Penalty for inaccurate particulars cannot rest on a mere disallowance; proof of false particulars is required.

Penalty under Section 271(1)(c) is not attracted merely because a claim is disallowed under Section 40A(3); the Revenue must show that the return contained incorrect, erroneous, or false particulars. A claim rejected in law, without proof of furnishing inaccurate particulars of income, does not by itself justify penalty. Applying this principle, the appellate authority deleted the penalty linked to the Section 40A(3) disallowance, and that relief was upheld.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable in relation to disallowance made under Section 40A(3) of the Income-tax Act, 1961.

Analysis: The assessee's claim was disallowed in assessment, but the penalty could be sustained only if the return contained incorrect, erroneous, or false particulars. A mere claim that is not accepted in law does not, by itself, amount to furnishing inaccurate particulars of income. The appellate authority applied this principle and deleted the penalty attributable to the disallowance under Section 40A(3) of the Income-tax Act, 1961.

Conclusion: The penalty was not leviable on the disallowance under Section 40A(3) of the Income-tax Act, 1961, and the deletion of that penalty was upheld.

Final Conclusion: The revenue's challenge failed and the penalty relief granted by the appellate authority remained undisturbed.

Ratio Decidendi: Disallowance of a claim, without proof of incorrect or false particulars, does not justify penalty for furnishing inaccurate particulars of income under Section 271(1)(c) of the Income-tax Act, 1961.

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