Court directs reassessment based on Commissioner's order & assessee's evidence for asset value reduction.

The Court set aside the Tribunal's decision, directing the Assessing Officer to re-do the assessment based on the Principal Commissioner's order and the documents provided by the assessee's counsel to substantiate the reduction of asset value due to bad debts/provisions written off.

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Issues involved:
The judgment involves issues related to the disallowance of provision for non-performing assets (NPA) under Section 36(1)(vii) of the Income Tax Act, the authority of the Principal Commissioner to revise the assessment order, and the interpretation of the Supreme Court judgment in Vijaya Bank v. Commissioner of Income-Tax.

Issue 1: Disallowance of NPA Provision:
The respondent, a scheduled bank, filed its return of income for the assessment year 2015-2016, declaring a net loss. The assessment under Section 143(3) disallowed an amount under Section 14A. The Principal Commissioner found an excess provision made towards NPA, not allowable as a deduction under Section 36(1)(vii). The Income Tax Appellate Tribunal allowed the assessee's appeal, relying on the Vijaya Bank case.

Issue 2: Revision of Assessment Order:
The revenue appealed against the Tribunal's decision, questioning the legality of the Principal Commissioner's order and the Tribunal's interference with it. The revenue argued that the failure to consider the excess provision for NPA as non-deductible under Section 36(1)(vii) made the assessment order erroneous and prejudicial to the revenue's interests, justifying the revision by the Principal Commissioner.

Issue 3: Interpretation of Vijaya Bank Case:
The Court discussed the Vijaya Bank case, emphasizing the requirement for banks to close individual debtor accounts or reduce the Loans and Advances Account for bad debts. The revenue contended that the Tribunal erred by not verifying if the assessee had reduced the value of assets by the bad debts claimed as irrecoverable. The Court found that the Tribunal should have verified this factual aspect and set aside the Tribunal's decision in favor of the revenue.

Separate Judgment:
The judgment was delivered by Honourable Mr. Justice A.K. Jayasankaran Nambiar and Honourable Mr. Justice Mohammed Nias C.P. The Court set aside the Tribunal's decision, directing the Assessing Officer to re-do the assessment based on the Principal Commissioner's order and the documents provided by the assessee's counsel to substantiate the reduction of asset value due to bad debts/provisions written off.

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