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Facts
The assessee, a cooperative bank, filed its return and was initially processed with a significant upward adjustment for recovered bad debts. The assessee contended this amount was already accounted for in its profit and loss and net profit. Subsequently, a rectification order under Section 154 was passed by the CPC, accepting the assessee's claim and rectifying the initial intimation.
Held
The Tribunal noted that the issue raised by the assessee regarding the adjustment for recovered bad debts had been addressed and rectified by a subsequent order under Section 154. To avoid any conflict, the Tribunal allowed the assessee's ground and set aside the order of the CIT(A).
Key Issues
Whether the CIT(A) erred in not acknowledging a subsequent Section 154 rectification order that addressed the assessee's grievance, and whether the initial upward adjustment for recovered bad debts was justified.
Sections Cited
154, 143(1), 41, 36(1)(viia), 41(4), 36(1)(viia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the Assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1069189949(1), dated 27.09.2024, passed against the assessment order by Centralized Processing Cell, u/s. 154 of the Income-tax Act,1961 (hereinafter referred to as the “Act”), dated 24.02.2023, for Assessment Year 2021-22.
Grounds taken by the Assessee are reproduced as under: 1) 1.1) The Learned Commissioner of Income Tax (Appeals) has erred in confirming the order u/sec 154 of the Act passed by the learned The Learned Deputy Director of Income Tax CPC, Bangalore, who has erred in not rectifying the intimation u/sec 143(1) of the Act, wherein, while processing the return of income, an addition of Rs.52,16,56,993/-has been made being "written off bad debts recovered", by not considering the fact that the said amount of Rs.52,16,56,993/- has already been credited to the Profit and Loss Account of the appellant for FY 2020-21, and was included in the net profit before tax for FY 2020-21, which is starting point of computation of income statement and thus was already considered while computing the taxable income of Rs. 9,98,580/- as per return filed.
1.2) By considering the said amount of Rs.52,16,56,993/- as income in the intimation u/s 143(1) of the Act and not rectifying the same under section 154 of the Act, amounts to taxing the same income more than once, which is not permissible under the Income Tax Act, 1962
1.3) The Learned Commissioner of Income Tax (Appeals) has erred in confirming the order u/sec 154 of the Act passed by the learned The Learned Deputy Director of Income Tax CPC, Bangalore, by not considering the fact that the Learned Deputy Director of Income Tax CPC, Bangalore who at first instance has erred in not rectifying the intimation u/sec 143(1) of the Act, but who subsequently, during the pendency of appellate proceedings, on an application filed by the appellant, has issued order u/s 154 of the Act, on 06th July, 2023, wherein, the addition of Rs.52,16,56,993/- [which has been made in the first intimation u/sec 143(1) issued on 01/12/2022 and has not been deleted in the first rectification order u/s 154 issued on 24/02/2023], has not been added to the returned income of the appellant, and accordingly in which the assessed income is computed same as returned income, thereby effectively rectifying the first intimation u/sec 143(1) dated 01/12/2022, in spite of the fact that the issue of subsequent order u/s 154 of the Act, issued on 06 July, 2023, was brought to the notice of The Learned Commissioner of Income Tax (Appeals), in the written submissions filed in the appellate proceedings.
2) Without having any prejudice of whatsoever nature to the Ground No.1, The Learned Commissioner of Income Tax (Appeals) has erred in confirming the order u/sec 154 of the Act, passed by the Learned Deputy Director of Income Tax CPC, Bangalore, who having made an addition of Rs. 52,16,56,993/- to the returned income, has further erred in not re computing and revising the deduction claimed U/s.36(1)(viia) of the Act, by not considering the fact that the deduction u/s 36(1) (viia) of the Act, is calculated on the basis of Income computed under the head Profits & Gains of Business or Profession, and any upward revision in the business income, will also result into increase in the deduction allowable u/s 36(1)(viia) of the Act.”
Brief facts of the case are that assessee is a cooperative society engaged in the business of banking. It filed its return of income on 13.02.2022, reporting total income at Rs.9,98,580/- which was processed u/s.143(1), dated 01.12.2022 whereby total income was computed at Rs.52,26,55,570/-. Against this intimation, assessee filed an application for rectification of mistake apparent from record u/s.154 on 19.01.2023. Pending this application, assessee preferred an appeal before ld. CIT(A), challenging the adjustment made u/s. 143(1) which is on account of income deemed u/s. 41 of the Act. The amount of adjustment was picked up from Part A-O of the return wherein the information is reported from the tax audit report, in clause 25 of Form No.3CD. In this clause, assessee had reported amount of recovery of bad debts amounting to Rs.52,16,56,993/- which has been picked up while processing the return taking it as income u/s.41(4) giving rise to an upward adjustment. On this issue, ld. Counsel of the assessee at the outset pointed out that subsequently CPC, Bengaluru has passed an order u/s.154 dated 06.07.2023 whereby the mistake apparent from record has been rectified accepting the claim of the assessee, thereby total income reported in the return was accepted. Copy of the said order is placed on record for ready reference. From the perusal of the order passed u/s.154, it is noted that the grievance of the assessee, by way of the present appeal before the Tribunal has been addressed. Fact of this was brought to the knowledge of ld. CIT(A), however, the appeal was dismissed.
3.1. Since ld. CIT(A) did not take cognisance of the order u/s 154 rectifying the mistake, under the compelling reasons, assessee had to come up in appeal before the Tribunal to get the first appellate order set aside so as to avoid conflict on passing of effect giving order.
We find that the issue raised by the assessee, in the present appeal has been addressed by rectification order passed u/s.154, dated 06.07.2023. In order to avoid any conflict which may arise on account passing of effect giving order, ground no. 1 raised by the assessee is allowed by setting aside the order of ld. CIT(A).
In the result, appeal by the assessee is allowed.
Order is pronounced in the open court on 08 April, 2025