Penalty for inaccurate particulars not leviable where deduction claim was bona fide and all material facts were disclosed.

Penalty under section 271(1)(c) was not attracted where the assessee had disclosed all material facts, the deduction claim under section 42 was made on a bona fide basis, and the issue was debatable. A mere disallowance of the claim in quantum proceedings did not, by itself, establish concealment of income or furnishing of inaccurate particulars unless the return particulars were shown to be false or incorrect. The deletion of penalty was therefore upheld in favour of the assessee.

---

---

Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the assessee had made a claim for deduction under section 42 and all material facts were disclosed, but the claim was disallowed in the quantum proceedings.

Analysis: The appeal turned on whether the assessee had concealed income or furnished inaccurate particulars. The record showed that the assessee had disclosed the relevant facts, the claim for deduction under section 42 had been allowed in the original assessment, and the issue was debatable. The governing principle applied was that a mere unsustainable or incorrect claim does not by itself amount to concealment or furnishing of inaccurate particulars unless the particulars in the return are shown to be false, erroneous, or incorrect. The decision also proceeded on the basis that the assessee's explanation was bona fide and supported by disclosure of all material facts.

Conclusion: Penalty under section 271(1)(c) was not leviable and its deletion was upheld in favour of the assessee.

Ratio Decidendi: Penalty under section 271(1)(c) cannot be imposed merely because a claim is rejected or disallowed; it is attracted only where the assessee is shown to have concealed income or furnished inaccurate particulars.

---