PER ANIL CHATURVEDI, AM :

1. This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A)-III, Pune dt. 17.12.2009 for the assessment year 2004-05.

2. The relevant facts as culled out from the material on record are as under :-

2.1 Assessee is a company stated to be engaged in the business of Printing and Publishing of newspapers and periodicals. Assessee filed its return of income for A.Y. 2004-05 on 30.10.2004 declaring total income of Rs.25,92,74,910/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the vide order   / Date of Hearing : 24.10.2017   / Date of Pronouncement: 17.01.2018 dt.30.08.2006 and the total income was determined at Rs.28,54,84,860/- inter-alia by disallowing legal expenses of Rs.90,70,080/-, expenses towards repairs and maintenance of Rs.1,08,89,864/- and expenses towards publicity expenses Rs.62,50,000/-. On the disallowance of legal expenses (Rs.90,70,080/-) and expenses of repairs and maintenance (Rs.1,8,89,864/-), AO vide order dt.31.03.2009 levied penalty u/s 271(1)(c) of the at Rs.71,60,630/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.17.12.2009 (in appeal No.PN/CIT(A)-III/Cir.6/430/09-10) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds :

On the facts and under the circumstances of the case the learned Assessing Officer and CIT Appeals erred in :

1. holding that the assessee concealed the income and /or concealed the particulars of income attracting provisions of Sec. 271(1)( c) of the Income Tax Act, 1961 and levying the penalty of Rs.71,60,630/-. This action being bad in law it is prayed that the penalty of Rs.71,60,630/- be deleted.

2. invoking the provisions of Sec. 271(1) ( c) and levying penalty of Rs. 71,60,630/-. The action being bad in law it is submitted that that the penalty be deleted.

3. not accepting and / or not considering and / or holding that the arguments the explanation given submissions made, and arguments advanced by the assesee are not convincing and as such are not acceptable and thereby levying penalty of Rs. 71,60,630/- u/s 271(1) (c). It is submitted that the explanations given by the assesee be considered and accepted and the penalty be deleted.

4. holding that the disallowance of legal expenses of Rs.90,70,080/-- on the ground that they are not incurred wholly and exclusively for the purpose of business, as furnishing of inaccurate particulars of income and / or concealment of income attracting provisions of Sec. 271(1)( c) and thereby levying penalty U/s 271(1)(c). The action being bad in law It is submitted that the penalty levied be deleted.

5. holding that the treatment of repairs and maintenance expenses of Rs. 1,08,89,854/- as capital expenditure by the AO amounts to furnishing of inaccurate particulars and / or concealment of income attracting provisions of Sec. 271(1) (c) and thereby levying penalty U/s 271(1) (c). The action being bad in law it is submitted that the penalty levied be deleted.

3. Before us, at the outset, Ld.A.R. submitted that though assessee has raised several ground but the sole controversy is with respect to levy of penalty on the expenses disallowed by AO.

4. Before us, Ld.A.R. submitted that out of the expenses towards repairs and maintenance the AO disallowed Rs.1,08,89,864/- as he was of the view that the expenditure was on capital account and therefore not allowable as revenue expenditure. He submitted that against the order of AO, whereby the expenses were disallowed, the matter was carried before Tribunal. He submitted that the Co- ordinate Bench of the Tribunal while deciding the appeal in ITA Nos.724 and 736/PUN/2008 order dt.13.06.2014 has decided the issue in favour of the assessee. He placed on record the copy of the aforesaid decision and pointed to the relevant findings of the Tribunal. He therefore submitted that since the addition itself has been deleted and the matter has been decided in favour of the assessee, no penalty on such addition survives. With respect to the penalty on the disallowance of legal expenses, Ld.A.R., submitted that the expenses were incurred on suits filed against the assessee relating to share transfer. The submission of the assessee that the expenditure was incurred wholly and exclusively for the purpose of business was not found acceptable to the AO. Ld.A.R. further submitted that the allowability of legal expenses is a debatable issue in view of the fact that against the quantum disallowance made and confirmed by the Appellate Authorities, assessee has filed appeal before the Honble Bombay High Court and the Honble Bombay High Court has admitted the appeal of assessee vide appeal No.2403 of 2011. He placed on record the copy of the aforesaid order of Honble High Court at page 18 of the paper book. He therefore submitted that when the issue of legal expenses is debatable in nature, the question of penalty on such debatable addition does not arise. He therefore submitted that the penalty be deleted. Ld.D.R. on the other hand, did not controvert the submissions made by Ld.A.R. but however supported the order of lower authorities.

5. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to levy of penalty u/s 271(1)(c) of the on the addition of Rs.1,08,89,864/- on account of repairs and maintenance and Rs.90,70,080/- on account of legal expenses. As far as the issue of disallowance of repairs and maintenance of Rs.1,08,89,864/- is concerned, we find that the quantum issue has been decided by the Co-ordinate Bench of the Tribunal in favour of the assessee. Once the quantum issue has been decided in favour of the assessee, the penalty on such addition does not survive. As far as the levy of penalty on disallowance of legal expenses is concerned, we find that the disallowance made by the AO was upheld by the Appellate Authorities. Against the order of Appellate Authorities, assessee carried the matter before Honble Bombay High Court and the Honble Bombay High Court vide order dt.04.03.2013 in ITA No.2403 of 2011 has admitted the issue as being a substantial question of law. When the Honble High Court has admitted the issue being as substantial question of law, then it becomes apparent that the addition is certainly debatable and in such a situation, penalty cannot be levied u/s 271(1)(c) of the on such debatable addition and for this proposition, we find support by the decision of Honble Bombay High Court in the case of CIT Vs. Nayan Builders and Developers reported in 368 ITR 722 (Bom). In view of the aforesaid facts, we direct the deletion of penalty on both the issues. Thus, the grounds of the assessee are allowed.

6. In the result, the appeal of assessee is allowed. Order pronounced on 17 th day of January, 2018. Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI)  ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER Pune;  Dated : 17 th January, 2018. Yamini # $& (/Copy of the Order forwarded to : 1.  / The Appellant 2.  / The Respondent 3. 4. 5 6. CIT(A)-III, Pune. CIT-III, Pune. " %%&,  &, / DR, ITAT, B Pune; , / Guard file. / BY ORDER // True Copy // ./ % & / Sr. Private Secretary  & , / ITAT, Pune.