2024 (2) TMI 1280 - AT - Income Tax

AO's legally tenable view on section 36(1)(viia) standard asset provision deduction invalidates section 263 revision proceedings

ITAT Pune held that revision proceedings under section 263 were invalid where the AO had adopted one of two legally possible views regarding section ... Validity of revision proceedings u/s 263 - Adoption of either of view by AO - allowability under section 36(1)(viia) - HELD THAT:- As observed that different benches of ITAT have taken different views on the issue of allowability under section 36(1)(viia) deduction for provision for standard assets. The ITAT Indore Bench in the case of Vikramaditya Nagrik Sahkari Bank Maryadit Vs. ACIT [2018 (3) TMI 1516 - ITAT INDORE], Kotak Mahindra Bank Limited [2023 (2) TMI 1005 - ITAT MUMBAI] and Dy.CIT Vs. M/s.Punjab Gamin Bank [2016 (6) TMI 1443 - ITAT AMRITSAR] = had held that deduction under section 36(1)(viia) is allowable for provision for standard assets which is basically in the nature of bad & doubtful debts. As relying on AMITABH BACHCHAN [2016 (5) TMI 493 - SUPREME COURT] and MEPCO INDUSTRIES LIMITED. [2006 (11) TMI 164 - MADRAS HIGH COURT] when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263. In this case, applying the above principle of law, it is held that assessment order is not erroneous and prejudicial to the interest of the revenue and hence the order under section 263 is bad in law. Accordingly, appeal of the assessee is allowed. Issues Involved:1. Validity of revision proceedings under section 263 of the Act2. Deduction claimed under section 36(1)(viia) of the Act on standard assetsIssue 1: Validity of revision proceedings under section 263 of the ActThe appeal was filed against the order under section 263 of the Income Tax Act, 1961, challenging the validity of the revision proceedings initiated by the Principal Commissioner of Income Tax. The grounds of appeal included contentions that the assessment order was not erroneous or prejudicial to the interest of the revenue, and that the proceedings under section 263 cannot be initiated on interpretational issues. The Appellate Tribunal noted that the Principal Commissioner set aside the assessment order to examine the issue of bad and doubtful assets and allowability under section 36(1)(viia) of the Act. The Tribunal considered various decisions and legal arguments put forth by both parties before reaching a decision.Issue 2: Deduction claimed under section 36(1)(viia) of the Act on standard assetsThe dispute revolved around the deduction claimed under section 36(1)(viia) of the Act for provision made for standard assets. The Principal Commissioner observed that the provision for standard assets does not fall under the purview of bad and doubtful debts as per the Act. The Appellate Tribunal examined different views taken by various ITAT benches on this issue. The Tribunal considered case laws, including decisions by the Hon'ble Supreme Court and High Courts, emphasizing that when two views are legally possible and the Assessing Officer adopts one view, the Assessment Order cannot be deemed erroneous for the Commissioner to invoke jurisdiction under section 263. The Tribunal concluded that the assessment order was not erroneous and prejudicial to the interest of the revenue, thus allowing the appeal of the assessee.This summary provides a detailed overview of the legal judgment, highlighting the key issues involved and the Tribunal's findings on each issue.