishing of inaccurate particulars. Because the housing rent allowance claim lacked supporting particulars and the other addition had been accepted by the assessee, the material did not justify penalty. The penalty was deleted, and the appeal succeeded on both delay and merits.

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Issues: (i) Whether the delay in filing the appeal should be condoned on the basis of reasonable cause; (ii) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the disallowance arose from an unsupported claim of exemption and a conceded addition.

Issue (i): Whether the delay in filing the appeal should be condoned on the basis of reasonable cause.

Analysis: The delay was explained by the assessee's serious illness and treatment for cancer. The materials placed on record indicated that the illness was genuine and that the appeal could not be filed within time because of the medical condition. The explanation was accepted as constituting sufficient cause.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the disallowance arose from an unsupported claim of exemption and a conceded addition.

Analysis: The penalty was founded on alleged furnishing of inaccurate particulars, but the record showed that no supporting particulars were produced for the housing rent allowance claim and that the other addition had been accepted by the assessee. Mere disallowance of a claim does not by itself establish concealment or furnishing of inaccurate particulars, and the legal position was consistent with the principle that a claim not accepted in law does not automatically attract penalty.

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

Final Conclusion: The appeal succeeded because the delay was excused and the penalty proceedings failed on merits.

Ratio Decidendi: Penalty under section 271(1)(c) is not attracted merely because a claim is disallowed; there must be material showing concealment of income or furnishing of inaccurate particulars, and a bona fide explanation supported by reasonable cause can justify condonation of delay.

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