TaxTMI 
TaxTMI 
2026 (7) TMI 1800
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....08.2025, passed against the assessment order by Assessment Unit, u/s. 143(3) of the Act, dated 03.08.2022, for Assessment Year 2020-21. 2. Grounds taken by the assessee are reproduced as under: ITA No. 6609/MUM/2025 "A) That in the facts and circumstances of the case and in the law the ld. Commissioner of Income Tax Appeals has erred in confirming the order u/sec. 143 3 of the Act passed by the ld. Assessing Officer who has erred in disallowing the deduction of Rs. 91,71,179 claimed by the 1 appellant u/s. 36 1 vir of the Income Tax Act, 1961, on account of Bad Debts Written off during the year, by incorrectly considering the same as Prior Period Expenses by not appreciating the fact that the Bad Debts are allowable as deduction u/s. 36 1 vil of the Act, only in the year of write off of such debts in books of account and not in any other year B) That in the facts and circumstances of the case and in the law the ld. Commissioner of Income Tax Appeals has erred in confirming the disallowance of deduction of Rs. 91,71,179 claimed by the appellant us. 36 | vii of the Act, on account of Bad Debts written off during the year, by not considering the decision of Hon....
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....o SCN in the scrutiny assessment proceedings. c) That in the facts & circumstances of the case and in the law the ld. Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of deduction of Rs. 1,03,17,024 claimed by the appellant us. 36(1) (vii) of the Act, on account of Bad Debts written off during the year, by not considering the 3 decision of Hon'ble ITAT, Mumbai Bench in case of ACIT 1(1)(1), Mumbai vs Ms Abhyudaya Co op. Bank Limited (ITA No. 1128 Mum 2023 dated 30062023), relied upon by the appellant in the submissions tiled before the ld. CIT (Appeals) in appellate proceedings for AY 2017 18, WHARE in the facts are identical & similar to the facts in case of appellant. d) That in the facts & circumstances of the case and in the law the ld. Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of deduction of Rs. 1.03.17.024 claimed by the appellant us. 36(1)(vn) of the Act, on account of Bad Debts written off during the year by relying on the following decisions Hon'ble Tribunal in case of ICIT (OSD) v Indian Bank (2024) 169 taxmann.com 246 (Chennai Trib) (20112024), by not considering the fact that the issue i....
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....to the returned income in the computation of total income section, at the end of the order passed u/sec. 143(3) of the Act, by stating ADD Exempt income disallowed by system as per order u/s. 143(1), by giving the reason for addition only in the NOTE below the Computation of Income in the order passed u/s. 143(3) of the Act. d)The ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition of Interest on Tax Free Bonds amounting to Rs. 4,80,32,803 (which is exempt u/sec. 10(15) of the Act) as part of taxable income of the appellant, without appreciating the fact that the appellant, while filing the return of income for computing the Gross Total Income in the computation of income statement has simultaneously made an disallowance of Its 60.53,100 as per the provisions of see 14A of the Act, read with Rule 8D of Income Tax Rules, 1962, which pertain to disallowance of expenses pertaining to exempt income ITA No. 6611/MUM/2025 1. a) That in the facts & circumstances of the case and in the law the Learned Commissioner of Income Tax (Appeals) has erred in confirming the order passed u/sec. 143(3) r w s 144B of the Act by the Learned Assessment Unit....
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.... itself has been issued by CPC by not following the due procedure as prescribed in First Proviso to Sec. 143(1) of the Act, thereby rendering the said intimation u/s. 143(1)(a) of the Act, dated 25th December, 2021 as invalid, null & void and consequently the order u/s. 143(3) rws 144B of the Act, passed on 03rd August, 2022 (where in the assessed income has been determined as per income processed u/s. 143(1) of the Act) is also invalid, null & void and accordingly deserves to be cancelled/annulled. d) That in the facts & circumstances of the case and in the law the Learned Commissioner of Income Tax (Appeals) has erred in confirming the order passed u/sec. 143(3) rws 144B of the Act, where in the assessed income of the appellant has been determined as per the income processed u/s. 143(1) of the Act at .168,45,76,960/- without considering the contents of the submissions made by the appellant during the course of assessment proceedings, in respect of intimation order u/s. 143(1) of the Act, dated 25th December, 2021, which has been passed nearly six months after the issue of notice u/s. 143(2) of the Act and after the issue of few notices u/s. 142(1) of the Act and after th....
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...., made by the Learned ADIT, CPC, Bangalore, being "written off bad debts recovered", by not considering the fact that the said amount of Rs. 4,00,50,981/- has already been credited to the Profit and Loss Account of the appellant for FY 2019-20, and was included in the net profit before tax for FY 2019-20, which is starting point of computation of income statement and thus was already included in the taxable income of Rs. 163,39,01,458/- as per return filed. b) That in the facts & circumstances of the case and in the law the Learned Commissioner of Income Tax (Appeals) by concurring with the action of the Learned ADIT СРС, Bangalore in considering the said amount of Rs. 4,00,50.981/- as income in the intimation order u/s. 143(1) of the Act and retaining the said addition in the order u/s. 143(3) of the Act, has erred in concurring with taxing the same income more than once, which is not permissible under the Income Tax Act, 1961. 5) That in the facts & circumstances of the case and in the law the Learned Commissioner of Income Tax (Appeals) has erred in confirming the levy of interest u/s. 234A of the Act, at Rs. 1,00,082/- by not considering the ....
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....rovision for bad and doubtful debts. Since no provision could have been created by the assessee in this respect, there was no credit balance available in the provision for bad and doubtful debts account in terms of section 36(1)(viia) and thus, applying the computation mechanism for claiming bad debts, the entire amount was claimed as a deduction. However, ld. AO did not accept the submissions made by the assessee and completed the assessment by disallowing the claim so made. 4. In the first appeal, ld. CIT(A) upheld the disallowance so made by the ld. AO for which he observed that assessee carried the loan assets in its books of accounts for a very long period even after these have become NPAs, which the assessee ought to have written off much earlier. According to him, the present write-off in the year under consideration is nothing but an afterthought for making a claim of deduction which should have been claimed in the earlier years. He further noted the absence of documentary evidence from the assessee to demonstrate that deduction of such provision was not claimed in earlier years. According to him, assessee cannot be allowed the claim of the deduction in any year of its c....
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....its books of accounts for accounting purposes, it was liable to be added back for the purpose of computation of total income and was thus, accordingly never claimed by or allowed to the assessee. 6.2. In this regard, assessee placed on record copies of profit and loss account and computation of income for the A.Ys. 2002-03 and 2005-06 to illustrate that the entire provision for bad debts made by it in its profit and loss account was added back in the computation of income. We also note that reliance placed by the ld. AO on RBI master circular as stated above is misplaced as it is applicable to commercial banks and not to cooperative banks. In respect of cooperative banks, the RBI master circular which governs them is under the circular UCBs (DCBR.BPD.PCB MC No. 12/09.14.000/2015-16). From para 5.2.1 of this circular by which cooperative banks are governed, loss asset is defined as extracted below: "Loss Assets (a) The entire assets should be written off after obtaining necessary approval from the competent authority and as per the provisions of the Co-operative Societies Act/Rules. If the assets are permitted to remain in the books for any reason, 100 per cent ....
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.... 6.4.1. In respect of the above-mentioned debts which were already NPA (loss assets) as on 31.03.2006, there was no provision to claim deduction u/s. 36(1)(viia) of the Act. For the reason that, the provisions of Section 36 (1)(viia) of the Act, have been made applicable to the Co-op. Banks only with effect from A.Y. 2007-08, and all the borrowers account were already Non Performing Assets as loss assets as on 31.03.2006. 6.4.2. Clause (v) of sub-section (2) of section 36, is applicable only in respect of the advances which have been written off as bad debts to which the provisions of section 36(1) (viia) are applicable. 6.5. We also refer to CBDT Circular 3, dated 12.03.2008 in respect of deduction of any provision for bad and doubtful debts to be allowed in case of cooperative banks under section 36(1)(viia). In para 20.2, it is noted that deduction earlier allowable under section 80P in the case of cooperative society engaged in carrying on the business of banking that is cooperative banks has been withdrawn from assessment year 2007-08, barring in the case of a primary agricultural credit society or a primary cooperative agricultural and rural development bank. In para 2....
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....tween that part of debt written off in the previous year and the credit balance in the provision for bad and doubtful debts account made under clause (viia)?" 7.1. While answering this substantial question of law, the Hon'ble Court distinguished between the bad debts written off which relate to debt other than for which the provision is made under section 36(1)(viia). The conclusion drawn by the Hon'ble Court on this substantial question of law is extracted from Para 39 to Para 41 of the said judgment. Hon'ble Court held that the provisions of section 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields. Bad debts written off in debts other than those for which the provision is made under clause (viia) will be covered under the main part of section 36(1)(vii), while the provision will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia) which is however, subject to satisfaction of requirements contemplated under secti....
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.... of employee contribution to PF Rs. 1,06,24,519/- Add: Addition u/s. 41 on account of recovery of loans written off Rs. 4,00,50,981/- Total Income determined u/s. 143(1) Rs. 168,45,76,960/- 10.1. In the course of impugned assessment proceedings, assessee made its submissions vide letter dated 31.01.2022 placed on record before us, whereby it explained the additions made in the processing of return and submitted that case of the assessee has already been selected for scrutiny under section 143(3) and raising demand subsequently, by an intimation under Section 143(1) is not correct which leads to conducting parallel proceedings for the same assessment year and is therefore ought to be avoided. In the said submission, assessee made out its case for the adjustment made in the intimation under Section 143(1) which relates to disallowance made under section 36(1)(va) on account of delay in deposit of employees' contribution to provident fund and addition made under section 41 on account of recovery of loans written off. 10.2. Assessee furnished copy of its audited profit and loss account from where it was demonstrated that amount of Rs. 4,00,50,981/- has already been....
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....ordance with the provisions of the Act and the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra). Accordingly, considering the overall factual position, ld. AO is directed to verify the records and details and allow the claim of the assessee accordingly. 11.2. In the conspectus of the above narration, we hold that addition made under section 41 on account of recovery of loans written off amounting to Rs. 4,00,50,981/- is deleted and issue relating to disallowance made under section 36(1)(va) on account of delay in deposit of employees' contribution to PF is remitted back to the file of ld. AO in terms of our above stated observations and directions. Accordingly, grounds raised by the assessee in this regard are partly allowed. 12. In the result, appeal of the assessee is partly allowed for statistical purposes. 13. In the result, appeals of the assessee for AY 2017-18 and 2018-19 are allowed and for AY 2020-21 is partly allowed. Order pronounced in the open court on 21.04.2026. ============= Document 1 USB SAHARARI BANK LTD DETAILS OF DEDUCTION DALVIED U(SEC 36(TV via) and Li 95C 38/2( vi) FROM A.Y.2007-28 TD A.Y. 2021-21 ....