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Facts
The appellant, engaged in running a hospital, filed a return disclosing a loss. The AO disallowed a provision for doubtful debts, treating it as a mere provision and not a write-off. The CIT(A) dismissed the appeal, holding the provision was not a write-off and the adjustment made in the intimation u/s 143(1) could not be agitated in an appeal against the assessment order u/s 143(3).
Held
The Tribunal found merit in the appellant's contention that debiting provision for bad and doubtful debts to the Profit & Loss A/c and reducing it from sundry debtors on the Balance Sheet constitutes a write-off, as held by the Apex Court in Vijaya Bank. However, this aspect was not verified by the lower authorities.
Key Issues
Whether the disallowance of provision for doubtful debts as a write-off was justified, and whether adjustments made in intimation u/s 143(1) could be challenged in appeal against assessment order u/s 143(3).
Sections Cited
143(3), 144B, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
Assessment Year: 2018-19 Lakeshore Hospital and Research Centre Ltd. .......... Appellant Nettoor SO, Ernakulam 682040 [PAN: AAACL4923A] vs. DCIT, Corporate Circle-1(1), Kochi .......... Respondent Appellant by: Ms. Rohini Thampy, CA Respondent by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 13.06.2025 Date of Pronouncement: 31.07.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 10.03.2025 for Assessment Year (AY) 2018-19.
Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of running a hospital. The return of income for AY 2018-19 was filed on 30.10.2018 disclosing loss of Rs. 11,39,12,480/-. Against the said return of income, the assessment was completed by the National Faceless Assessment Centre Lakeshore Hospital and Research Centre Ltd. (hereinafter called "the AO") vide order dated 23.07.2021 passed u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act) at a loss of Rs. 8,03,03,359/-. While doing so, the AO disallowed the provision for doubtful debts of Rs. 8,00,870/- by holding that the appellant merely created the provision. The AO also repeated the adjustment made vide intimation u/s. 143(1) of the Act.
Being aggrieved, an appeal was filed before the CIT(A) contending that the appellant was not in receipt of the intimation issued u/s. 143(1) of the Act and without giving an opportunity had merely repeated the adjustment made in the intimation u/s. 143(1) while passing the assessment order. She further submitted that the AO ought not have disallowed the claim against doubtful debts of Rs. 8,00,870/- as it amounts to “write off”. The CIT(A) dismissed the appeal by holding that the appellant merely created the provision for doubtful debts of Rs. 8,00,870/-. The ratio of the decision of the Hon'ble Apex Court in the case of Vijaya Bank v. CIT 323 ITR 116 is not applicable to the facts of the case. The CIT(A) further held that the adjustment made by CPC while processing the return of income u/s. 143(1) cannot be agitated in the appeal filed against the order passed u/s. 143(3) of the Act.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
Ground of appeal No. 1 is general in nature, does not require adjudication. Ground No. 2 challenges the claim for deduction of Lakeshore Hospital and Research Centre Ltd. bad debt of Rs. 8,00,870/-. It is the contention of the appellant that the provision for doubtful doubts were debited to the Profit & Loss A/c. and the same was reduced from sundry debtors on the asset side of the Balance Sheet and this would constitute a “write off” as held by the Hon'ble Apex Court in the case of Vijaya Bank (supra). On a mere perusal of the order passed by the AO as well as the CIT(A) it would appear that both the authorities have denied the claim for deduction of bad debts by holding that the appellant company merely created the provision. However, we find merit in the contention of the appellant that debiting provision for bad and doubtful doubts to Profit & Loss A/c. and reducing the same from sundry debtors on the asset side of the Balance Sheet constitutes a “write off” as held by the Hon'ble Apex Court in the case of Vijaya Bank (supra). However, this aspect had not been verified by both the authorities and, therefore, we are of the considered opinion that the matter requires remand to the file of AO to verify the treatment given in the books of account in line with the ratio of decision of Hon'ble Apex Court in the case of Vijaya Bank (supra), if so found the same may be allowed as deduction. Ground No. 2 is partly allowed for statistical purposes.
6. Ground Nos. 3 & 4 challenges the repetition of adjustment made in the intimation u/s. 143(1) of the Act. No doubt, the cause of action had arisen in the proceedings u/s. 143(1) of the Act. However, it is the contention of the appellant that the appellant was not served with a copy of the intimation and pleaded ignorance of the intimation Lakeshore Hospital and Research Centre Ltd. passed u/s. 143(1) of the Act. Therefore, the matter is restored to the file of the AO with a direction to give an opportunity of hearing to the appellant before repeating the adjustment made in the intimation u/s. 143(1) of the Act. Ground Nos. 3 & 4 stand partly allowed.
Ground of appeal No. 5 challenges the finding of the CIT(A) in adjudicating the ground of appeal relating to dividend distribution tax of Rs. 1,01,78,789/-. Since this issue in preceding years was restored to the AO, this issue also restored to the file of the AO to examine the claim of the appellant.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 31st July, 2025.