Penalty for unsustainable loss set-off fails where full disclosure was made and the notice did not specify the exact charge.

Penalty under section 271(1)(c) was deleted because the assessee had disclosed all primary facts, including the cancellation of its banking licence, and the disallowance arose only from a technical claim for set-off of brought-forward losses. An unsustainable claim, without an independent finding of concealment or furnishing of inaccurate particulars, does not by itself justify penalty. The notice under section 274 also failed to clearly specify whether the charge was concealment or inaccurate particulars, which further weakened the penalty proceedings.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable when the assessee had disclosed all material facts, the addition arose from a claimed set-off of brought forward losses and the penalty notice did not clearly specify the charge.

Analysis: The assessee had disclosed the cancellation of its banking licence and the relevant facts in the return. The penalty arose from a technical disallowance relating to set-off of losses and not from any independent finding of concealment of income or furnishing of inaccurate particulars. The notice issued under section 274 did not clearly specify whether the proposed penalty was for concealment or for furnishing inaccurate particulars. The penalty proceedings are distinct from the quantum proceedings, and an unsustainable claim by itself does not amount to concealment where all primary facts are disclosed.

Conclusion: Penalty under section 271(1)(c) was not justified and was deleted.

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