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TMI Blog2020 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... andate to write off of bad debts by debiting to the P L account so as to claim deduction u/s. 36(1)(vii) - AR relied on the judgment of the Supreme Court in the case of Vijaya Bank Ltd. [ 2010 (4) TMI 46 - SUPREME COURT] . Unable to accept the proposition because profit and loss account is the final computation of profit made by the assessee based on which assessment is to be framed. Unless the bad debt is written off by debiting to the P L account which necessarily means that the debtors account should be credited or so much of the amount debited in the profit and loss account should be written off from the amount due from the debtors, the condition as contemplated u/s. 36(1)(vii) is not satisfied. Even though the assessee s Counsel contended that when bad debt is recovered, there is provision for assessment of the same u/s. 41 of the I.T. Act, we do not think that such a safety provision will entitle the assessee to claim bad debt as a deduction without satisfying the conditions contained in section 36(1)(vii). Judgment of the Supreme Court in the case of Vijaya Bank Ltd. [ 2010 (4) TMI 46 - SUPREME COURT] relied on by the assessee s Counsel applies mainly to Banking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be prejudicial to the interest of revenue. In this case there is no error in the assessment order passed since the assessing officer had examined the facts of the case and allowed the claim on the basis of forming an opinion that the judgment of the Supreme Court in the case of Vijaya Bank Ltd reported in 323 ITR 166 is applicable to the facts of the case. The Ld. AR relied on the following decisions which prescribe / stipulate ban/ bar on the jurisdiction on the Commissioner of Income Tax u/s. 263 in case the twin conditions stipulated are not cumulatively satisfied / fulfilled: 1) Malabar Industrial Co. Limited vs. CIT (243 ITR 83) (SC) 2) CIT vs. Vikash Polymers (194 Taxman 57) (Delhi High Court) 3) S. Murugan vs. ITO (135 ITD 527) (ITAT, Chennai Bench) 4) J.K. Construction Co. vs. ITO (162 Taxman 46) (ITAT, Jodhpur Bench). 3.1 The Ld. AR submitted that the Pr. CIT erred in setting aside the assessment order passed u/s. 143(3) dt. 22.12.2016 by substituting his opinion /judgment over that of the assessing officer in the matter of applicability of the judgment of the Supreme Court in the case of Vijaya Bank Ltd (supra) to the facts of the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to constitute actual write off whereas, after the Explanation, the assesses (s) is now required not only to debit the Profit and Loss Account but simultaneously also reduce loans and advances or the debtors from the asset side of the Balance Sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the High Court in it's impugned judgment. In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under Section 36(l)(viii) of 1961 Act as there was an actual write off by the assessee in it's Books, as indicated above . 3.2 From the above details, the Ld. AR submitted that the assessing officer had applied his mind and formed a definite opinion on the subject matter and issues involved. Thus, the Ld. AR submitted that the Pr. CIT in his order u/s. 263 had substituted his own opinion / view with that of the assessing officer which is not permitted by law as per the established position as per legal pronouncements given below : 1) Antala Sanjaykumar Ravjibhai v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad and doubtful debts and ₹ 37,03,177/- towards doubtful advances was examined in detail by the assessing officer by verifying the facts of the case as detailed in the written submission filed by the authorised representative of the assessee and Pr. CIT had referred to the submission of the assessee in para 2.(i) page 1 of his order passed u/s. 263 of the I.T. Act. The Ld. AR submitted that the assessing officer had formed a view / opinion after examining the written submissions of the assessee. The Ld. AR relied on the judgment of the Supreme Court of India in the case of Vijaya Bank Ltd reported in 323 ITR 166, where it was held that debit of provision to P L account and at the same time reducing the same from receivables in the balance sheet would constitute write off for the purpose of Section 36(1)(vii). The Ld. AR relied on the order of CIT(A) in another case ie., of Kerala State Electricity Board in ITA No.105-T/10-ll dt.03.02.2014 wherein the same issue involving much larger amount allowed as deduction was considered by the assessing officer while forming an opinion as above in favour of the assessee. Further, the Ld. AR relied on the decision of this Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising power u/s. 263 of the I.T. Act. 5. We have heard the rival submissions and perused the material on record. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to treat an order as erroneous on the ground that the Assessing Officer should have made further inquiries before accepting the wrong claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which calls for further enquiry to know the genuineness of it. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to claim bad debt as a deduction without satisfying the conditions contained in section 36(1)(vii) of the I.T. Act. The same proposition was laid down by the Jurisdictional High Court in the case of Sampanna Kuries Pvt. Ltd. vs. DCIT (249 CTR 210). Further, in the case of Art Leasing Ltd. vs. CIT (229 CTR 272), it was held as under: Any other law referred to in s. 45Q of RBI Act does not cover IT Act which applies to all assessees in the computation of taxable income. May be the provisions of Chapter III-B of the RBI Act has an overriding effect over the provisions of the Money Lenders Acts or similar Acts made by various States, which may otherwise apply to NBFCs. The Accounting Standards prescribed by the RBI, so long as they are consistent with the IT Act, are certainly applicable to the IT authorities in the computation of taxable income. Under s. 36(1)(viia), the eligible banks are authorised to create provision subject to certain limits in respect of rural advances and other loans referred to therein and claim deduction of the same. This provision clearly indicates that Parliament is well aware of the risk undertaken by the banks in making advance to the rural sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on which assessment is made. Unless the write off took place at the time of finalisation of the accounts and is reflected in the books of account, it cannot be treated as a write off at all. There was no special circumstance under which the Tribunal has accepted the write off stated to have been done by the assessee in the personal account, of the debtors maintained by the assessee, as against the normal practice of charging the same to the P L a/c. The reassessment proceedings under s. 147 is income escaped assessment where the Department has reopened the assessment for the purpose of assessment of escaped income. Whatever claims may be eligible for deduction in reassessment proceedings, a deduction of bad debts is not permissible in reassessment proceedings because in reassessment proceedings, there is no finalization of accounts to write off bad debts. 5.4 In view of the above, we are of the opinion that the judgment of the Supreme Court in the case of Vijaya Bank Ltd. (supra) relied on by the assessee s Counsel applies mainly to Banking companies and not to other assessees. Accordingly, we hold that the Pr. CIT is justified in exercising his power u/s. 263 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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