9911796707
TMI Blog2025 (1) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... rved on the assessee. Subsequently, notice u/s 142(1) of the Act was also issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The case was selected for complete scrutiny under the E-assessment Scheme, 2019 on the following issues: S. No. Issues i. Claim of Any other Amount Allowable as Deduction in Schedule BP ii. Verification of Genuineness of Expenses iii. Business Purchase iv. Depreciation Claim v. Default in TDS vi. Default in TDS & Disallowance for such Default vii. Refund Claim viii. Business Loss ix. ICDS Compliance and Adjustment x. Disallowance u/s 40A(7) (Gratuity provision) xi. Expenses incurred for Earning Exempt Income xii. Excess Contribution to Provident Fund, Superannuation Fund or Gratuity Fund xiii. Capital Gains/Income on Sale of Property xiv. Business Expenses 3. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 27.04.2021 determining the total loss of the assessee at Rs. 1569,56,31,309/- under the normal provisions and determined the book profit u/s 115JB of the Act at Rs. 6911,69,43,041/-. 4. Subsequently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar issue was involved in this case for assessment years 2012-13 to 2017-18 and the Hon'ble ITAT has decided the issue as per the above discussion for assessment years 2011-12 to 2015-16 and accordingly confirmed the part of the addition/disallowance on this issue. 2.3 It is also seen that the decision of the Hon'ble ITAT in respect of the relief allowed to the assessee i.e. restricting the disallowance under section 36(1)(viia) to the total provision on account of bad and doubtful debts instead of restricting the same only to the extent of actual provision related to rural advances, has not been accepted by the Department and the Department has filed appeal before the Hon'ble High Court for A.Y.s 2006-07 to 2010-11 and 2013-14 to 2015-16. Therefore, the issue of relief granted by the Hon'ble ITAT has also not yet reached finality. 2.4 During the year under consideration, the assessee has claimed deduction under section 36(1)(viia) of the Act at Rs. 1137.14 crores whereas provision towards rural advances was at Rs. 206.57 crores only However, the FAO has allowed the entire claim of the assessee at Rs 1137.14 crores instead of restricting it to the actual provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 36(1)(viia) of the Act to the turn of Rs. 1137,14,39,790/- without making proper inquiries, without making proper verification and without examining the actual facts of the case which are required to be verified for allowing such a deduction in terms of provisions of Rule 6ABA read with section 36(1)(viia) and section 36(2)(v) of the Income Tax Act, 1961. Failure on the part of the FAO rendered the assessment order dated 27/04/2021 under section 143(3) read with section 144B of the Act as erroneous in so far as it is prejudicial to the interests of the revenue. 3.1 Since proper enquiries with regard to correctness of the claim have not been made, the order passed u/s. 143(3) r.w.s. 144B of Income-tax Act, 1961, dated 27/04/2021 is prejudicial to the interests of revenue. Thus both the conditions specified under section 263 of the Act are satisfied in this case and it is a fit case to invoke provisions of the said section. Hence, the assessment order dated 27/04/2021 for the AY 2018-19 is hereby partly set aside to the file of the Assessing Officer on the issue of allowance of deduction under section 36(1)(viia) of the Act. The Assessing Officer shall examine the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for bad and doubtful debts u/s 36(1)(viia). In this regard, kindly furnish the details of deduction claimed along with calculation made as per section u/s 36(1)(viia) r.w.r. 6ABA of Income-tax Rules, 1962. Please justify allowability and explain the same." 9. Referring to the reply dated 29.01.2021 given by the assessee, copy of which is placed at pages 40 to 49 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply at point No.17 (at page 47) which reads as under: "Point No. 17 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 36(1)(viia) of the Income Tax Act, 1961 i.e. 10% of average rural advances and 8.5% of taxable income before claiming deduction under this section. The procedure for calculation of 10% of average rural advances made by rural branches has been prescribed under Rule 6ABA of the Income Tax Rules 1962. Bank was having 615 rural branches as on 31st March 2018. Accordingly, the advances of such br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in any earlier years. Hon'ble ITAT. Pune in the order refereed above, had also given relief on this issue." 10. Referring to page 69 of the appeal set, the Ld. Counsel for the assessee drew the attention of the Bench to the Annexure-7 which is as under: A.Y. 2018-19 Working of Provision for Bad and Doubtful Debts Eligible u/s 36(1)(viia) 1 Total Number of Branches 1846 2 Total Number of Rural Branches (As per 2011 Census) 615 3 Average Aggregate Advances at Rural Branches 1137 14 39 790 4 Total Income before making any deduction under clause 36(1)(viia) - 5 10% of Average Aggregate Rural Advances 11371439790 6 8.50% of Total Income before making any deduction under clause 36(1)(viia) 7 Total amount eligible u/s 36(1)(viia) 1137 14 39 790 11. Referring to the second questionnaire issued by the Assessing Officer dated 31.03.2021, the Ld. Counsel for the assessee drew the attention of the Bench to the following queries raised by the Assessing Officer which read as under: "2. Deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the Income Tax Act, 1961 i.e. 10% of average rural advances and 8.5% of taxable income before claiming deduction under this section. The procedure for calculation of 10% of average rural advances made by rural branches has been prescribed under Rule GABA of the Income Tax Rules 1962. Bank was having 515 rural branches as on 31 March 2018. Accordingly, the advances of such branches had been considered for calculation of eligibility, which were verified/audited by branch statutory auditors and then consolidation of the same had also been verified/audited by central statutory auditors, appointed by RBI The statement showing the calculation of eligible amount for claiming deduction u/s 36(1)(viia) had already been provided vide our reply dated 20 Jan 2021. During the year under consideration, Bank has made NPA provision for Rs. 5330,88,53,716/- (as shown in page 110 of annual report) which had been first offered to tax in the computation of income Against the same. Bank has claimed deduction towards provision for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 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 6ABA. Therefore, it is submitted that deduction u/s 36(1)(viia) should not be restricted to provisions made for rural advances only and the total claim of Rs. 1137,14,39,790/- u/s 36(1)(viia) should be allowed considering the above submissions Though the addition had been made u/s 36(1)(viia) during assessment for AY 2016-17 and 2017-18, the same has been challenged in appeal, which is pending adjudication. Further the addition made u/s 36(1)(viia) during AY 2010-11 to AY 2014-15 during assessment proceedings, was already reversed by Hon'ble ITAT and as such, allowed the claim u/s 36(1) (viia) upto the amount of provision actually created in the books." 13. He submitted that since the Tribunal has passed the order on the issue raised by Ld. PCIT in favour of the assessee and since the Assessing Officer, on the basis of the reply given by the assessee and on the basis of the decision of the Tribunal in assessee's own case and various other cases, did not make any addition, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 Rath Institute of Engineering & Medical Sciences (2023) 458 ITR 509 (Ori) ix) DCIT vs. Bank of Maharashtra 2020 (3) TMI 877 - ITAT, Pune x) Madhya Gujarat Vij Company Ltd. vs. PCIT 2024-TIOL-1019-ITAT-Ahm xi) PCIT vs. M/s. Sinhotia Metals and Minerals Pvt. Ltd. (2023) 455 ITR 736 (Cal) xii) Karan Jain vs. PCIT (2024) 465 ITR 1 (Gau) 16. The Ld. DR on the other hand heavily relied on the order of the Ld. PCIT and submitted that the Ld. PCIT after following due procedure of law has set aside the order to the file of the Assessing Officer to the limited extent of verification of the claim of deduction u/s 36(1)(viia) of the Act. Therefore, the grounds raised by the assessee should be dismissed. 17. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both sides. We find the Assessing ..... 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