Tribunal allows deduction for bad debts, dismisses revenue's appeal, and partly allows assessee's appeal.

The tribunal upheld the reopening of assessment citing tangible information indicating possible income escapement. Recovery of bad debts written off in rural branches was allowed as a deduction subject to verification by the AO. The disallowance under Section 40(a)(ia) was allowed for statistical purposes pending evidence from the assessee. The tribunal affirmed that Section 115JB did not apply to the bank, as per the CIT(A)'s decision. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Reopening of Assessment
2. Recovery in respect of rural bad debts written off
3. Disallowance u/s 40(a)(ia)
4. Applicability of Section 115JB

Detailed Analysis:

Reopening of Assessment:
The assessee challenged the reopening of the assessment on the grounds that it was done after four years without any failure on their part to disclose necessary information. The reassessment was initiated based on information from the TDS Wing, revealing non-deduction of TDS in certain cases. The tribunal upheld the reopening, citing that specific tangible information indicated possible income escapement, thus justifying the reassessment. The tribunal referenced the Supreme Court's decision in Raymond Woollen Mills Ltd. v. ITO, stating that a prima-facie opinion of underassessment was sufficient to reopen the case.

Recovery of Bad Debts Written Off:
The assessee claimed a deduction for recovery of bad debts written off in rural branches, arguing that these were not previously claimed as deductions. The tribunal noted that banks are allowed a deduction under Section 36(1)(viia) for bad debts, creating a reserve to offset bad debts. Since the bad debts written off were allowed as deductions, the recovery of such amounts should be taxable under Section 41(4). The tribunal referenced a prior decision in the assessee's favor, subject to verification by the AO, and thus allowed the claim for statistical purposes.

Disallowance u/s 40(a)(ia):
The disallowance was based on the assessee's failure to deduct TDS on certain interest payments. The assessee argued that TDS was automatically deducted by the system, and non-deduction was due to specific reasons like exemption certificates. The tribunal granted the assessee another opportunity to furnish evidence supporting non-deduction or to prove the applicability of the second proviso to Section 40(a)(ia), allowing the claim for statistical purposes.

Applicability of Section 115JB:
The revenue contested the CIT(A)'s decision that Section 115JB was not applicable to the assessee bank. The tribunal upheld the CIT(A)'s decision, referencing the Bombay High Court's ruling in the assessee's favor for AY 2005-06, which stated that Section 115JB did not apply to banking companies governed by the Banking Regulation Act, 1949.

Conclusion:
The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes. The tribunal's decision was pronounced on 03rd March 2021.

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