JUDGMENT We heard counsel for Revenue. assessee filed its return on July 30, 1980, for assessment year 1980-81 declaring income of Rs. 21,97,794. income of assessee, however, was computed at Rs. 24,02,551 by Assessing Officer vide assessment order dated March 15, 1983. On basis of addition made by Assessing Officer, he initiated proceedings for penalty and imposed penalty of Rs. 7,10,155 under section 271(1)(c) of Income-tax Act, 1961. In appeal by assessee before Commissioner of Income-tax (Appeals), modification in order concerning addition in two categories was made. However, Commissioner of Income-tax held that part of penalty was leviable. Aggrieved thereby assessee filed second appeal before Incometax Appellate Tribunal. There was cross-appeal by Revenue as well. Tribunal considered matter threadbare in paragraph 6 of its order which reads thus: We have considered rival submissions as also decisions mentioned above. By now it is well-settled that mere disallowance of claim or making of addition in assessment is not sufficient to attract penalty under section 271(1)(c). One fact which is very glaring on face is that assessee is company in whose case rate of tax remains same. assessee-company maintained books of account and relevant records properly and regularly which were duly adjusted, audited and closed. All facts material to correct computation of total income had been furnished by assessee along with return and whatever clarifications/details were asked for during assessment proceedings, were also furnished, it is seen that as against returned income of Rs. 21,97,794, finally assessed income as result of order dated December 3, 1988, of Appellate Tribunal was only Rs. 15,54,009. Therefore, contention raised on behalf of assessee that income assessed was less than returned income and, therefore, more taxes were paid than due is correct and it was not case in which there was any postponement of payment of taxes. So far as addition of Rs. 97,740 out of professional and legal fee is concerned, details were given by 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 advocate who had not submitted their bills. distinction drawn by Inspecting Assistant Commissioner (Assessment) in penalty order between advances and expenditure was certainly technical. disallowance was confirmed by learned Commissioner (Appeals). claim could not be said to be false. Moreover there was no such finding in assessment proceedings. So far as item of Rs. 5,34,967 out of salaries, wages and bonus is concerned, assessee had given information vide letter dated October 17, 1982. Inspecting Assistant Commissioner (Assessment) had taken view that liability accrued in assessment year 1979-80 and not in assessment year 1980-81. assessee had explained vide letter dated February 28, 1985, that in amount was paid during previous year in question in consequence of decision of Supreme Court. This was not followed on ground that assessee was following mercantile system of accounting. It could not be said that any inaccurate particulars had been furnished by assessee. So far as amount of Rs. 8,013 representing duty draw back is concerned, assessee filed details vide letters dated October 18, 1982, January 27, 1983 and February 28, 1985. Inspecting Assistant Commissioner (Assessment) found that Rs. 8,013 were received during previous year. case of assessee was that amount was received against pending draw-back bills. amount had been already shown by way of income in succeeding years, though it was found taxable in assessment year in question. So far as amount of Rs. 62,500 is concerned, assessee had claimed amount of Rs. 1,25,000 on basis of decision to pay. disallowance was made of amount of Rs. 62,500 on basis that amount had not been paid. Since system of accounting followed by assessee was mercantile, it could not be said that claim made on basis of decision was false. So far as disallowance of Rs. 66,203 out of miscellaneous expenses is concerned, assessee had furnished details vide letter dated October 17, 1982. This disallowance was clearly debatable claim. It was rightly held by learned Commissioner (Appeals) to be bona fide one. next amount of Rs. 46,508 represented selling expenses. assessee had filed details with letter dated October 17, 1982. It showed that amount in question was incurred on account of travelling, boarding and lodging of representatives of various clients who visited premises for inspection of cables. This expenditure was treated as of nature of entertainment and, therefore, disallowance was made under section 37(2A). Here also claim could not be said to be other than bona fide or debatable. next item of Rs. 18,592 was added on account of section 37(3A). details were given by assessee, vide letter dated October 17, 1982. Inspecting Assistant Commissioner (Assessment) treated it as case of statutory disallowance. However, there is nothing on record to show that claim was false or not arguable. next item of Rs. 83,900 related to duty draw back written off in 1968-69. Inspecting Assistant Commissioner (Assessment) found that all draw-back records up to 1972 had been destroyed in 1976 and, therefore, irrecoverability was ascertained and decided in October, 1979. However, accounting year of assessee closed on May 31, 1979. It also appears that this account was allowed to assessee in assessment year 1981-82. This claim also appears to have been made bona fide. next amount represented for disallowance is of Rs. 16,300 under section 40A(5). Here we agree with learned Commissioner (Appeals) that claim was bona fide. Details were given by assessee vide letter dated October 17, 1982. Actually this amount was arrived at after rectification under section 154, original amount disallowed being Rs. 900. At time of penalty order, assessee s appeal against order under section 154 was pending. claim was plausible one. next amount involved is Rs. 14,362 representing compensation for belated supplies. This was allowed in 1981- 82 and another amount of Rs. 2,31,399 was also allowed in assessment year 198182. first item related to supplies on Singapore orders. facts relating to these claims show that claims were debatable though on basis of previous year ending on May 31, 1979. claims were allowed only for subsequent assessment year 1981-82. finding of learned Commissioner (Appeals) that these claims were false, is not sustainable on facts. This takes us to last item, namely, Rs. 21,618 which represents disallowance out of travelling expenses made under rule 6D. assessee had given details, vide letter dated October 17, 1982, wherein names of employees and amounts of expenditure incurred on each of them were detailed. Further details were filed by assessee, vide letters dated February 15, 1983 and February 28, 1985. disallowance was made on basis of view taken on rule 6D. After considering all facts and foregoing discussions, it could not be said that explanations furnished by assessee were false or that they were not bona fide or that complete facts relating to computation of assessee s income had not been furnished. Amounts which were ulti mately allowed in assessment year 1981-82, but which were claimed for assessment year 1980-81 were those which were claimed under bona fide belief that they pertained to assessment year in question. expenditure had either been directed to be allowed in assessment year 1979-80 or 1980-81 or 1981-82. It is pertinent to notice that Tribunal specifically recorded that there is no finding of income-tax authorities that assessee deliberately made false claims for claiming deduction. case of assessee that it did not include particular item in taxable items in bona fide belief was accepted. Tribunal, thus, cancelled penalty levied by Assessing Officer and partly maintained by Commissioner of Incometax (Appeals). findings recorded by Tribunal are concluded on facts and do not give rise to any question of law. Reference application is, accordingly, rejected. *** COMMISSIONER OF INCOME TAX v. ORIENTAL POWER CABLE LTD.