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Facts
The assessee, KKR India Asset Finance Pvt. Ltd., filed its income tax return for AY 2022-23, declaring total income of Rs. 75,15,49,137. The Assessing Officer (AO) completed the assessment under section 143(3), initially accepting the returned income. However, a computation sheet annexed to the order showed an increased income of Rs. 122,38,08,403, which included disallowed bad debts.
Held
The Tribunal noted that the CIT(A) had previously deleted the disallowance of bad debts in proceedings related to section 143(1). The Tribunal found that the CIT(A) failed to consider this subsequent relief when passing its order. The Tribunal also observed that no addition was made in the scrutiny assessment under section 143(3) itself, thus the disallowance in the computation sheet could not be sustained.
Key Issues
Whether the disallowance of bad debts, which was subsequently deleted by the CIT(A) in earlier proceedings, can be sustained in the assessment order.
Sections Cited
143(3), 143(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI
आदेश / O R D E R
PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 28.08.2025 for Assessment Year (AY) 2022-23.
The assessee is a company and filed the return of income for AY 2022- 23 on 04.11.2022 declaring total income of Rs. 75,15,49,137/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The AO completed the assessment us. 143(3) accepting the income returned by the assessee. The relevant observations of the A.O in this regard are extracted hereunder:
“4.3 Reasons for inference drawn that no variation is required on this issue: In this regards the assessee has submited i.e. copy of income tax return, Copy of Audited balance Sheet, Profit and loss Account, Tax audit Report with all annexure computation of income, statement of all bank accounts, Tax invoice, copy of Cash book and furnished details relevant to each point discussed above. The details/evidences submitted by the assessee during the course of assessment proceeding have been examined and found in order. The assessee is in the business of finance. The assessee has declared interest income of Rs 450 cr and declared income of Rs 75.15 cr which comes to 16%. Hence, no adverse inference could be drawn in this case. Under the circumstances, no adverse inference could be drawn against the assessee. Hence, retuned income is accepted.”
However, in the computation sheet which is annexed to order u/s. 143(3) of the Act, the A.O has computed the income at Rs. 122,38,08,403/- which included the bad debts disallowed in the intimation u/s. 143(1) of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). The assessee before the CIT(A) submitted that in the appellate proceedings against the order u/s. 143(1) of the Act, the CIT(A) has deleted the disallowance made towards bad debts. The assessee further submitted that the A.O in the assessment order has accepted the income returned by the assessee whereas in the computation sheet has erroneously considered the income assessed u/s. 143(1) of the Act. Accordingly the assessee prayed before the CIT(A) that the addition made in the computation sheet is to be deleted. The CIT(A) after considering the submissions of the assessee held that:
1. “The contentions of both the Appellant assessee and the Assessing officer resp. have been carefully considered and this Appellate authority has noted the following points: i. The assessee filed his return of income for the A.Y. 2022-23 on 04.11.2022 declaring Income of Rs.75,15,49,137/-. The case of the appellant was selected for complete scrutiny under CASS. Notice u/s 143(2) was issued by AO on 02.06.2023 and duly served upon the assessee. Thereafter, to examine the CASS reason, notices u/s. 142(1) was issued through E-assessment module of ITBA. ii. The AO states in the order that, "....In this regards the assessee has submitted i.e. copy of income tax return, Copy of Audited balance Sheet, Profit and loss Account, Tax audit Report with allannexure computation of income, statement of all bank accounts, Tax invoice, copy of Cash book and furnished details relevant to each point discussed above. The details/evidences submitted by the assessee during the course of assessment proceeding have been examined and found in order. The assessee is in the business of finance. The assessee has declared interest income of Rs 450 cr and declared income of Rs 75.15 cr which comes to 16%. Hence, no adverse inference could be drawn in this case. Under the circumstances, no adverse inference could be drawn against the assessee. Hence, retuned income is accepted..." iii. However, without going into the merits of the case it is observed that, the appellant assessee in its submissions states that, Prayer 2.9 In view of the above submission, the Appellant humbly prays before your goodself that the Ld AO be directed to allow the claim for bad debts written off of INR 47.74,73,168 and in the computation consider the total income at INR 75,15,49,137 instead of INR 1,22.90,22.310.
1. As per the above mentioned submissions at point no.-(i) to (iii), the AO is directed to allow the eligible claim of TDS, after verifying from records, as per law. Therefore, in view of the same the appeal is treated as partly allowed for statistical purposes.”
The assessee is in appeal before the Tribunal against the order of the CIT(A).
We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee during the course of hearing drew our attention to the intimation u/s. 143(1) of the Act (page 32 to 54 of paper book), where the bad debts have been disallowed by the CPC (page 46 of paper book). The Ld. AR further drew our attention to the order of the CIT(A) against the order u/s. 143(1) of the Act (page 103 of paper book), where the CIT(A) has deleted the addition made by CPC towards bad debts stating that the addition is made inadvertently. The Ld. AR also drew our attention to the submission made before the CIT(A) in the present case, where the fact that the disallowance of bad debts being deleted has been brought to the attention of the CIT(A) (page 101 & 102 of paper book). From the perusal of the findings of CIT(A) as extracted hereinabove, we notice that the subsequent relief given against the intimation u/s. 143(1) of the Act has not been considered by the CIT(A). Considering the facts as enumerated hereinabove, we are of the view that the CIT(A) is not correct in giving any specific finding with regard to submission of the assessee pertaining to the disallowance of bad debts which is subsequently deleted. Further, from the order of the A.O, it is clear that no addition is made in the scrutiny assessment u/s. 143(3) of the Act. Therefore, we hold that the disallowance of bad debt in the computation sheet of the order u/s.143(3) cannot be sustained since the same is deleted subsequently.
In the result, the appeal of the assessee is allowed.
Order pronounced on 04th day of March, 2026 at Chennai.