2023 (8) TMI 630 - AT - Income Tax

Deduction u/s 36(1)(viia) - amount of provision made towards bad and doubtful debts in the books of accounts - DR submitted that the provision made on standard assets cannot be considered as provision made for bad and doubtful debts since the assessee itself has classified the asset as good and recoverable i.e. standard asset - HELD THAT - As in the given case the Hon'ble Tribunal has given a direction to the Assessing Officer to consider the issue afresh in the light of the decision of Sarvodaya Sahakari Bank Ltd 2014 (5) TMI 1182 - ITAT AHMEDABAD whereby the AO is required to look into the total provision towards bad and doubtful debts as per the books of accounts of the assessee irrespective whether the provision is made in the current year or previous year and allow the claim u/s. 36(1)(viia) accordingly. However we notice that the Assessing Officer in the order giving effect has not discussed anything in this regard but has proceeded to restrict the claim based on a different ground. We notice that the revenue had not taken any action against the directions of the Tribunal as per the original order, and therefore the directions have crystallized which means that the Assessing Officer has no alternate course except to follow the directions. Accordingly, AO in the remand proceedings ought to have verified the availability of sufficiency of provisions as per the books of accounts of the assessee and allow the claim u/s. 36(1)(viia). As has been pointed out by assessee is carrying a provision of Rs. 1549 crores as on 31/03/2009 and the claim made during the year under consideration is Rs. 820.28 crores. Therefore respectfully following the decision of Sarvodaya Sahakari Bank Ltd (supra), we are of the view that no disallowance is warranted since the assessee is having sufficient provision towards bad and doubtful debts in the books of accounts and delete the disallowance made by restricting the amount claimed as a deduction u/s. 36(1)(viia) by the Assessing Officer in this regard. Decided in favour of assessee.

Summary

Issues Involved:

1. Jurisdictional Issue: Non-granting of opportunity for video conferencing under the Faceless Appeal Scheme, 2020.
2. Merits of the Case: Restriction of deduction under section 36(1)(viia) of the Income Tax Act, 1961.

Summary:

1. Jurisdictional Issue:

On the facts and in the circumstances of the case and in law, the Ld. CIT(A), NFAC erred by not granting the Appellant Bank the opportunity to present the case through video conferencing as specified under the Faceless Appeal Scheme, 2020 provided u/s 250(6B) of the Income Tax Act, 1961.

2. Merits of the Case:

2.1. Restriction of Deduction under Section 36(1)(viia):

The assessee bank claimed a deduction under section 36(1)(viia) in its return of income, which was restricted by the Assessing Officer (AO) to the provisions made for the year under consideration. The CIT(A) upheld the AO's order. The Tribunal, in its previous order dated 17/12/2015, remanded the issue to the AO to be decided afresh in light of the Tribunal Ahmedabad Bench's decision in the case of Sarvodaya Sahakari Bank Ltd, which held that the deduction should be allowed to the extent of the provision available in the books of account, irrespective of whether made in the current or preceding previous years.

2.2. Remand Proceedings:

In the remand proceedings, the AO excluded the provision made for standard assets and restricted the amount allowable to Rs. 555,29,90,156/-. The CIT(A) upheld this exclusion, relying on the Visakhapatnam Bench's decision in ACIT vs Chaitainya Godavari Grameena Bank, which held that the provision for standard assets cannot be considered for deduction under section 36(1)(viia). The assessee contended that the AO did not comply with the Tribunal's directions and should have allowed the entire amount of Rs. 820.28 crores claimed, as there was sufficient provision in the books of accounts.

2.3. Tribunal's Decision:

The Tribunal noted that the AO, in the remand proceedings, did not follow the directions to verify the sufficiency of provisions in the books of accounts and instead restricted the claim on a different ground. The Tribunal emphasized that the AO should have verified the availability of sufficient provisions as per the books of accounts and allowed the claim under section 36(1)(viia). Given that the assessee had a provision of Rs. 1549 crores as on 31/03/2009 and claimed Rs. 820.28 crores during the year, the Tribunal concluded that no disallowance was warranted. The Tribunal deleted the disallowance made by the AO and allowed the appeal of the assessee.

Conclusion:

The appeal of the assessee is allowed, and the order pronounced in the open court on 26/06/2023.