JUDGMENT 1. We heard counsel for the Revenue. 2. The assessee filed its return on July 30, 1980, for the assessment year 1980-81 declaring an income of Rs. 21,97,794. The income of the assessee, however, was computed at Rs. 24,02,551 by the Assessing Officer vide assessment order dated March 15, 1983. 3. On the basis of the addition made by the Assessing Officer, he initiated proceedings for penalty and imposed a penalty of Rs. 7,10,155 under section 271(1)(c) of the Income-tax Act, 1961. 4. In appeal by the assessee before the Commissioner of Income-tax (Appeals), the modification in the order concerning addition in two categories was made. However, the Commissioner of Income-tax held that the part of penalty was leviable. 5. Aggrieved thereby the assessee filed a second appeal before the Income-tax Appellate Tribunal. There was cross-appeal by the Revenue as well. 6. The Tribunal considered the matter threadbare in paragraph 6 of its order which reads thus : "We have considered the rival submissions as also the decisions mentioned above. By now it is well-settled that a mere disallowance of the claim or making of an addition in the assessment is not sufficient to attract penalty under section 271(1)(c). One fact which is very glaring on the face is that the assessee is a company in whose case the rate of tax remains the same. The assessee-company maintained the books of account and relevant records properly and regularly which were duly adjusted, audited and closed. All facts material to the correct computation of the total income had been furnished by the assessee along with the return and whatever clarifications/details were asked for during the assessment proceedings, were also furnished, it is seen that as against the returned income of Rs. 21,97,794, the finally assessed income as a result of the order dated December 3, 1988, of the Appellate Tribunal was only Rs. 15,54,009. Therefore, the contention raised on behalf of the assessee that the income assessed was less than the returned income and, therefore, more taxes were paid than due is correct and it was not a case in which there was any postponement of the payment of taxes. So far as the addition of Rs.97,740 out of professional and legal fee is concerned, details were given by the assessee vide letters dated October 17, 1982, January 27, 1983 and February 28, 1985 and three items of Rs. So far as the addition of Rs.97,740 out of professional and legal fee is concerned, details were given by the assessee vide letters dated October 17, 1982, January 27, 1983 and February 28, 1985 and three items of Rs. 2,500, Rs. 2,140 and Rs. 92,800 represented advances made to the advocate who had not submitted their bills. The distinction drawn by the Inspecting Assistant Commissioner (Assessment) in the penalty order between advances and expenditure was certainly technical. The disallowance was confirmed by the learned Commissioner (Appeals). The claim could not be said to be false. Moreover there was no such finding in the assessment proceedings. So far as the item of Rs. 5,34,967 out of salaries, wages and bonus is concerned, the assessee had given information vide letter dated October 17, 1982. The Inspecting Assist ant Commissioner (Assessment) had taken the view that the liability accrued in the assessment year 1979-80 and not in the assessment year 1980-81. The assessee had explained vide letter dated February 28, 1985, that in the amount was paid during the previous year in question in consequence of the decision of the Supreme Court. This was not followed on the ground that the assessee was following the mercantile system of accounting. It could not be said that any inaccurate particulars had been furnished by the assessee. So far as the amount of Rs. 8,013 representing 'duty draw back' is concerned, the assessee filed details vide letters dated October 18, 1982, January 27, 1983 and February 28, 1985. The Inspecting Assistant Commissioner (Assessment) found that Rs. 8,013 were received during the previous year. The case of the assessee was that the amount was received against pending "draw-back" bills. The amount had been already shown by way of income in the succeeding years, though it was found taxable in the assessment year in question. So far as the amount of Rs. 62,500 is concerned, the assessee had claimed an amount of Rs.1,25,000 on the basis of the decision to pay. The disallowance was made of an amount of Rs. 62,500 on the basis that the amount had not been paid. Since the system of accounting followed by the asses see was mercantile, it could not be said that the claim made on the basis of the decision was false. So far as disallowance of Rs. The disallowance was made of an amount of Rs. 62,500 on the basis that the amount had not been paid. Since the system of accounting followed by the asses see was mercantile, it could not be said that the claim made on the basis of the decision was false. So far as disallowance of Rs. 66,203 out of miscellaneous expenses is concerned, the assessee had furnished details vide letter dated October 17, 1982. This disallowance was clearly a debatable claim. It was rightly held by the learned Com missioner (Appeals) to be a bona fide one. The next amount of Rs.46,508 represented selling expenses. The assessee had filed the details with letter dated October 17, 1982. It showed that the amount in question was incurred on account of travelling, boarding and lodging of the representatives of various clients who visited the premises for inspection of the cables. This expenditure was treated as of the nature of entertainment and, therefore, disallowance was made under section 37(2A). Here also the claim could not be said to be other than bona fide or debatable. The next item of Rs. 18,592 was added on account of section 37(3A). The details were given by the assessee, vide letter dated October 17, 1982. The Inspecting Assistant Com missioner (Assessment) treated it as a case of statutory disallowance. However, there is nothing on the record to show that the claim was false or not arguable. The next item of Rs. 83,900 related to duty draw back written off in 1968-69. The Inspecting Assistant Commissioner (Assessment) found that all draw-back records up to 1972 had been destroyed in 1976 and, therefore, the irrecoverability was ascertained and decided in October, 1979. However, the accounting year of the assessee closed on May 31, 1979. It also appears that this account was allowed to the assessee in the assessment year 1981-82. This claim also appears to have been made bona fide. The next amount represented for disallowance is of Rs. 16,300 under section 40A(5). Here we agree with the learned Commissioner (Appeals) that the claim was bona fide. Details were given by the assessee vide letter dated October 17, 1982. Actually this amount was arrived at after rectification under section 154, the original amount disallowed being Rs. 900. At the time of the penalty order, the assessee's appeal against the order under section 154 was pending. Details were given by the assessee vide letter dated October 17, 1982. Actually this amount was arrived at after rectification under section 154, the original amount disallowed being Rs. 900. At the time of the penalty order, the assessee's appeal against the order under section 154 was pending. The claim was a plausible one. The next amount involved is Rs. 14,362 representing compensation for the belated supplies. This was allowed in 1981-82 and another amount of Rs. 2,31,399 was also allowed in the assessment year 1981- 82. The first item related to supplies on Singapore orders. The facts relating to these claims show that the claims were debatable though on the basis of the previous year ending on May 31, 1979. The claims were allowed only for the subsequent assessment year 1981-82. The finding of the learned Commissioner (Appeals) that these claims were false, is not sustainable on facts. This takes us to the last item, namely, Rs. 21,618 which represents the disallowance out of travel ling expenses made under rule 6D. The assessee had given details, vide letter dated October 17, 1982, wherein the names of the employ ees and the amounts of expenditure incurred on each of them were detailed. Further details were filed by the assessee, vide letters dated February 15, 1983 and February 28, 1985. The disallowance was made on the basis of the view taken on rule 6D. After considering all the facts and the foregoing discussions, it could not be said that the explanations furnished by the assessee were false or that they were not bona fide or that complete facts relating to the computation of the assessee's income had not been furnished. Amounts which were ultimately allowed in the assessment year 1981-82, but which were claimed for the assessment year 1980-81 were those which were claimed under the bona fide belief that they pertained to the assessment year in question. The expenditure had either been directed to be allowed in the assessment year 1979-80 or 1980-81 or 1981-82." 7. It is pertinent to notice that the Tribunal specifically recorded that there is no finding of the Income-tax authorities that the assessee deliberately made false claims for claiming deduction. The case of the assessee that it did not include the particular item in the taxable items in a bona fide belief was accepted. It is pertinent to notice that the Tribunal specifically recorded that there is no finding of the Income-tax authorities that the assessee deliberately made false claims for claiming deduction. The case of the assessee that it did not include the particular item in the taxable items in a bona fide belief was accepted. The Tribunal, thus, cancelled the penalty levied by the Assessing Officer and partly maintained by the Commissioner of Income-tax (Appeals). 8. The findings recorded by the Tribunal are concluded on the facts and do not give rise to any question of law. 9. Reference application is, accordingly, rejected. *******