Penalty for ad hoc disallowances in search assessment deleted where no incriminating material showed concealment or inaccurate particulars.

Ad hoc disallowances in a search-related assessment under section 153C read with section 143(3) did not justify penalty under section 271(1)(c) where no incriminating material showed the expenditure claims were false or unrelated to business. The assessee had disclosed the expenditure in the return and profit and loss account, so the additions were treated as beyond the permissible scope of the unabated search assessment and did not establish concealment or furnishing of inaccurate particulars. Penalty was therefore not sustainable and was deleted, with the Revenue's appeal dismissed.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable on ad hoc disallowances made in a search-related assessment under section 153C read with section 143(3) in the absence of incriminating material.

Analysis: The assessment was framed in the search context without any recorded incriminating material showing that the assessee's expenditure claims were false or not for business purposes. The disallowances were made ad hoc, while the expenditure details had been disclosed in the return and profit and loss account. On these facts, the additions themselves were treated as beyond the permissible scope of the unabated search assessment, and the disclosure of particulars did not amount to concealment or furnishing of inaccurate particulars.

Conclusion: Penalty under section 271(1)(c) was not sustainable and was rightly deleted; the Revenue's appeal failed.

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