Bona fide tax claim on disclosed facts does not by itself trigger penalty for concealment or inaccurate particulars.

Penalty under Section 271(1)(c) of the Income-tax Act, 1961 was held not leviable where the assessee had made a bona fide but legally unsustainable claim for double taxation relief on fully disclosed facts. The disallowance arose from interpretation of the treaty position and did not establish concealment of income or furnishing of inaccurate particulars. A mere rejection of a claim, even if incorrect in law, is insufficient to attract penalty unless the statutory ingredients of concealment or inaccuracy are proved. On that basis, the penalty was deleted in favour of the assessee.

---

---

Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee had made an erroneous but bona fide claim for double taxation relief and had disclosed the relevant income in the return.

Analysis: The claim for treaty relief was found to be legally untenable, but the record did not show concealment of income or furnishing of inaccurate particulars. The disallowance arose from a pure question of law and interpretation, based on a plausible understanding of the treaty position before the amendment to Section 90 of the Income-tax Act, 1961. Penalty under Section 271(1)(c) is not attracted merely because a claim is disallowed; the statutory preconditions of concealment or inaccuracy must be established. The facts did not justify treating the assessee's claim as inflated, deliberate, or false.

Conclusion: Penalty under Section 271(1)(c) was not exigible, and the issue was decided in favour of the assessee.

Ratio Decidendi: A bona fide but erroneous legal claim, made on disclosed facts, does not by itself constitute concealment or furnishing of inaccurate particulars so as to attract penalty under Section 271(1)(c) of the Income-tax Act, 1961.

---