Concurrent findings of fact and Explanation 1 to section 37(1) barred reassessment-based tax disallowance in mining dispute.

Concurrent factual findings on reassessment under section 147 did not give rise to a substantial question of law because the Tribunal and first appellate authority found, on the record, that the assessee's statutory filings and audit report matched and no perversity was shown. The addition therefore could not be reopened on that basis. Disallowance under Explanation 1 to section 37(1) was also unwarranted because the record did not establish that any penalty expenditure had been claimed, or that the expenditure related to an actually illegal act attracting the Explanation. In the absence of foundational facts, the disallowance was unsustainable and the Tribunal's deletion of the addition was upheld.

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Issues: (i) whether any substantial question of law arose from the Tribunal's concurrent factual findings in relation to reassessment under section 147 of the Income-tax Act, 1961; (ii) whether disallowance of expenditure under Explanation 1 to section 37(1) of the Income-tax Act, 1961 was warranted on the alleged illegality of the mining activity.

Issue (i): whether any substantial question of law arose from the Tribunal's concurrent factual findings in relation to reassessment under section 147 of the Income-tax Act, 1961.

Analysis: The assessment was reopened on the basis of alleged suppression of production particulars and illegal mining activity. The Tribunal, affirming the first appellate authority, found on facts that the figures in the assessee's statutory filings and audit report matched, and that there was no perversity in the factual conclusions. A substantial question of law does not arise from concurrent findings of fact unless they are shown to be perverse or unsupported by material on record.

Conclusion: No substantial question of law arose on the reopening issue, and the finding stood in favour of the assessee.

Issue (ii): whether disallowance of expenditure under Explanation 1 to section 37(1) of the Income-tax Act, 1961 was warranted on the alleged illegality of the mining activity.

Analysis: The Tribunal held that the assessee had not claimed deduction of any penalty expenditure, and the record did not establish that the activity had been declared illegal so as to attract Explanation 1. The materials referred to did not show that the expenditure claimed was in respect of any penalty actually imposed and paid for an illegal act. In the absence of such foundational facts, the disallowance could not be sustained.

Conclusion: The disallowance under Explanation 1 to section 37(1) was not justified, and the finding stood in favour of the assessee.

Final Conclusion: The appeal failed because the record did not disclose any substantial question of law and the Tribunal's deletion of the addition was upheld.

Ratio Decidendi: Concurrent findings of fact do not give rise to a substantial question of law unless shown to be perverse, and Explanation 1 to section 37(1) applies only where the claimed expenditure is in respect of an actually illegal act or penalty founded on such illegality.

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