Penalty u/s. 271(1)(c) cannot be imposed on a debatable issue

It is observed that the assessee capitalized the expenses in relation to Cafeteria project as capital work in progress in earlier year. Such project did not take off and eventually the assessee claimed it as a business loss in the current year. It is clearly borne out from records that the assessee claimed deduction by disclosing complete particulars in this regard. Simply because the assessee did not succeed in the first appeal on this issue, it does not mean that penalty will be automatic.

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