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2014 (6) TMI 42 - HC - Income TaxDeletion of penalty u/s 271(1)(c) of the Act – Debt not written off even after the amendment of Section 36(1) (vii) and 36(2) of the Act - No material to show that the Government had refused to pay any amount - Held that:- The Tribunal was of the view that the assessee has credited a sum of Rs. 3.5 crores towards interest on advances given to Government of Punjab and CONWARE – Relying upon South India Surgical Co. Limited [2006 (1) TMI 111 - MADRAS High Court] - penalty proceedings are not automatic in the sense that once addition is made, the same will not be followed by penalty - the assessee has furnished the explanation which seems to be bonafide before the AO for making this entry for provision towards interest - The penalty 'cannot be levied unless and until there is concealment or when the explanation which has been filed before the AO and which is found not bonafide - wherever assessee might have made a claim on bonafide basis and that claims is ultimately found to be incorrect, the same will not lead to the penal consequence. The Tribunal noticed that the entry towards interest on advances given to Government of Punjab and CONWARE was made by the assessee - principal amount due from Punjab Government as well as CONWARE was written off in the next subsequent year i.e. AY 2005-06 - The assessee was not hoping to recover the interest and entry of interest was made only for memorandum purposes - the explanation furnished by the assessee appeared to be bonafide in making entry for provision towards interest - The assessee provided the interest on accrual basis but simultaneously made a debit entry against such interest which was accepted to be purely bonafide – thus, the order of the Tribunal is upheld – Decided against Revenue.
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