TaxTMI 
TaxTMI 
2025 (8) TMI 1664
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.... (Appeals), Income Tax Department NFAC, Delhi erred in sustaining the disallowance of Rs. 43,77,323/- out of total claim of deduction of Rs. 83,77,323/- made by the assessee u/s 36(1)(viia) of the Act in the return of income filed for the year. 3. The assessee craves leave to add, amend, alter and withdraw any ground of appeal any time up to the hearing of this appeal." 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee, is a co-operative bank and engaged in the business of banking. The assessee filed Return of Income on 28.09.2013, u/s 139(1) of the Act showing total income of Rs. 5,57,04,700/-. Thereafter, scrutiny assessment was finalized on 26.02.2016 at assessed income of Rs. 5,58,97,457/-. On perusal of case record, it was noticed by the assessing officer that the computation of income for the year under consideration of the assessee, revealed that the assessee had claimed provisions of bad and doubtful debts u/s 36(1)(viia) of the Act, for an amount of Rs. 83,77,323/-. Further, verification of the notes on accounts & Annexure-20 forming part of the annual accounts for the financial year 2012-13 revealed that th....
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....nd was required to be disallowed. Therefore, the allowance of the Provision of bad and doubtful debts u/s 36(1)(viia) of Rs. 83,77,323/- was not tenable in the eyes of law. Therefore, as per assessing officer, the allowance of the provision of bad and doubtful debts u/s 36(1)(viia) of the Act, of Rs. 83,77,323/-, was required to be added of total income of the assessee. 5. Therefore, based on the above facts, the assessing officer held that there was under assessment of Rs. 43,98,000/- and Rs. 83,77,323/- in respect of allowance of the provision of bad and doubtful debts u/s 36(1)(viia) of the Act, therefore, these amounts have remained unexplained. Therefore, assessing officer held that the amount to the tune of Rs. 1,27,75,323/- ( Rs. 43,98,000 + Rs. 83,77,323/-) has escaped assessment within the meaning of section 147 of the Act, for the assessment year (A.Y.) 2013-14 and therefore re-opening was within the meaning of section 147 of the Act. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before Ld.CIT(A), who has partly deleted the addition made by the Assessing Officer. The ld CIT(A) observed that the disallowance of Rs. 43,98,00....
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.....2021. The ld. CIT(A) noticed that in the memo of computation of total income, the claim of deduction on account of section 36(1)(viia) is Rs. 83,77,323/-. Therefore, the reassessment ought to have restricted itself to check the correctness of quantum of deduction u/s 36(1)(viia), as has been claimed by the assessee in the memo of computation of total income of Rs. 83,77,323/-. However, the assessing officer at the time of reopening, had travelled beyond the scope of the verification and had inserted some illogical argument based on which, an additional disallowance of Rs. 43,98,000/- was determined based on the entries in the Balance Sheet, during the year under consideration in comparison to the immediately preceding year. The disallowance of Rs. 43,98,000/-, has no basis and when the assessee had not made the corresponding claim of deduction in the memo of computation of total income, there is no reason to add the same. The disallowance of any claim of deduction can occur only when the corresponding deduction is claimed by the assessee. When no such claim of deduction of Rs. 43,98,000/-, has been made either u/s 36(1)(vii) of the Act, in the profit and loss account or u/s 36(1)(....
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....ion claimed by the assessee, u/s 36(1)(viia) of the Act, which is reproduced below: We have examined the above computation of total income and observed that assessee has computed the deduction u/s 36(1)(viia) of the Act, as per the procedure laid down in the said section. The computation of total income of the assessee, is placed at page No.2 of paper book, wherein the amount was claimed on account of provision for bad and doubtful debts, to the tune of Rs. 83,77,323/- and this is the deduction u/s 36(1)(viia) of the Act, for provision for bad and doubtful debts, as per the scheme of the said section, that is, an amount 7.5% of the total income ( computed before making any deduction under this clause and chapter VIA) and an amount, not exceeding 10% of the aggregate average advances made by the rural branches of such bank, computed in the prescribed manner. 12. Therefore, we find total deduction u/s 36(1)(viia) of the Act, was claimed at Rs. 83,77,323/- and out of such total deduction, the provision was at to Rs. 40,00,000/- and bad debts was to the tune of Rs. 43,77,323/-. Therefore the maximum permissible deduction u/s 36(1)(viia) is @ 7.5% of total income or 10% of aggrega....