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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee which is directed against the order of ld. CIT (A), Mysore dated 08.06.2012 for Assessment Year 2009-10.
The grounds raised
by the assessee are as under. “1. The learned Commissioner of Income-tax (A) erred in passing the order in the manner which he did.
2. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in confirming the addition made by the assessing officer without appreciating the explanation of the Appellant.
3. The learned Commissioner (A) further ought to have appreciated the fact that credit balance in the profit and loss account was nothing but the excess provision for Bad and Doubtful Debts written back and having deducted from the taxable income, the same is liable to be deleted in the hand of Appellant.
4. The learned Commissioner (A) ought to have appreciated that neither any provision made for bad and doubtful debts nor any reversal of the same from time to time is liable to be taxed as same is required to be done in accordance of the NPA provisioning norms of Page 2 of 4 the RBI and same is already includible in the computation of taxable income. 5. Without prejudice, the addition is excessive, arbitrary and unreasonable and ought to be reduced substantially. 6. The learned Commissioner (A) erred in confirming the interest levied by the AO u/s.234B and 234D of the Act. 7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
It was submitted by ld. AR of assessee that ground nos. 1, 2 and 7 are general and ground no. 6 is consequential regarding interest u/s. 234B and 234D and therefore, no adjudication is called for in respect of these grounds. Regarding the remaining grounds, she submitted that only one issue is involved as to whether the addition made by the AO in respect of write back of bad and doubtful debts is justified or not. In this regard, it was pointed out by the bench that as per Para no. 5.4 of assessment order reproduced by CIT (A) on page no. 10 of his order, it is stated that it is conclusively proved that the write off of the provision for bad and doubtful debts was claimed and allowed as deduction in the previous years and therefore, the current write back is taxable. The bench observed that this categorical finding has to be dislodged if any relief on this account is prayed for. In reply, it was submitted by ld. AR of assessee that on page no. 9 of paper book is letter filed by assessee before the AO in respect of the application u/s. 154 of IT Act for Assessment Year 2007-08 wherein it was submitted by assessee that the deduction claimed by the assessee of Rs. 24,53,710/- in respect of provision for Non Performing Assets (NPA) is not allowable under the IT Act but deduction is allowable under the provisions of section 36(1)(viia) of the IT Act. But this application of the assessee u/s. 154 in Assessment Year 2007-08 filed on 28.08.2008 was not disposed of by the AO. She also submitted copy of a letter dated 26.05.2012 filed by the assessee before the CIT (A) and it was pointed out that as per the same, it was submitted by the assessee before the CIT (A) that for Assessment Year 2007-08, a sum of Rs. 24,53,710/- was debited to P & L Account and in computation of taxable income for the said year, this amount was not added back due to lapse on the part of the assessee and the return was filed belatedly. She also submitted that subsequently, since a revised return could not be filed, an application was made u/s. 154 of the IT Act adding back the said provision made for bad and doubtful debts and claimed deduction u/s. 36(1)(viia) of IT Act. It was also submitted that as a result, a tax of Rs. 5,77,550/- became payable and was paid on 28.08.2008 and the application u/s. 154 was made on 28.08.2008 which was not responded to by the Department. She submitted that there is no finding of CIT(A) in respect of this submission of assessee before him. She submitted that under these facts, the matter may be restored back to the file of AO / CIT(A) for fresh decision after examining these facts. The ld. DR of revenue supported the order of CIT(A).
We have considered the rival submissions. We find that this is an admitted position of fact and law that if the provision is made in an earlier year and deduction is allowed for the same, on write back of the said provision, addition has to be made u/s 41 (1). But if no deduction was claimed and allowed in respect of this provision in an earlier year then for write back of such a provision, no addition can be made in the year of write back. In the present case, the basis of assessment order is this that the deduction was allowed in respect of the provision which is written back in the present year. But this is the claim of the assessee before us that in Assessment Year 2007-08, the application was made by the assessee u/s. 154 for rectification and consequential amount of tax was also paid by the assessee and therefore, the assessee is under bonafide belief that the assessee’s application for rectification was accepted because the assessee has heard nothing from the revenue in this regard. In spite of this submission before the CIT(A), no finding was given by CIT(A) in this regard as to whether this claim of the assessee is correct or not. Under these facts, we are of the considered opinion that this matter should go back to the file of CIT(A) for fresh decision and accordingly, we set aside the order of CIT(A) and restore the matter back to his file for fresh decision and he should give a categorical finding in this regard as to whether in Assessment Year 2007-08, the assessee’s claim for rectification u/s. 154 of IT Act stands accepted or not and in consequence thereof, the deduction of Page 4 of 4 NPA stands allowed or not. The ld. CIT(A) should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to both sides.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.