TaxTMI 
TaxTMI 
2025 (1) TMI 30
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act dated 23.09.2019 was issued and served on the assessee. Subsequently, notice u/s 142(1) of the Act was also issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The case was selected for complete scrutiny under the E-assessment Scheme, 2019 on the following issues: S. No. Issues i. Claim of Any other Amount Allowable as Deduction in Schedule BP ii. Verification of Genuineness of Expenses iii. Business Purchase iv. Depreciation Claim v. Default in TDS vi. Default in TDS & Disallowance for such Default vii. Refund Claim viii. Business Loss ix. ICDS Compliance and Adjustment x. Disallowance u/s 40A(7) (Gratuity provision) xi. Expenses incurred for Earning Exempt Income xii. Excess Contribution to Provident Fund, Superannuation Fund or Gratuity Fund xiii. Capital Gains/Income on Sale of Property xiv. Business Expenses 3. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 27.04.2021 determining the total loss of the assessee at Rs. 1569,56,31,309/- under the normal provisions and determi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s confirmed the balance addition / disallowance made by the Assessing Officer at Rs. 144.59 crores. Similar issue was involved in this case for assessment years 2012-13 to 2017-18 and the Hon'ble ITAT has decided the issue as per the above discussion for assessment years 2011-12 to 2015-16 and accordingly confirmed the part of the addition/disallowance on this issue. 2.3 It is also seen that the decision of the Hon'ble ITAT in respect of the relief allowed to the assessee i.e. restricting the disallowance under section 36(1)(viia) to the total provision on account of bad and doubtful debts instead of restricting the same only to the extent of actual provision related to rural advances, has not been accepted by the Department and the Department has filed appeal before the Hon'ble High Court for A.Y.s 2006-07 to 2010-11 and 2013-14 to 2015-16. Therefore, the issue of relief granted by the Hon'ble ITAT has also not yet reached finality. 2.4 During the year under consideration, the assessee has claimed deduction under section 36(1)(viia) of the Act at Rs. 1137.14 crores whereas provision towards rural advances was at Rs. 206.57 crores only However, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssion of the assessee is not acceptable. 3. In view of the above facts, it is seen from records that the FAO has allowed deduction under section 36(1)(viia) of the Act to the turn of Rs. 1137,14,39,790/- without making proper inquiries, without making proper verification and without examining the actual facts of the case which are required to be verified for allowing such a deduction in terms of provisions of Rule 6ABA read with section 36(1)(viia) and section 36(2)(v) of the Income Tax Act, 1961. Failure on the part of the FAO rendered the assessment order dated 27/04/2021 under section 143(3) read with section 144B of the Act as erroneous in so far as it is prejudicial to the interests of the revenue. 3.1 Since proper enquiries with regard to correctness of the claim have not been made, the order passed u/s. 143(3) r.w.s. 144B of Income-tax Act, 1961, dated 27/04/2021 is prejudicial to the interests of revenue. Thus both the conditions specified under section 263 of the Act are satisfied in this case and it is a fit case to invoke provisions of the said section. Hence, the assessment order dated 27/04/2021 for the AY 2018-19 is hereby partly set aside to the fil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....42(1) of the Act issued by the Assessing Officer on 13.01.2021 drew the attention of the Bench to question No.17 which reads as under: "17. In Page No.12 of ITR, you have shown an amount of Rs. 41937413926/- regarding provision for bad and doubtful debts u/s 36(1)(viia). In this regard, kindly furnish the details of deduction claimed along with calculation made as per section u/s 36(1)(viia) r.w.r. 6ABA of Income-tax Rules, 1962. Please justify allowability and explain the same." 9. Referring to the reply dated 29.01.2021 given by the assessee, copy of which is placed at pages 40 to 49 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply at point No.17 (at page 47) which reads as under: "Point No. 17 Bank provides for bad and doubtful debts as per the prudential norms of RBI in the books of account and the same is offered to tax irrespective of the amount. However, an Incentive has been given to the Banks by providing the deduction for bad and doubtful debts u/s 36(1)(viia) of the Income Tax Act, 1961 i.e. 10% of average rural advances and 8.5% of taxable income before claiming deduction under this section. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earlier years, these expenses should not be categorised as Prior Period Expense. Alternatively, even if such expenses are considered as Prior Period Expenses, it should be allowed in the current year since the liability for the same had been crystalized in the relevant previous year and the same was not claimed in any earlier years. Hon'ble ITAT. Pune in the order refereed above, had also given relief on this issue." 10. Referring to page 69 of the appeal set, the Ld. Counsel for the assessee drew the attention of the Bench to the Annexure-7 which is as under: A.Y. 2018-19 Working of Provision for Bad and Doubtful Debts Eligible u/s 36(1)(viia) 1 Total Number of Branches 1846 2 Total Number of Rural Branches (As per 2011 Census) 615 3 Average Aggregate Advances at Rural Branches 1137 14 39 790 4 Total Income before making any deduction under clause 36(1)(viia) - 5 10% of Average Aggregate Rural Advances 11371439790 6 8.50% of Total Income before making any deduction under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom that of A.Y. 2016-17 and be made in the year under consideration." 12. Referring to the reply given by the assessee vide letter dated 04.04.2021, the Ld. Counsel for the assessee drew the attention of the Bench to point No.2 which reads as under: "Point No.2 Deduction u/s 36(1)(viia) Bank provides for bad and doubtful debts as per the prudential norms of RBI in the books of account and the same is offered to tax irrespective of the amount However, an incentive has been given to the Banks by providing the deduction for bad and doubtful debts u/s 30(1)(viia) of the Income Tax Act, 1961 i.e. 10% of average rural advances and 8.5% of taxable income before claiming deduction under this section. The procedure for calculation of 10% of average rural advances made by rural branches has been prescribed under Rule GABA of the Income Tax Rules 1962. Bank was having 515 rural branches as on 31 March 2018. Accordingly, the advances of such branches had been considered for calculation of eligibility, which were verified/audited by branch statutory auditors and then consolidation of the same had also been verified/audited by central statutory auditors, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a High Court against the decisions in the case of ING Vysya Bank and Vijaya Bank. Through in the case of Vijaya Bank an appeal was filed by the Department against the order of the ITAT, the issue relating to deduction u/s 35(1)(viia) was not challenged. Further, in the bank's own case, Hon'ble ITAT, Pune in ITA No 1370 of 2014 relating to AY 2010-11, ITA No. 634 & 635 of 2017 relating to AY 2011-12 & 2012-13 and in ITA No. 114 & 780 of 2018 relating to AY 2013- 14 & 2014-15, has also decided the similar issue in favour of Bank and allowing the claim u/s 36(1)(viia) for the total provisions made for bad and doubtful debts subject to limit specified under Rule 6ABA. Therefore, it is submitted that deduction u/s 36(1)(viia) should not be restricted to provisions made for rural advances only and the total claim of Rs. 1137,14,39,790/- u/s 36(1)(viia) should be allowed considering the above submissions Though the addition had been made u/s 36(1)(viia) during assessment for AY 2016-17 and 2017-18, the same has been challenged in appeal, which is pending adjudication. Further the addition made u/s 36(1)(viia) during AY 2010-11 to AY 2014-15 during assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee has allowed the deduction, therefore, the Ld. PCIT without applying his mind should not have invoked the jurisdiction u/s 263 of the Act. He also relied on the following decisions: i) PCIT vs. R.K. Jain Infra Projects (P.) Ltd. (2024) 159 taxmann.com 387 (SC) ii) CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) iii) PCIT vs. R.K. Jain Infra Projects (P.) Ltd. (2023) 150 taxmann.com 313 (Del) iv) PCIT vs. Clix Finance India (P.) Ltd. (2024) 160 taxmann.com 357 (Del) v) Prudential Assurance Co. Ltd. vs. DIT (IT) (2010) 191 Taxman 62 (Bom) vi) CIT vs. M/s. A.R. Builders & Developers P Ltd. (2020) 425 ITR 272 (Mad) vii) KN Agarwal vs. CIT (1991) 189 ITR 769 (All) viii) CIT vs. M/s. Dhaneswar Rath Institute of Engineering & Medical Sciences (2023) 458 ITR 509 (Ori) ix) DCIT vs. Bank of Maharashtra 2020 (3) TMI 877 - ITAT, Pune x) Madhya Gujarat Vij Company Ltd. vs. PCIT 2024-TIOL-1019-ITAT-Ahm xi) PCIT vs. M/s. Sinhotia Metals and Minerals Pvt. Ltd. (2023) 455 ITR 736 (Cal) xii) Karan Jain vs. PCIT (2024) 465 ITR 1 (Gau) 16. The Ld. DR on the other hand heavily re....