Penalty for an arguable tax claim is unsustainable absent concealment or inaccurate particulars in the return.

Penalty under section 271(1)(c) of the Income-tax Act was held not exigible where the assessee had disclosed the relevant transactions in the return and the claim for deduction of interest against fixed-deposit income was at least debatable. The court reasoned that concealment or furnishing of inaccurate particulars, with intent to mislead, is required for penalty, and a mere incorrect claim or different possible view does not by itself establish mala fides. The Tribunal's deletion of penalty was based on the factual matrix and was not shown to be perverse, so no substantial question of law arose.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was exigible for the assessee's claim of deduction of interest against income from fixed deposits, and whether the Tribunal's deletion of penalty gave rise to any substantial question of law.

Analysis: Penalty under section 271(1)(c) is attracted only where the assessee has concealed particulars of income or furnished inaccurate particulars with an intent to mislead. Since the transactions were disclosed in the return, concealment was not established. Even if the explanation of a printing error was ignored, the claim was at least debatable and could not be treated as mala fide merely because a different view was possible. The provision for interest under section 234 had already operated, and penalty was not shown to be a necessary consequence of an incorrect assessment. The Tribunal's conclusion was based on appreciation of the factual matrix and was not shown to be perverse.

Conclusion: Penalty under section 271(1)(c) was not sustainable, and no substantial question of law arose.

Final Conclusion: The assessee succeeded on the penalty issue, and the Revenue's appeals were rejected at the threshold on the ground that the Tribunal's view did not warrant interference.

Ratio Decidendi: A penalty under section 271(1)(c) cannot be imposed merely because a return is found to be incorrect; it requires concealment or furnishing of inaccurate particulars, and a bona fide or debatable claim does not, by itself, justify penalty.

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