Commissioner Of Income Tax vs Fracht Forwarding & Travel (P) ...
2010 Latest Caselaw 4185 Del

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*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+       ITA 1318/2010
COMMISSIONER OF INCOME TAX               ..... Appellant
                  Through: Mrs. Prem Lata Bansal, Advocate

                        versus

FRACHT FORWARDING &
TRAVEL (P) LTD..                                                ..... Respondent

Through: None

% Date of Decision: 09th September, 2010

CORAM:

HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment? No.

2. To be referred to the Reporter or not? No.

3. Whether the judgment should be reported in the Digest? No.

MANMOHAN, J:

1. The present appeal has been filed under Section 260A of the

Income Tax Act,1961 (hereinafter referred to as "Act") challenging the

order dated 04th June, 2009 passed by the Income Tax Appellate

Tribunal (in short "Tribunal") in ITA No. 1591/Del/2009 for the

Assessment Year 2001-2002.

2. It is pertinent to mention that in the present case the Tribunal has

deleted the penalty imposed by the Assessing Officer (in short, "AO")

under Section 271(1)(c) of the Act. So far as the penalty with respect to

provision for doubtful debts was concerned, the Tribunal observed that

not only the explanation furnished by the respondent-assessee was

bonafide but also the said finding recorded by the Commissioner of

Income Tax (Appeals) [in short, "CIT(A)] had not been controverted by

the Revenue. With regard to loss on sale of assets, the Tribunal

observed that the assessee had duly reduced the sale proceeds from the

gross block of assets for computing depreciation. According to the

Tribunal, the respondent-assessee had committed a bonafide mistake in

not adding it back while computing the taxable income. The Tribunal

further held that the mistake was so apparent that the AO had not

carried out any detailed investigation to find out the same. Accordingly,

the Tribunal held that the explanation offered by the respondent-

assessee was bonafide and genuine.

3. Mr. N.P. Sahni, learned counsel for the Revenue submitted that

the Tribunal had erred in law in deleting the penalty imposed by the AO

under Section 271(1)(c) of the Act. Mr. Sahni also submitted that the

Tribunal had erred in accepting the explanation offered by the

respondent-assessee as bonafide. In this connection, Mr. Sahni relied

upon a judgment of Supreme Court in Union of India Vs.

Dharamendra Textiles Processors, (2008) 13, SCC 369.

4. In our opinion, the decision in Dharamendra Textile Processors

(supra) must be understood to mean that applicability of Section

271(1)(c) would depend upon the existence or otherwise of the

conditions expressly stated in the said Section and once the said Section

was applicable, the authority concerned would have no discretion in

imposing penalty. Consequently, if the assessee is able to bring its case

within Explanation 1 to Section 271, then no penalty can be levied on

it.

5. In the present case, it is apparent that because of pendency of

legal proceedings being initiated against the debtors, the respondent-

assessee had not actually written off its debts in the books of account.

We are also in agreement with the Tribunal that the explanation

furnished by the respondent-assessee in the present case is bonafide and

as the said finding had not been controverted by the DR before the

Tribunal, we are of the opinion that the Tribunal could not have reached

any other conclusion. Consequently, the present appeal being devoid

of merit is dismissed in limine.

MANMOHAN, J

CHIEF JUSTICE SEPTEMBER 09, 2010 js