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Facts
The assessee, a cooperative bank, appealed against the CIT(A)'s confirmation of two disallowances for AY 2018-19. The first was for expenses of Rs. 53,62,300, not debited to the P&L account but deducted from reserves. The second was an addition of Rs. 27,42,118 for provision for doubtful debts, which the assessee claimed was duly made and allowable under the Income Tax Act.
Held
For both grounds of appeal, the Tribunal remanded the matter to the Assessing Officer (AO). The AO was directed to verify the assessee's separate accounts/computation and the DR's contention regarding the expenses. For the bad debts provision, the AO was directed to verify the claim and allow it if the assessee is entitled under Section 36(1)(viia) of the Act.
Key Issues
Whether expenses not debited to the P&L account but adjusted against reserves are allowable deductions; Whether provision for doubtful debts is allowable under Section 36(1)(viia) when the assessee claims it was duly made in books of accounts.
Sections Cited
Section 250, Section 36(1)(viia), Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Year : 2018-19 The Modasa Nagarik Sahakari The ACIT बनाम/ Bank Ltd. Circle-2(1)(1) v/s. Sutharwada, Nr.Nagar Palika Anandnagar-Prahladnagar PO: Modasa – 383 315 Ahmedabad-380 015 Dist. Aravalli (S.K.) "थायी लेखा सं./PAN: AAAAT 0525 G (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri Dhinal Shah, AR Revenue by : Shri Rohit Aasudani, Sr.DR सुनवाई की तारीख/Date of Hearing : 21/01/2026 घोषणा की तारीख /Date of Pronouncement: 28/01/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 31/07/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2018-19. 2. The assessee, in this appeal, has taken the following grounds of appeal: The Modasa Nagrik Sahkari Bank Ltd. vs. ACIRT Asst. Year : 2018-19 2
1. The learned CIT(A) has erred in confirming the disallowance of expenses of Rs. 53,62,300 on the ground that it is not debited to the Profit & Loss Account inasmuch as the profits, when appropriated to earmarked funds, were added back in the respective year. The said expenses are incurred out of the funds and therefore the same is claimed as a deduction, and that this method has been followed consistently since years.
The learned CIT(A) has erred in confirming the addition of provision for doubtful debts of Rs. 27,42,118 on the ground that the assessee has not made any such provision in as much as the assessee has made the provision and that such provision is allowable as deduction in view of Supreme Court decision in case of Vijya Bank 323 ITR 166.”
Ground No.1:- Vide Ground No.1, the assessee has agitated against the confirmation of disallowance of expenditure of Rs.53,62,300/- made by the Assessing Officer (AO) on the ground that it is not debited to the Profit & Loss Account (P&L A/c.), but was deducted out of the reserves created from appropriation of profits.
The Ld. Counsel for the assessee, at the outset, has submitted that the assessee has drawn its accounts as per the provisions of Co-operative Bank Act. However, for the purpose of income-tax, a separate computation/P&L A/c. was drawn and which was shown to the AO and it was explained that the expenditure claimed by the assessee was eligible for deduction as per the provisions of Income Tax Act.
The Ld. DR, however, has submitted that the issue needs to be verified at the end of AO as to whether the claim was made twice or not, i.e. before the appropriation of funds to the reserves and surplus also. It has been held, time and again, that only because the assessee maintains its accounts in a different manner, that does not entitle the AO to make the disallowance, if the claim is otherwise admissible to an assessee under the provisions of The Modasa Nagrik Sahkari Bank Ltd. vs. ACIRT Asst. Year : 2018-19 3 Income Tax Act. The assessee has drawn separate accounts/computation for the purpose of assessments of its income. We direct the AO to look into the same, irrespective of the fact whether the assessee had booked the said expenditure in a different manner in its books of accounts or not. The AO will also verify the contention raised by the Ld.DR.
Ground No.2:- Vide Ground No.2, the assessee has agitated against 6. the disallowance of provisions for bad debts as entitled to u/s.36(1)(viia) of the Act.
The Ld. AO has made the impugned disallowance by holding that the assessee has not made the provisions of the said expenditure in its books of accounts, whereas, the case of the assessee is that it has duly made the provisions of the said expenditure in its books of accounts. The AO is directed to verify the claim of expenditure and if the assessee is entitled to the same under the provisions of section 36(1)(viia) of the Act, the same may be allowed to the assessee.
Ground No.3 is general in nature.