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TMI Blog2022 (4) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration assessee filed return of income on 15.09.2011 declaring total income of Rs..41,79,64,710/-. The original assessment was completed u/s. 143(3) of Income-tax Act, 1961 (in short "Act") on 31.01.2014 determining the total income at Rs..41,79,64,710/- under normal provisions of the Act. Subsequently re-assessment was made u/s. 143(3) r.w.s. 147 of the Act on 26.12.2018 determining total income as per the original assessment order. Ld. Pr.CIT, Mumbai -1 perused the assessment records and observed that assessee had claimed deduction on account of provision of bad debts u/s. 36(1)(viia) of the Act to the tune of Rs..17,43,85,411/- from A.Y.2007-08 to A.Y.2010-11. Assessee also claimed bad debts of Rs..1,65,53,139/- during those Assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed by the Assessing officer. b) As per RBI guidelines bank has to create 100% provision (BDDR) on loss assets (Non performing assets -NPA) and as per percentage prescribed on doubtful assets and substandard assets. c) During the A.Y 2011-12 bank had written off Rs. 14,83,13,270/- as bad debts. The Bad Debts were written off by utilizing the provision created for the same. The Bad debts were written off against the BDDR provisions made before 01.04.2006 (as these advances were classified as NPA before 31.03.2006) i.e. before applicability of the section 36(1)(viia) to Co-op. Banks. d) The assessment in the said case was completed under Sec.143(3) on 31.01.2014 when no addition was made on the issue of Bad debts. The case was again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the Act to say that the opening balance created u/s.36(1)(viia) has to be adjusted only if the debts have been classified after the application of provisions of Section 36(1)(viia). The proviso below section 36(1)(viia) only stated that the opening balance has to be restricted to the amount by which such bad debts written off exceeds the credit balance in the provision for bad and doubtful debts account. 2. Alternatively, prior to 01.04.2006, co-operative banks were fully exempt from tax under the proviso of section 80P. Hence, there was no question of considering the bad debts during the computation of total income. Thus, the logic that debts classified as NPA prior to 01.04.2006 shall not be adjusted against the opening balance cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Principal Commissioner of Income-tax failed to appreciate that the assessment order 26/12/2018 is neither erroneous nor prejudicial to the interest of the revenue. 1.4 The learned Principal Commissioner of Income-tax failed to appreciate that the claim for deduction of Rs. 14,83,13,270/- u/s.36(1)(vii) was allowed in the assessment order dated 31/01/2014 and not in the assessment order dated 26/12/2018 and accordingly the notice u/s. 263 is barred by limitation. 1.5 The Learned Principal Commissioner of Income-tax failed to appreciate that the claim for deduction of Rs. 14,83,13,270/- u/s.36(1)(vii) is allowable and the claim is also supported by the decision of the jurisdictional Mumbai Bench of the Income Tax Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision of the jurisdictional Mumbai Bench of the Income Tax Appellate Tribunal dated 12/09/2017 in the case of City Cooperative Bank Ltd., in ITA no. 2884/Mum/2015 has reached the finality and is binding on him. 3. The appellant craves leave to add, amend, alter and/or delete any of the grounds of appeal." 6. At the time of hearing, Ld. AR submitted that this issue is already covered by the Coordinate Bench of the Tribunal in the case of City Cooperative Bank Ltd. v. ITO in ITA no. 2884/Mum/2015 dated 12.09.2017 and relied on the above case. 7. On the other hand, Ld. DR brought to our notice Para No. 8 of the Ld. Pr.CIT order and supported the finding and also submitted that Co-operative banks are fully exempted from tax under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act. Subsequently by Finance Act, 2006 by insertion of sub-section (4) in section 80P the assessee was not entitled for deduction under section 80P from A.Y. 2007-08. The deduction under section 36(1)(vii) is available in respect of bad debts written off subject to the fulfilment of the conditions specified under section 36(2). Section 36(1)(viia) provides for the treatment of provisions for bad and doubtful debts of an amount not exceeding 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 banks. The provisions of Section 36(1)(vii) and section 36(1)(viia) are distinct and independent. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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