Concealment penalty must match the surviving addition, while a bona fide loan-waiver tax position does not attract penalty.

Penalty under section 271(1)(c) was sustained only where the commission disallowance reflected a false claim and inaccurate particulars, but it had to be restricted to the quantum addition that actually survived appellate relief; any penalty computed on an excess amount required recalculation. For the interest-waiver addition under section 41(1), the assessee had disclosed the waiver and adopted a bona fide tax position, so penalty was not warranted and the corresponding penalty was deleted. The stated principle is that concealment penalty can attach only to the finally surviving addition and only where the claim is not bona fide.

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Issues: (i) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable on the commission expenditure disallowance, and whether it had to be confined to the quantum addition that actually survived appellate proceedings. (ii) Whether penalty under section 271(1)(c) was leviable on the addition relating to waiver of interest under section 41(1) of the Income-tax Act, 1961.

Issue (i): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable on the commission expenditure disallowance, and whether it had to be confined to the quantum addition that actually survived appellate proceedings.

Analysis: The commission claim was rejected on the basis of third-party verification showing that the alleged intermediary had not rendered the claimed services. In one year, the penalty had been worked out on a quantum addition larger than the amount ultimately sustained in appeal, which was held to be an apparent mistake. Penalty proceedings were therefore required to track only the addition that remained after appellate relief. In the year where the penalty was already computed on the sustained quantum, the commission claim was treated as a false claim furnishing inaccurate particulars.

Conclusion: Penalty was sustainable on the commission disallowance only to the extent of the addition actually sustained, and the penalty was to be recalculated accordingly where it had been levied on an excess quantum; the commission-related penalty otherwise stood confirmed.

Issue (ii): Whether penalty under section 271(1)(c) was leviable on the addition relating to waiver of interest under section 41(1) of the Income-tax Act, 1961.

Analysis: The waived interest had earlier been claimed and allowed as revenue expenditure, but the assessee had treated the entire loan waiver as a capital receipt in computing income. The interest component was held taxable under section 41(1), yet the explanation was found bona fide only to the extent that the assessee had disclosed the waiver and adopted a legal position on its tax treatment. On those facts, the interest waiver issue was distinguished from the false commission claim, and penalty was held not warranted on that component.

Conclusion: Penalty under section 271(1)(c) was not leviable on the interest-waiver addition under section 41(1), and the corresponding penalty was directed to be deleted.

Final Conclusion: The appeals were disposed of by sustaining penalty on the commission-related concealment only to the extent of the finally surviving addition, while deleting penalty on the interest-waiver component and granting consequential relief where the penalty had been computed on an excess or unsustainable basis.

Ratio Decidendi: Penalty under section 271(1)(c) can be sustained only for the addition that finally survives and only when the assessee's claim amounts to furnishing inaccurate particulars or concealment; a bona fide though unsuccessful tax treatment of a liability waiver does not automatically attract penalty.

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