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Facts
The PCIT passed an ex-parte order under Section 263 of the Income Tax Act, setting aside the AO's order on issues related to provision for bad debts, depreciation, and foreign currency translation reserve. The assessee filed an appeal with a 214-day delay, contending non-receipt of the Section 263 notices, which the Revenue disputed by providing proof of e-service.
Held
The Tribunal condoned the delay in filing the appeal. It ruled that the issue of bad and doubtful debts, having already been examined by the AO, could not be the subject of Section 263 proceedings. However, the issues of depreciation and foreign currency fluctuation were remanded back to the PCIT for fresh consideration after granting the assessee an opportunity of being heard.
Key Issues
Validity of PCIT's order under Section 263 concerning matters already addressed by the AO; proper service of Section 263 notices; and condonation of delay in filing the appeal.
Sections Cited
263, 143(3), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Appearances by: Assessee represented by : Priyanka Salpuria, AR Department represented by : Praveen Kishore, CIT-DR Date of concluding the hearing : 18.06.2025 Date of pronouncing the order : 30.06.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER
This appeal arises from order passed by the Ld. Principal Commissioner of Income Tax (hereafter “the Ld. PCIT”) u/s 263 of the Income Tax Act, 1961, vide order dated 28.03.2024. It is seen that through this order the Ld. PCIT has set aside the order of Ld. AO on the issue of provision of bad debts (Rs. 734337.64 lacs), the issue of depreciation (Rs. 6.48 lacs) and the issue of addition to foreign currency translation reserve (Rs. 22.012 crores). It is seen that there is on record, at page 2, para 4 of the impugned order, that the opportunities given for hearing were not availed of by the assessee. Thus, effectively, the Ld. PCIT has passed an exparte order against the assessee.
UCO Bank 1.2 The assessee is seen to have filed an affidavit contending that none of such notices were received by him and has also prayed for condoning the delay of 214 days in filing of the said appeal. It is observed that the registry has not pointed out any delay but from the documents before us it is clear that while the date of order is 28.03.2024, the appeal has been filed only on 30.12.2024. For the sake of reference, an affidavit filed by the assessee deserves to be extracted as under:
“I, Shri Supriyo Baidya S/o Late Saurin Baidya R/o Baruipur, South 24 pgs Presently residing at Narendrapur, Kolkata do hereby solemnly affirm as under: “1. That the order of the PCIT, Kolkata-2 was passed on 28th March 2024.
2. That Mr. Supriyo Baidya, Senior Manager (Taxation) of the Bank who was looking after the Income Tax matters of M/s. UCO Bank.
3. That no notice u/s 263 alleged to have been issued to the Bank was received in the e-mail ID of the Bank registered with the Income Tax Department.
4. That a notice u/s 142(1) dated 12.12.2024 of the Income Tax Act 1961 was received by the Bank in the registered e-mail ID of the Income Tax Department.
That on going through the notice the bank came to know that an Forder u/s 263 of the Income Tax Act was passed on 28.03.2024 by the Ld. PCIT-2 Kolkata 6. That the bank took immediate steps to file an appeal against the said order passed u/s 263 by the Ld. PCIT-2, Kolkata.
For the aforesaid reason there is a delay of 214 days in filing the appeal.
That the delay in filing the appeal is not intentional or mala fide but due to circumstances beyond the control of the Appellant Bank.
I am conversant with the facts and circumstances of the case. As such, I am competent to sign this affidavit.
I have read the contents of this affidavit and state that the averments made there are true and correct to the best of my knowledge and belief.” 1.3 As mentioned earlier, even though, the ITAT Registry has not pointed out any delay, there is actually a delay which the assessee has fairly admitted to and also explained the reasons for the same. Accordingly, we condone the said delay and proceed ahead with the adjudication.
1.4 In the body of the said affidavit, the assessee has pointed out that they did not receive any notice pertaining to proceedings u/s 263 of the Act. Contrary to this, the Revenue has also filed a letter dated 17.06.2025 UCO Bank stating that the notices u/s 263 of the Act were served on the assessee in the e-filing account which would be visible in CPC 2.0 portal. Screenshot of the said portal has also been annexed with the said letter, which deserves to be extracted:
Sub:. Report on appeal filed before Hon'ble ITAT, 'C' Bench, Kolkata in the case of UCO Bank, (PAN: AAACU3561B) for the A.Y. 2018-19 and sending of original 263 records - matter reg. Ref: CIT(DR)/ITAT-4/PAN:AAACU3561B/2024-25/2462 dated 27/02/2025. Kindly refer to above In response to the above referred letter, I am directed to send the original 263 folder in case of the assessee, captioned above in the subject for your kind perusal. In this respect it is stated that notices u/s 263 dated 30/01/2024, 19/02/2024 and 04/03/2024 were served on the assessee in its e-filing account which is visible in CPC 2.0 Portal confirming service of the same. Accordingly, the plea of the assessee that the notices u/s 263 were not served on it is not correct. I am also directed to request you to kindly acknowledge the receipt of the same.
Aggrieved with the action of Ld. PCIT, the assessee has filed the present appeal with the following grounds:
“1. That on the facts and in the circumstances of the case and law, the order passed by the Ld. Pr. CIT under section 263 of the Income-tax Act, 1961 ('IT Act') is illegal, invalid and not sustainable in law.
2. For that the Ld. PCIT grossly erred in setting aside the issue of provision for bad debts of Rs.734337.64 Lakhs to the Assessing Officer for re-adjudicating the same after making enquiries and considering the submissions of the assessee when the addition was made by the Assessing Officer in the order passed u/s 143(3) of the Act.
3. For that the Ld. PCIT erred in restoring the issue of depreciation of Rs.6.48 Lakhs to the file of the Assessing Officer for re-adjudicating the same after making enquiries and considering the submissions of the assessee when the same was enquired by him during assessment proceedings u/s 142(1) of the Act and the PCIT has found no error in the order of the AO.
4. For that the Ld. PCIT erred in restoring the issue of addition to foreign currency translation reserve of Rs.22.012 crores to the file of the AO for re-adjudication of the same after considering the submissions of the assessee when no such amount was debited in the Profit & Loss a/c and claimed deduction by the assessee-bank.
For that the appellant craves leave to file additional grounds and/or amend or alter the grounds already taken either before or at the time of hearing of the appeal.” 2.1 Before us, the Ld. AR pointed out that the main issue of bad and doubtful debts has already been added by the Ld. AO in his order, which UCO Bank can clearly be seen on page 8 at first para thereon. The Ld. AR vehemently argued that the Ld. PCIT had not applied his mind to the facts of the case and had proceeded ahead with the giving of directions to AO as per the impugned order. Regarding the remaining two issues it was stated that the assessee could clarify the same before the Bench, just as they could have before the lower authority, in case any opportunity was available. Thereafter, the Ld. AR concluded her argument by saying that the major addition on account of bad and doubtful debts was already made by the Ld. AO and hence there was no reason why the same should have been set aside again. Regarding the issue of depreciation, it was averred that the issue was examined by the Ld. AO, as also the issue pertaining to exchange fluctuation arising on net investment in foreign operations.
2.2 The Ld. DR on the other hand, admitted that the issue of bad and doubtful debts amounting to Rs. 7356,07,27,793/- was wrongly picked up by the Ld. PCIT. He however, stated that the remaining two issues are far from clear and it does not emerge clearly from the Ld. AO’s order that these issues were considered by him or not at all.
We have carefully considered the submissions made by the Ld. AR/DR and have also gone through the records before us. It is quite clear that while the assessee has probably not received any notice from the office of Ld. PCIT regarding proceedings u/s 263 of the Act, the department has come up with good evidence to show that had the assessee been more cautious about the tax proceedings he could have seen the notices on the relevant portal. Be that as it may, while we are convinced that the issue of bad and doubtful debts has been wrongly picked up by the Ld. PCIT as the relevant addition has already been made by the Ld. AO, but we are not convinced that the remaining two issues have been dealt with by the Ld. AO at his level. It is felt that these factual issues could have easily been thrashed out at the level of Ld. PCIT in case the assessee had made a presentation of facts before him. Thus, in the interests of substantive justice, we set aside the impugned order and direct that the Ld. PCIT UCO Bank should examine the issues pertaining to depreciation and foreign exchange fluctuation and in case any discrepancy is noticed thereon then a specific direction could be given to the Ld. AO for considering the same appropriately. Needless to say, the issue of bad and doubtful debts has already been considered by the Ld. AO and hence cannot be the subject matter of any proceedings u/s 263 of the Act. Accordingly, we remand this matter back to the file of Ld. PCIT for considering the issues of depreciation and foreign exchange fluctuation only, after giving an opportunity of being heard to the assessee.
With these remarks, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 30.06.2025