In this appeal assessee challenges levy of penalty under provisions of section 273(a) of Income-tax Act, 1961 ('the Act') amounting to Rs. 89,476. alternative plea urged is that penalty be reduced to minimum. 2. assessee is company and assessment year involved in 1978- 79 with previous year ending 31-5-1977. notice under section 210 of Act demanding sum of Rs. 16,002 as advance tax in three equal instalments w s issued and served upon company on 2-6-1977. In response, company paid two instalments of Rs. 5,334 each on 12-6-1977 and 22-9-1977. However, before date of third instalment company filed estimate on 12-12-1977 showing nil liability on account of advance tax. This company did by making adjustment in respect of claim under section 35B of Act of Rs. 14,63,304 against income Rs. 11,04,071 thus arriving at figure of loss amounting to Rs. 3,59,233. 3. assessee-company also filed return of loss showing identical figure, namely Rs. 3,59,233, after claiming aforesaid deduction under section 35B. assessment order was finalised by ITO on 18-3-1981 determining net income of Rs. 10,68,058. substantial portion of claim under section 35B was rejected and in fact expenses aggregating Rs. 74,104 only were found entitled for deduction under section 35B which was allowed at Rs. 37,062 (half). 4. ITO also initiated penalty proceedings under section 273(a) on account of notable difference in figures given in estimate and finally assessed figures. reply dated 3-4-1981 was filed in which it was contended that main difference between income returned and income assessed was on account of claim under section 35B which was allowed at figure of Rs. 37,052 as against claim of Rs. 14,63,304. It was urged that assessee had no reason to believe that estimate filed by him was untrue. ITO, however, rejected explanation put forward and levied penalty of Rs. 89,476 as against minimum of Rs. 44,738 and maximum of Rs. 6,71,076. He observed as following in doing so: "The records have been seen. It indicates crystal clear fact assessee- company is guided by well known and well experienced senior CAs, of Naushir Marfatia & Co. As such, assessee-company, disregarding crystal clear provisions of section 35B had put up incorrect claim and thus reduced tax liability payable as per provisions of law. It is pertinent to note here that as per amended proviso of section 35B , which came into effect from 1-4-1973, i.e., assessment year 1974-75 assessee-company had during course of assessment proceedings of assessment year 1974-75 put up such claim of substantial amount and ITO, in his order dated 28-10-1976 had turned down assessee's claim and even Commissioner (Appeals), relying decision of Tribunal, Special Bench, Bombay in case of J. H. & Co. v. Second ITO [1982] 1 SOT 150 gave deductions at 50 per cent only on minor amount of Rs. 19,395 out of which Tribunal on account of department's appeal has knocked down deduction, granted of Rs. 8,852. Thus, claim under section 35B is considered finally amount of Rs. 10,543 in assessment year 1974-75. Same facts existed for assessment years 1975-76, 1976-77 and 1977-78. Thus, it proves beyond shadow of doubt that estimate filed by assessee-company was untrue and incorrect and I am fully satisfied that assessee-company has committed default." 5. In appeal before Commissioner (Appeals), assessee reiterated as he had done before ITO that main difference in estimate filed and assessed income was entirely on account of claim under section 35B. It was further urged that assessee was guided by various Tribunal judgments, wherein deduction under section 35B had been allowed on various types of expenses incurred by exporters such as port, fees, freight, packing, salary, etc. It was also submitted that order of Commissioner (Appeals) in assessee's own case for assessment year 1974-75 wherein similar claim was considered and rejected was passed only on 10-4-1980. It was further urged that decision of Tribunal in case of J. H. & Co. v. Second ITO [1982] 1 SOT 150 (Bom.) (SB) whereby matter acquired some finality came about only on 17-6-1978, i.e., much after last date of filing estimate. He also drew attention of Commissioner (Appeals) to fact that IAC had waived interest levied under section 216 of Act to extent of Rs. 2,16,000. assessee also put forward plea that there was no mala fide intention in filing of estimate. 6. learned Commissioner (Appeals), however, rejected various pleas put forward by assessee-company and observed as follows: "I do not agree with contentions of learned representative of appellant. As stated by Income-tax Officer in his order under section 273(a) of Act, Income-tax Officer had issued notice under section 210 demanding tax payable at Rs. 16,002 on basis of income of assessee for assessment year 1976-77. assessment of appellant company for t h e assessment years 1974-75, 1975-76, 1976-77 and 1977-78 were also finalised by ITO. claim of assessee for assessment year 1974-75 in respect of weighted deduction was negatived by Income-tax Officer. So when assessee was aware of department's viewpoint as assessment order of Income-tax Officer of assessment year 1974-75 was available to assessee. In spite of it, if assessee has made higher deduction on account of export market allowance under section 35B it must be presumed that assessee has done it deliberately with view to reduce its tax liabilities. argument that because IAC has waived interest under section 215 , penalty also should be deleted under section 273 , is not acceptable. Interest under section 215 and penalty under section 273 , are quite independent proceedings. Various considerations come in mind of IAC when he reduces or waives interest under section 215 and penalty under section 273 are quite independent proceedings. One of them might be that because penalty is levied under section 273 it will be double punishment to assessee if interest also is charged under section 215. fact that IAC has waived interest charged under section 215 , therefore, has no bearing on deciding question of penalty under section 273 of Act. 5. I am, therefore, of opinion that Income-tax Officer was justified in levying penalty under section 273(a) of Act. penalty of Rs. 89,476 levied by Income-tax Officer under section 273(a) of Act is, therefore, confirmed and appeal is dismissed." 7. assessee-company is now in appeal and learned counsel reiterated arguments as had been advanced before Commissioner (Appeals). We accordingly do not repeat them here. learned departmental representative, on other hand, supported orders of ITO and Commissioner (Appeals) and urged that penalty be confirmed. reference was also made to decision of Hon'ble Gujarat High Court in case of CIT v. Bharat Machinery & Hardware Mart [1982] 136 ITR 875. 8. We have weighed arguments advanced on both sides and have also perused paper book filed by appellant. It is apparent that ITO and Commissioner (Appeals) have been swayed by fact that claim of assessee under section 35B for earlier assessment years had been turned down. They also considered judgment in case of J. H. & Co. (supra) as going against appellant-company in respect of substantial portion of expenditure claimed for weighted deduction under section 35B. However, they failed to appreciate fact that judgment in case of J. H. & Co. (supra) was delivered only on 17-6-1978 which was well after date of filing of estimate. As regards assessment year 1974-75 in which claim under section 35B was rejected by ITO, it is seen that appeal before Commissioner (Appeals) was decided only on 10-4-1980 and order received by appellant much later. These facts show that assessee at time of filing estimate on 12-12-1979 was under bona fide belief that claim under section 35B as worked out by him was allowable and could be agitated in view of certain judgments of Tribunal which he felt supported his claim. It is further observed that all these facts weighed with IAC during course of proceedings for waiver of interest under section 215 of Act. following observations in his order lend credence to this line of thinking: "The question to be examined is to see whether assessee-company was under bona fide belief that it was entitled to weighted deduction in respect of aggregate sum of Rs. 29,26,608. As already stated, estimate was filed on 12-12-1977. Shri C. C. Shah, CA appearing for assessee- company has cited five decisions of Tribunals Bombay and Calcutta in support of assessee-company's belief that impugned expenditure was of nature entitled to weighted deduction in terms of section 35B. His contention is that tribunal's decisions cited by him are all on date prior to 12-12-1977. As for Commissioner (Appeals)'s order in assessee- company's own case, it is dated 10-4-1980. As for decision of Tribunal, Special Bench, Bombay in case of J. H. & Co. v. Second ITO [1982] 1 SOT 150, it was delivered on 17-6-1978." 9. We also observe that in course of assessment proceedings ITO has nowhere opined that claim under section 35B was false. Even at time of filing estimate on 12-12-1977, assessee had clearly indicated claim under section 35B which was quantified by him according to what he felt was correct basis. Even his returned figure was same as figure shown in estimate, namely, loss of Rs. 3,59,233. It also does not appear to us to be case where legitimate dues of Government in form of taxes were sought t o be kept beck by making baseless claim. company not only made claim, but agitated for its allowability before ITO. We do not know whether is was taken up further before Commissioner (Appeals). 10. In light of above facts and nothing to contrary brought on record by departmental representative, we have no hesitation in reversing order of Commissioner (Appeals). We do hold that assessee- company at time of filing estimate was under bona fide belief that claim under section 35B as quantified by it merited allowance from its total income. facts do not provide contrary view to be taken. decision cited by departmental representative is of no avail to case of revenue inasmuch as point involved therein was levy of interest under section 217(1A) for failure to file estimate under section 212(3A) of Act. Court decided in favour of assessee. 11. We accordingly reverse order of Commissioner (Appeals) and cancel penalty of Rs. 89,476 imposed by ITO. appeal is allowed. *** MADHUSUDAN VEGETABLE PRODUCTS CO. LTD. v. INCOME TAX OFFICER