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TMI Blog2025 (1) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue and the appeal is pending before the Hon ble High Court and since the AO on the basis of submissions made by the assessee and relying on the decision of the Tribunal in assessee s own case has not made any addition / disallowance, therefore, the order of the AO in our opinion cannot be held to be erroneous - Decided in favour of assessee. - Shri R. K. Panda, Vice President And Ms Astha Chandra, Judicial Member For the Assessee : Shri Ananthan and Mrs. Lalitha Rameswaran For the Department : Shri Amol Khairnar, CIT-DR ORDER PER R.K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 04.03.2024 passed by the PCIT, Pune-1 relating to assessment year 2018-19. 2. Facts of the case in brief, are that the assessee is a domestic banking company in which the public is substantially interested. It is governed by the Banking Regulation Act, 1949 and it regularly follows the mercantile system of accounting. The assessee filed its return of income on 29.09.2018 declaring total loss of Rs. 1612,29,57,294/- under the normal provisions. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by the CPC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r AYs. 2011-12 to 2017-18 and earlier years also. In A.Y. 2011-12, the issue was contested before the Hon'ble Income Tax Appellate Tribunal (hereinafter referred to as 'ITAT') in appeal ITA No.634/PUN/2017. In the said year, the assessee bank had claimed deduction of Rs 486.59 crores under section 36(1)(viia) though the actual provision in respect of rural advances in the books of accounts was Rs. 102.36 crores only. Therefore, the Assessing Officer restricted the claim of the assessee to Rs. 102.36 crores ie to the extent of actual provision for rural advances made in the books of accounts. The Hon'ble ITAT observed that a similar claim was made by the assessee in assessment year 2010-11 wherein the Co-ordinate Bench of Tribunal upheld the findings of Commissioner of Income Tax (Appeals) and had restricted the deduction under section 36(1)(viia) to the extent of provision made (total provision). In view of the admitted position, this ground of appeal by the assessee qua the claim of deduction under section 36(1)(viia) was allowed by the Hon'ble ITAT to the extent of provision actually made for bad and doubtful debts (total provision) in the books of account at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given by the assessee and distinguishing the various decisions cited before him, the Ld. PCIT held that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue to the extent of allowance of deduction u/s 36(1)(viia) of the Act. The relevant observations of the PCIT read as under: 2.7.1 The submission of the assessee is considered. However, as discussed in earlier paras, the FAO has allowed the deduction under section 36(1)(viia) of the Act to the assessee merely on a computation sheet submitted by the assessee without making proper verification. Even the list of rural branches was not obtained. The list submitted by the assessee now during the present proceedings also lacks any details of population of the relevant place. 2.7.2 As regards assessee's contention regarding restriction of deduction to the extent of total provision under bad and doubtful debts, it is to be noted here that the issue has not yet reached finality and the Departmental appeal has already been admitted by the Hon'ble High Court in the assessee's own case for A.Y.2006-07 to 2009-10 on this issue. Considering the above facts, the submission of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order is erroneous prejudicial to the interest of the Revenue without making any specific enquiry finding in this regard. 3. The learned PCIT erred in disregarding the contention of the Appellant Bank that the deduction u/s 36(1)(viia) has to be allowed by considering the total provision for bad doubtful debts made by the Bank. 3.1. The learned PCIT failed to appreciate the fact that the Faceless Assessing Officer has allowed this deduction following the decisions of the Hon'ble Tribunal in the Appellant Bank's own case and as such, is not erroneous. 3.2. The learned PCIT failed to appreciate the fact that the provisions of section 263 cannot be invoked on this point. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal. 8. The Ld. Counsel for the assessee strongly challenged the order of the Ld. PCIT invoking the jurisdiction u/s 263 of the Act. The Ld. Counsel for the assessee referring to the notice u/s 142(1) of the Act issued by the Assessing Officer on 13.01.2021 drew the attention of the Bench to question No.17 which reads as under: 17. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectively. While filing the Income Tax Return, Prior Period Income was offered to tax whereas prior period expenses had been claimed as deduction. Item-wise details are attached as [Annexure 8]. Such expenses are generally made under the circumstances as under:- a) In some cases, rent for the premises gets revised with retrospective effect, by making agreement during the year. b) Sometimes the demand for payment of enhanced taxes, electricity etc is given by the concerned authority, which pertains to earlier period. c) Interest of deposits is paid with retrospective effect. As per Accounting Standard-5 issued by Institute of Chartered Accountants of India, prior period item are the result of either error or omission in the financial statement of earlier period. As such, in case of Bank, since the liability of payment is crystalized in the relevant previous year and there is no omission or error in booking of such expenditure in earlier years, these expenses should not be categorised as Prior Period Expense. Alternatively, even if such expenses are considered as Prior Period Expenses, it should be allowed in the current year since the liability for the same had been crystalized in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added back to the return of income for the year under consideration. Further, you are requested produce the working of claim of provision of rural advance of Rs. 419.37 crore working as per rule 6ABA of Income Tax Rule. If you fails to produce the working of the said provision as per rule 6ABA of Income Tax Rule, the amount of Rs. 419.37 crore will also be added to the total income. It is to further to draw your attention to order passed in your case for A.Y. 2016-17 and 2017-18 wherein similar addition was made. Hence, you are also requested to show cause as to how in the year under consideration, conditions are different from that of A.Y. 2016-17 and be made in the year under consideration. 12. Referring to the reply given by the assessee vide letter dated 04.04.2021, the Ld. Counsel for the assessee drew the attention of the Bench to point No.2 which reads as under: Point No.2 Deduction u/s 36(1)(viia) Bank provides for bad and doubtful debts as per the prudential norms of RBI in the books of account and the same is offered to tax irrespective of the amount However, an incentive has been given to the Banks by providing the deduction for bad and doubtful debts u/s 30(1)(viia) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Hon'ble Supreme Court in the case of Catholic Syrian Bank and held that, that decision was not relevant to the present case On the similar set of facts, the Hon'ble Bangalore Bench of ITAT in the case of Vijaya Bank 2015 (7) TMI 86 -ITAT Bangalore, held that for the purpose of deduction u/s 36(1)(viia), the provision need not be bifurcated between rural and non rural and the entire provision has to be considered. It is pertinent to note that the Department has not filed any appeal before the Hon'ble Karnataka High Court against the decisions in the case of ING Vysya Bank and Vijaya Bank. Through in the case of Vijaya Bank an appeal was filed by the Department against the order of the ITAT, the issue relating to deduction u/s 35(1)(viia) was not challenged. Further, in the bank's own case, Hon'ble ITAT, Pune in ITA No 1370 of 2014 relating to AY 2010-11, ITA No. 634 635 of 2017 relating to AY 2011-12 2012-13 and in ITA No. 114 780 of 2018 relating to AY 2013- 14 2014-15, has also decided the similar issue in favour of Bank and allowing the claim u/s 36(1)(viia) for the total provisions made for bad and doubtful debts subject to limit specified under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer can be held to be erroneous only to that extent the details of which were not given. Referring to pages 58 to 68 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the list of approved branches as on March, 2018 and submitted that the Ld. PCIT has not applied his mind while passing the order u/s 263 of the Act. He accordingly submitted that since the faceless Assessing Officer has called for the details and on the basis of various replies given by the assessee has allowed the deduction, therefore, the Ld. PCIT without applying his mind should not have invoked the jurisdiction u/s 263 of the Act. He also relied on the following decisions: i) PCIT vs. R.K. Jain Infra Projects (P.) Ltd. (2024) 159 taxmann.com 387 (SC) ii) CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) iii) PCIT vs. R.K. Jain Infra Projects (P.) Ltd. (2023) 150 taxmann.com 313 (Del) iv) PCIT vs. Clix Finance India (P.) Ltd. (2024) 160 taxmann.com 357 (Del) v) Prudential Assurance Co. Ltd. vs. DIT (IT) (2010) 191 Taxman 62 (Bom) vi) CIT vs. M/s. A.R. Builders Developers P Ltd. (2020) 425 ITR 272 (Mad) vii) KN Agarwal vs. CIT (1991) 189 ITR 769 (All) viii) CIT vs. M/s. Dhaneswar Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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