Penalty under section 271(1)(c) cannot be imposed for a bona fide claim made on disclosed facts and later rejected in assessment.

Penalty under section 271(1)(c) requires proof of concealment of income or furnishing of inaccurate particulars, and a merely unsustainable claim in law is not enough. A deduction claim under section 35E based on disclosed mining lease rights and prospecting material was held to rest on the absence of satisfaction of statutory conditions, not on false particulars. A depreciation claim arising from a sale and lease-back transaction, supported by invoices and agreements, also could not be treated as concealment merely because it failed in quantum assessment. On the disclosed facts, the claims were bona fide and penalty was not leviable.

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Issues: Whether penalty under section 271(1)(c) was leviable in respect of the assessee's claim for deduction under section 35E and depreciation on leased machinery.

Analysis: The claim under section 35E was made on the basis of mining lease rights and other material showing prospecting activities. The disallowance rested on the assessee's inability to satisfy the conditions for the deduction and the absence of commercial production, but the return did not disclose any false or incorrect particulars. Likewise, the depreciation claim on the sale and lease-back transaction was supported by invoices and agreements, and the transaction could not be treated as a case of concealment merely because the claim was disallowed in quantum proceedings. Penalty proceedings require proof of concealment or furnishing of inaccurate particulars, and a merely unsustainable claim in law does not by itself attract section 271(1)(c).

Conclusion: Penalty under section 271(1)(c) was not leviable and the additions made in quantum did not justify penalty.

Final Conclusion: The assessee's appeals succeeded because the disputed claims were treated as claims made on disclosed facts and not as concealment or furnishing of inaccurate particulars.

Ratio Decidendi: A disallowed claim does not attract penalty under section 271(1)(c) unless the Revenue establishes concealment of income or furnishing of inaccurate particulars, and a bona fide claim made on disclosed facts cannot be penalised merely because it is rejected in assessment.

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