Penalty on disallowed interest claim not sustainable where mere quantum disallowance did not prove concealment or inaccurate particulars.

A mere disallowance of interest deduction claimed under section 36(1)(iii) does not, by itself, establish concealment of income or furnishing of inaccurate particulars for penalty under section 271(1)(c). The Tribunal applied the settled principle that confirmation of the quantum addition is not enough without material showing a false claim or deliberate suppression. Penalty was therefore held not leviable on the disallowance, and the matter was decided in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable in respect of the disallowance under section 36(1)(iii) of the Income-tax Act, 1961.

Analysis: The assessee had claimed deduction of interest on borrowings under section 36(1)(iii). Although the disallowance was confirmed in quantum proceedings, that by itself did not establish concealment of income or furnishing of inaccurate particulars. The Tribunal applied the settled principle that a mere disallowance of a claim, without more, does not automatically justify penalty under section 271(1)(c), and treated the cited Supreme Court and jurisdictional High Court view as applicable to the facts.

Conclusion: Penalty under section 271(1)(c) was not leviable on the disallowance under section 36(1)(iii), and the addition could not be treated as concealment or inaccurate particulars; the issue was decided in favour of the assessee.

Ratio Decidendi: A bona fide disallowance of a deduction claim in quantum proceedings does not, by itself, constitute concealment of income or furnishing of inaccurate particulars for the purposes of penalty under section 271(1)(c) of the Income-tax Act, 1961.

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