Penalty should not be imposed if full disclosure of the facts of the case made by the Assessee

The Delhi Bench of the Income – tax Appellate Tribunal (Delhi Tribunal), in the case of Vertex Customer Services (India) Pvt. Ltd. (the taxpayer) held that exclusion of provision of doubtful debts from the operating expenses being a debatable issue and considering full disclosure made by the taxpayer; the taxpayer could not be held liable for penalty.

Facts of the Case

• The taxpayer was engaged in the business of running call centre. From the financial services provided, the taxpayer incurred a loss to the tune of Rs. 4.27 crores on account of costs related to excess capacity, costs incurred being first year of operations and also a provision of doubtful debts of Rs. 2.3 crores.
• The provision for doubtful debts pertained to the net costs of services rendered by the taxpayer to the parent company which was ultimately wound up.

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