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TMI Blog2011 (3) TMI 1746X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (BIFR) in the case of M/s. Hindustan Spinning Weaving Mills Ltd.vide order dated 1.4.2004 and was responsible for developing the Prabhadevi Property of M/s. Hindustan Spinning and Weaving Mills Ltd. The AO during the assessment proceedings noted that the only income declared by the assessee was interest on loans of ₹ 9,687/- and miscellaneous income of ₹ 75/-. However, the assessee had claimed the following expenses amounting to ₹ 33,23,196/-: Rs. Printing Stationery 41,185 Profession Tax 1,700 Filing Fees 2,900 Audit Fees 5,510 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 24,23,604/-. 4. In appeal the assessee submitted that it had not furnished inaccurate particulars of income or concealed any particulars of income. The assessee had given complete details and the loss had only been carried forward. There was also no additional tax liability. It was accordingly urged that the penalty should be deleted. CIT(A) was however not satisfied by the explanation given. It was observed by him that the assessee was following project completion method and therefore the expenses relating to the project including the interest should have been capitalized and taken to the work in progress. The assessee had accepted the addition as no appeal had been filed. CIT(A) also observed that penalty under section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had filed the return of income for the relevant year on 31.10.2005 and was not aware of the decision. Moreover the decision of the special bench was further disputed before the High Court where the matter was pending. Therefore any addition made on account of any disallowance which is debatable cannot attract penalty under section 271(1)(c) as the explanation in such cases based on a particular interpretation has to be considered as bonafide. The disallowance of claim on a debatable issue made under bonafide belief could not be the basis for penalty under section 271(1)(c). Reliance was placed on the decision of the tribunal in case of Orion Travels Pvt. Ltd. Vs ACIT (87 TTJ 246) and the decision of Special Bench of Ahmedabad t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot automatically lead to penalty under section 271(1)(c). A case for penalty has to be evaluated in terms of the Explanation 1 to section 271(1)(c) as per which in case of any addition made in assessment even if the assessee is not able to substantiate the explanation but is able to prove that the explanation is bonafide and all necessary details have been submitted penalty under section 271(1)(c) cannot be levied. In this case there is no dispute that details of expenses had been given. The case of the assessee is that the claim had been made under the bonafide belief that such expenses were allowable from year to year basis. We also note that allovability of expenses such as interest etc on year to year basis or in the year of complet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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