Section 263 revision, bad-debt write-off, and buy-back tax treatment: factual verification and account write-off principles control the outcome.

Section 263 revision is available only where the assessment order is both erroneous and prejudicial to the Revenue, and it cannot displace a plausible view taken after enquiry. In relation to reversal of provision for onerous contract and Ind AS 116 amortisation or lease adjustments, the absence of specific verification meant the claims required fresh factual examination by the Assessing Officer. For bad debts, the write-off in the accounts is sufficient subject to section 36(2), and actual irrecoverability is not required. Buy-back tax under section 115QA was also accepted where challans showed payment and no shortfall was demonstrated.

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Issues: (i) whether revision under section 263 was sustainable in respect of reversal of provision for onerous contract and related reversal credited in the books, (ii) whether the revision could survive in respect of bad debts written off and buy-back tax under section 115QA, and (iii) whether the revision could be sustained in respect of Ind AS 116 amortisation and lease-related adjustments.

Issue (i): whether revision under section 263 was sustainable in respect of reversal of provision for onerous contract and related reversal credited in the books.

Analysis: The revisionary power could be exercised only where the assessment order was both erroneous and prejudicial to the interests of the Revenue. On the record, no specific enquiry had been made in assessment on the deduction claimed under the head reversal of provision for onerous contract, and the assessee's claim required factual verification. The Tribunal also noted that if a provision had been disallowed in an earlier year and later reversed, the same credit could not be subjected to double taxation, while a reversal of a provision not earlier allowed as deduction would not automatically give rise to taxable income. As the factual position was not ascertainable from the record, the matter required verification by the Assessing Officer.

Conclusion: The revisional order was upheld only to the extent of directing verification, and the issue was remanded for fresh examination in favour of neither side finally.

Issue (ii): whether the revision could survive in respect of bad debts written off and buy-back tax under section 115QA.

Analysis: For bad debts, the assessee had furnished details during assessment and the debt was written off in the accounts. After the amendment to section 36(1)(vii), it is sufficient if the bad debt is written off as irrecoverable in the assessee's accounts, subject to section 36(2); proof of actual irrecoverability is not required. The Tribunal held that enquiries into identity, genuineness, creditworthiness, or whether the debt was recognised as income in the debtor's books were not relevant tests for allowability of the deduction. The Assessing Officer's view, taken after enquiry, could not be displaced under section 263. On the buy-back issue, the assessee had furnished challans evidencing payment of tax under section 115QA, and no contrary material or short payment was shown.

Conclusion: The revision was set aside on both bad debts and buy-back tax, in favour of the assessee.

Issue (iii): whether the revision could be sustained in respect of Ind AS 116 amortisation and lease-related adjustments.

Analysis: The Assessing Officer had not specifically verified the allowability of the amortisation claim arising from Ind AS 116. The allowability of the deduction had to be tested independently under the Act, and could not be rejected merely because accounting adjustments were made, unless the claim was shown to violate a specific statutory provision. The Tribunal found that the matter required factual verification and proper adjudication by the Assessing Officer.

Conclusion: The revisional order was modified and the issue was remitted for fresh adjudication, with the limited outcome being in favour of the assessee to the extent of restoration for reconsideration.

Final Conclusion: The revision order was sustained only in part, the bad-debt and buy-back findings were deleted, and the remaining disputed items were sent back for verification and fresh decision.

Ratio Decidendi: Revision under section 263 cannot replace a possible and plausible view taken after enquiry, and a bad-debt claim is allowable when the debt is written off in the accounts, subject to section 36(2), without requiring proof of actual irrecoverability.

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