Penalty for disallowed claims requires specific falsity or misreporting; mere quantum disallowance is insufficient, except where business nexus is absent.

Penalty for concealment or inaccurate particulars under section 271(1)(c) could not be sustained merely because depreciation or routine expenses were disallowed when the claims were disclosed in the return and financial statements; penalty was therefore not leviable on depreciation, though it remained sustainable on foreign travelling expenditure found to lack business nexus. Under section 270A, disallowances of depreciation, administrative expenses and a write-off did not by themselves establish under-reporting by misreporting, as there was no finding of false entries or suppression of facts, so the penalty was deleted. The penalty notice was held valid because it specified the charge of furnishing inaccurate particulars of income.

---

---

Issues: (i) Whether penalty under section 271(1)(c) was leviable for the assessment years governed by that provision where depreciation and certain expenses were disallowed. (ii) Whether penalty under section 270A was leviable for the assessment years governed by that provision on the ground of under-reporting in consequence of misreporting. (iii) Whether the penalty notice for the relevant year was invalid for want of a clear specification of the charge.

Issue (i): Whether penalty under section 271(1)(c) was leviable for the assessment years governed by that provision where depreciation and certain expenses were disallowed.

Analysis: The claims were disclosed in the return and financial statements, and the depreciation claim was made on the reflected block of assets. A mere disallowance in assessment did not establish concealment or furnishing of inaccurate particulars. In respect of routine or compliance-related expenses, penalty could not be sustained merely because the claim failed in quantum. However, the foreign travelling expenditure lacked any business nexus or supporting basis and stood on a different footing.

Conclusion: Penalty under section 271(1)(c) was not leviable on depreciation but was sustainable on foreign travelling expenses. The assessee succeeded partly for the relevant year.

Issue (ii): Whether penalty under section 270A was leviable for the assessment years governed by that provision on the ground of under-reporting in consequence of misreporting.

Analysis: The assessment additions were based on disallowance of depreciation, routine administrative expenses, and a write-off claim. The material did not show false entries, suppression of facts, or a distinct finding of misreporting. An ad hoc or quantum disallowance, by itself, was insufficient to attract the higher threshold for misreporting under section 270A.

Conclusion: Penalty under section 270A was not sustainable for either assessment year covered by that provision and was directed to be deleted in full.

Issue (iii): Whether the penalty notice for the relevant year was invalid for want of a clear specification of the charge.

Analysis: The notice on record specifically indicated the charge of furnishing inaccurate particulars of income, and therefore the plea of vagueness was not made out.

Conclusion: The penalty notice was held to be valid.

Final Conclusion: The appeal succeeded only to the extent that the penalty was sustained solely on the foreign travelling expenditure for one year, while the penalty for the remaining disputed additions and for the later years was deleted.

Ratio Decidendi: A penalty for concealment, inaccurate particulars, or misreporting cannot be sustained merely because a claim is disallowed in quantum; it requires a separate and specific finding of falsity, suppression, or statutory misreporting, while a claim wholly lacking business nexus may still attract penalty.

---