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2024 (2) TMI 275 - AT - Income TaxRevision u/s 263 - Discrepancies regarding the claim of deduction on account of bad debts and provision of bad and doubtful debts and the claim of deduction u/s. 80JJAA - as per CIT AO failed to verify the above claims and passed the assessment order which is erroneous and prejudicial to the interest of Revenue - HELD THAT - In the case of the assessee company, the claim was taken while filing Revised Return of Income and further such claim was fully examined by Ld. AO during the course of assessment proceedings after verifying all evidences and explanation produced by the assessee. No defects have been pointed out either by the AO or the PCIT in the Revised Return of Income filed by the assessee. Assessee had merely exercised its right in claiming rightful deduction while revising its Return of Income. Therefore, the direction given to the assessing officer in connection with the claim of assessee company u/s 80JJAA to verify the belated return filed by the assessee is whether valid return of income u/s 139(9) or not is totally against the law laid down by Hon ble Jurisdictional High Court. Accordingly there is no justification in invoking Revision power u/s 263 of the Act. We also find merits in the arguments of once the AO has made inquires and accepted genuineness of the same after detailed verification submitted by the assessee, such view of A.O. being a plausible view, could not be considered erroneous or prejudicial to interest of Revenue as held in case of PCIT V. Shreeji Prints (P.) Ltd. 2021 (9) TMI 108 - SUPREME COURT Respectfully following the above judicial principle, it is clear that the Ld. AO had made adequate inquiries in respect of the claim of deduction u/s. 80JJAA of the Act, while passing assessment order u/s 143(3) of the Act. The Revision of assessment proceedings on this ground is not permissible and accordingly the findings of the Ld. PCIT is hereby set aside. Provision for bad debt u/s. 36(1)(viia) - We observe that the assessees company reverses the provision created u/s 36(1)(viia) in the immediately next year and claims actual bad debt incurred for the year under consideration only. Further, details of bad debt written off for the year under consideration which shows list of customer name, amount written off, PAN, Address and subsequently recovered was also given before the PCIT. It was also explained that Net off bad debt written off, which means Bad debt incurred for the AY 2017-18, less the amount recovered from the customer has been written off by the assessee. Though, all such details were produced before the PCIT, he has without giving any finding on how the assessment order passed by AO is erroneous or pointing out any defect in the claim made by assessee u/s 36(1)(vii) and 36(1)(viia), directly set aside the assessment order passed by the Ld. AO, which is beyond the scope of powers conferred u/s 263 of the Act. Thus the very same issue what was considered by the Ld. A.O. in the assessment proceedings is revised by the Ld. PCIT on the ground that the Ld. A.O. has verified the claim properly. PCIT partially looking into the assessment record initiated the Revision proceedings which is factually not correct. PCIT failed to consider the reply to the notice issued u/s. 143(2) dated 21.11.2019 filed by the assessee already this order. Thus both the ingredients i.e order must be erroneous in nature; and the error must be such that it is prejudicial to the interest of Revenue are present in a given case, it is not legally permissible for a Commissioner to initiate suo motu proceeding u/s 263 the same has been upheld by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT An assessment cannot be revised if there is no jurisdictional error in the order or if it has been passed after due application of mind or in case where PCIT has a view different from that taken by A.O. Therefore we have no hesitation in quashing the Revision order passed by the Ld. PCIT. It transpires that the Ld. PCIT ought to have proved that the order of the AO is both erroneous as well as prejudicial to the interests of the revenue. Even lack of adequate inquiries by the AO should result fulfilment of these critical twin conditions. Since the assessee has been following a consistent method and claim of deduction as and when it is actually written off in the annual accounts and the Ld. PCIT did not rebut the submissions made by the assessee. The claim of the assessee is also valid in light of the Judgment of T.R.F. Ltd., 2010 (2) TMI 211 - SUPREME COURT we find merit in the submissions made of the assessee and set aside the order passed by the PCIT and restore the order passed by the AO. Appeal filed by the Assessee is hereby allowed.
Issues Involved:
1. Deduction under Section 80JJAA of the Income Tax Act. 2. Claim of bad debts under Section 36(1)(vii) of the Income Tax Act. 3. Claim of provision for bad and doubtful debts under Section 36(1)(viia) of the Income Tax Act. Summary: 1. Deduction under Section 80JJAA of the Income Tax Act: The assessee claimed a deduction under Section 80JJAA, which was initially accepted by the Assessing Officer (AO) based on Form 10DA certified by a Chartered Accountant. The Principal Commissioner of Income Tax (PCIT) issued a show cause notice questioning the deduction and directed the AO to collect a revised audit report in Form 3CD and verify the validity of the revised return filed by the assessee. The Tribunal found that the AO had conducted a detailed inquiry and accepted the claim based on adequate evidence. The Tribunal held that the PCIT's direction was without basis and unjustified, as the AO's acceptance of the claim was a plausible view supported by the law. The Tribunal quashed the PCIT's revision order, emphasizing that the AO's decision was neither erroneous nor prejudicial to the interest of the Revenue. 2. Claim of Bad Debts under Section 36(1)(vii) of the Income Tax Act: The assessee, a Non-Banking Financial Institution (NBFC), claimed a deduction for bad debts written off amounting to Rs. 224,81,43,124/-. The PCIT questioned the AO's failure to verify this claim and directed a fresh examination. The Tribunal noted that the assessee had consistently followed a method of writing off bad debts and provided detailed evidence, including customer details and recovery efforts. The Tribunal referred to the Supreme Court's decision in T.R.F. Ltd. Vs. CIT, which established that writing off bad debts in the books of accounts is sufficient for claiming a deduction. The Tribunal found that the AO had adequately verified the claim and the PCIT's revision was unwarranted. 3. Claim of Provision for Bad and Doubtful Debts under Section 36(1)(viia) of the Income Tax Act: The assessee claimed a provision for bad and doubtful debts amounting to Rs. 57,79,00,453/-. The PCIT directed a thorough examination of this claim. The Tribunal observed that the assessee had disallowed the provision in its return of income and claimed only the actual bad debts written off. The Tribunal found that the AO had properly verified the claim, and the PCIT's revision was not justified. The Tribunal emphasized that the AO's view was a plausible one, and the PCIT failed to demonstrate that the AO's order was erroneous and prejudicial to the Revenue. Conclusion: The Tribunal allowed the appeal filed by the assessee, quashing the PCIT's revision order and restoring the AO's assessment order. The Tribunal highlighted that the PCIT's directions were without basis, as the AO had conducted adequate inquiries and the claims were justified based on the law and evidence provided.
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