Penalty for bogus purchase claims cannot stand without proof of concealment or inaccurate particulars, even if the claim is unproved.

Penalty under section 271(1)(c) was held not leviable where additions for alleged bogus purchases were sustained only on an estimated basis and the assessee's claim was unproved but not disproved by clinching evidence. The record showed purchase invoices, inward and outward material details, consumption records, and payments through normal banking channels, none of which were conclusively rebutted by the revenue. Mere rejection of an expenditure or purchase claim in assessment does not automatically establish concealment or furnishing of inaccurate particulars; a positive finding that the explanation is false is required. On these facts, deletion of penalty was upheld.

---

---

Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable on additions sustained in respect of alleged bogus purchases, where the assessee's claim was found unproved but not disproved by clinching evidence.

Analysis: The addition on account of purchases was sustained on an estimated basis after the authorities found that the assessee had not fully substantiated the genuineness of the transactions. However, the material on record included purchase invoices, inward and outward details of raw material, consumption details, and payments through normal banking/business channels. Those materials were not dislodged or disproved by the revenue with conclusive evidence. Penalty under section 271(1)(c) cannot rest merely on the fact that a claim for expenditure or purchases was not accepted in assessment; there must be material showing concealment of income or furnishing of inaccurate particulars. An unproved claim, without a positive finding that the explanation is false, does not by itself attract penalty.

Conclusion: Penalty under section 271(1)(c) was not exigible on the facts, and the deletion of penalty was upheld.

---