Penalty for cash payment disallowance rejected where disclosed particulars showed no concealment or inaccurate tax claims.

Penalty under section 271(1)(c) was held not leviable where the addition arose only from disallowance under section 40A(3) for cash payments above the prescribed limit. The assessee had disclosed the payments and supporting particulars, and there was no finding of concealment of income or furnishing of inaccurate particulars. The disallowance was treated as a statutory consequence of the cash-payment restriction, not as proof that the expenditure claim was false or bogus. As penalty under section 271(1)(c) requires concealment or inaccurate particulars, the penalty could not be sustained.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the addition arose from disallowance under section 40A(3) of the Income-tax Act, 1961 on the basis of cash payments disclosed by the assessee.

Analysis: The addition was made because certain payments exceeded the prescribed cash limit under section 40A(3), but the record did not show concealment of material facts or furnishing of inaccurate particulars. The payments and supporting details were already disclosed, and the disallowance stemmed from a statutory deeming consequence rather than from any finding that the claim was false or bogus. Penalty under section 271(1)(c) requires either concealment of income or furnishing of inaccurate particulars, and a mere disallowance of expenditure does not by itself establish those ingredients.

Conclusion: Penalty under section 271(1)(c) was not leviable, and the assessee succeeded.

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