Penalty for inaccurate particulars fails where an expense claim was disclosed and only disallowed in assessment.

Penalty under section 271(1)(c) is not attracted merely because an expense claim is disallowed in assessment. The governing requirement is a finding of concealment of income or furnishing of inaccurate particulars in the return. Where the assessee had disclosed the expenditure in the return and books of account, the addition arising only from disallowance of the claim did not, by itself, establish inaccuracy or concealment. On that basis, the penalty was held unsustainable and was quashed in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained where the assessee had disclosed the expenses in the return and the addition arose only from disallowance of a claim.

Analysis: Penalty under section 271(1)(c) requires a finding that the particulars furnished in the return are inaccurate or that income has been concealed. A disallowance made in assessment proceedings, by itself, does not establish furnishing of inaccurate particulars. Where the claim is disclosed and the expenditure is reflected in the return and books of account, the mere fact that the claim is not accepted in assessment is insufficient to attract penalty.

Conclusion: The penalty was not sustainable and was quashed in favour of the assessee.

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