Appeal allowed on grounds of provision for bad debts & profit reconciliation.

The appeal was allowed on both grounds. The case was remanded for further examination of the provision for bad and doubtful debts under Section 36(1)(viia) of the Income Tax Act, 1961, to determine if it was correctly made in accordance with the law. Additionally, the Assessing Officer was directed to verify the reconciliation statement submitted by the assessee regarding the difference in profit between the P&L account and computation of income, ultimately allowing the appeal on this ground as well.

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Issues:
1. Provision for bad and doubtful debts
2. Difference in the P&L account and computation of income

Analysis:

Provision for bad and doubtful debts:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) dismissing the claim of deduction on provision for bad and doubtful debts under Section 36(1)(viia) of the Income Tax Act, 1961. The Assessing Officer disallowed the deduction as the provision was not made in the books of accounts. However, the Co-Ordinate Bench of ITAT noted that Co-Operative Banks are eligible for the deduction, and the revised profit and loss account submitted by the assessee supported the claim. The case was remanded to the Assessing Officer to examine if the provision was correctly made in accordance with the law.

Difference in the P&L account and computation of income:
Another issue raised was regarding the difference between the profit as per the P&L account and the profit declared in the computation of income due to adjustments in branch accounts. The assessee claimed to have submitted a reconciliation statement, but the CIT(A) held otherwise. The Tribunal directed the Assessing Officer to verify the reconciliation statement before accepting it, ultimately allowing the appeal of the assessee on this ground.

In conclusion, the appeal of the assessee was allowed on both grounds, with the case being remanded for further examination of the provision for bad and doubtful debts and verification of the reconciliation statement for the difference in the P&L account and computation of income.

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