Revision under section 263 cannot reopen a deduction issue already decided in appeal; bank provision deduction allowed.

The Commissioner could not invoke revisional jurisdiction under section 263 over the bank's deduction claim because the first appellate authority had already considered and allowed the same issue, and a matter merged in appeal is outside revision. The revisional order was therefore without jurisdiction and quashed. On merits, section 36(1)(viia) permits a statutory deduction for provision for bad and doubtful debts made by eligible banks, while section 36(1)(vii) and section 36(2)(v) operate only to prevent double deduction on a later write-off. As the bank had made the qualifying provision and had not claimed duplicate relief, the deduction was rightly allowable and the disallowance was unjustified.

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Issues: (i) Whether the Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of an issue already decided by the first appellate authority; (ii) Whether the assessee bank was entitled to deduction under section 36(1)(viia) of the Income-tax Act, 1961 notwithstanding the Commissioner's view regarding a separate provision for rural advances and the interaction with section 36(1)(vii).

Issue (i): Whether the Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of an issue already decided by the first appellate authority.

Analysis: The assessment order under section 143(3) had been carried in appeal before the first appellate authority, which expressly dealt with the relief under section 36(1)(viia) and directed allowance of the deduction. The revisional power under section 263 does not extend to matters that have merged in the appellate order. Since the same issue had been considered and decided in appeal, the Commissioner could not revise that part of the assessment order.

Conclusion: The revision under section 263 was without jurisdiction and was liable to be quashed.

Issue (ii): Whether the assessee bank was entitled to deduction under section 36(1)(viia) of the Income-tax Act, 1961 notwithstanding the Commissioner's view regarding a separate provision for rural advances and the interaction with section 36(1)(vii).

Analysis: Clause (viia) grants a deduction for any provision for bad and doubtful debts made by eligible banks, quantified by reference to the prescribed percentages of total income and rural advances. Clause (vii) operates independently and, read with the proviso and section 36(2)(v), is intended only to prevent double deduction when a debt already covered by the provision is later written off. The assessee had made a provision for bad and doubtful debts and had not claimed any double deduction on the same items. The Commissioner's insistence on a separate rural-branch-specific provision and his disallowance in toto were therefore misconceived.

Conclusion: The assessee was entitled to the deduction under section 36(1)(viia), and the disallowance was unjustified.

Final Conclusion: The impugned revisional order failed both on jurisdiction and on merits, and the assessee's claim for deduction under section 36(1)(viia) stood allowed.

Ratio Decidendi: Where a claim has been considered and decided by the first appellate authority, the Commissioner cannot revise the assessment on that point under section 263; and section 36(1)(viia) allows a separate statutory deduction for provision for bad and doubtful debts, while section 36(1)(vii) and section 36(2)(v) operate only to prevent double deduction.

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