Bona fide taxability dispute defeats penalty where full facts were disclosed and the claim was debatable under income-tax law.

Penalty under section 271(1)(c) is not attracted where the assessee has disclosed all primary facts and the dispute concerns a debatable issue on taxability under section 41(1). The Tribunal held that penalty proceedings are distinct from assessment proceedings, so sustaining the addition in quantum does not by itself establish concealment or furnishing of inaccurate particulars. As the assessee's explanation was found bona fide and there was no material showing conscious inaccuracy, the requirements of Explanation 1 to section 271(1)(c) were not met. Penalty was therefore deleted.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable for the assessee's claim regarding the year of taxability of remission under section 41(1).

Analysis: The assessee had consistently disclosed the relevant facts and had taken the stand that the benefit arising from the Government Resolution fixing viable tariff was taxable over the earlier years to which the liability related. The Tribunal held that penalty proceedings are distinct from assessment proceedings and that the mere fact that the addition was sustained in quantum did not automatically attract penalty. On the facts, the explanation was treated as bona fide, the issue of taxability under section 41(1) was regarded as debatable, and there was no material to show a conscious furnishing of inaccurate particulars. In such circumstances, the requirements of Explanation 1 to section 271(1)(c) were not satisfied.

Conclusion: Penalty under section 271(1)(c) was not leviable and had to be deleted.

Ratio Decidendi: Where the assessee has disclosed all primary facts and the dispute concerns a debatable legal issue on taxability, a disallowed claim by itself does not constitute concealment or furnishing of inaccurate particulars for the purposes of section 271(1)(c).

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