Unsustainable legal claim alone does not attract penalty absent concealment or inaccurate particulars in the return

Penalty under section 271(1)(c) is not leviable where an assessee makes a claim that is disallowed in law, but the return discloses full particulars and there is no finding that the details furnished were false, erroneous, or incomplete. Mere rejection of a deduction or expense claim as capital in nature does not, by itself, establish concealment of income or furnishing of inaccurate particulars. On these facts, the disallowance of documentation and stamp charges did not justify penalty, and the penalty was deleted.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee's claim for documentation and stamp charges was disallowed as capital in nature, but the return disclosed all particulars and there was no finding of concealment or furnishing of inaccurate particulars.

Analysis: The penalty provision applies only where the assessee has concealed particulars of income or furnished inaccurate particulars. A claim that is not accepted in law does not, by itself, amount to inaccurate particulars when the underlying details in the return are complete and not found to be false, erroneous, or incorrect. Mere disallowance of an expenditure claim, even if the claim is ultimately unsustainable, does not automatically attract penalty in the absence of concealment or factual inaccuracy.

Conclusion: Penalty under section 271(1)(c) was not exigible. The penalty was deleted and the assessee succeeded.

Ratio Decidendi: A merely unsustainable claim in law does not constitute concealment of income or furnishing of inaccurate particulars unless the particulars furnished in the return are themselves false or incorrect.

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