2010 (7) TMI 150

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.... the ITAT had erred in law in dismissing the Revenue's appeal whereby penalty under Section 271(1)(c) of Act, 1961 amounting to Rs. 11,85,500/- levied by the assessing officer had been deleted. She contended that the assessee's claim with regard to bad debts relating to investment in shares, not being the business of assessee, cannot be held to be bona fide. She relied upon a judgment of Supreme Court in Union of India Vs. Dharamendra Textiles Processors, (2008) 13, SCC 369. 3. In our opinion, ITAT in its impugned order has given cogent reasons for not interfering with the order of the Commissioner of Income Tax (Appeal) (in short "Commissioner"). The relevant portion of the impugned order is reproduced hereinbelow:- "7. It is not in ....

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....on that in view of the very poor financial conditions of Mr. Gautam Nemani, the balance amount of Rs. 30,00,000/- due from him may be treated as bad debts and be written of in that year. It is thus clear that writing off of the amount of Rs. 30,00,000/- to the profit loss account is pursuant to the resolution taken by the Board of Directors on March 09, 2001. It is not the case that the amount has been written off at the end of the year after finalization of accounts of the assessee so as to presume that assessee intended to reduce its taxable income to evade payment of taxes. There is no material available on record to entertain any doubt or suspicion about the veracity of the resolution taken on March 09, 2001in the Board meeting. At the ....

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....that the assessee had the authority to pursue the business of investment in shares. However, after examining and verifying subsequent conduct of the assessee, the Tribunal has taken a view that there was no other circumstances brought on record to show that the assessee's intention would he advanced money to Mr. Gautam Nemani was to purchase share to be held as stock in trade of business of dealing in shares. Therefore, the Tribunal held that the loans in question cannot be considered as one which occurred in the course of any business which the assessee carried on or intended to carry on. However, in the light of the Board's resolution dated 04.12.1987, there could be a bonafide reason for the assessee to treat the advances given to Mr. Ga....