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2021 (1) TMI 956 - ITAT CUTTACKRevision u/s 263 - loss on OTS is nothing but the claim of deduction of bad debt during the previous year and same is allowable as a deduction u/s.36(1)(vii) - HELD THAT:- The provisions of section 36(1)(vii) provides that in case of the banks, who are eligible deduction u/s.36(1)(viia), deduction on account of bad debts relating to rural advance/loans shall be first set off against credit balance in the provision for bad and doubtful debts account and deduction will be allowed to the extent of debts relating to rural debts which exceeds credit balance available in the said provision created under section 36(1)(vii). Present case are that the assessee had a credit balance in its balance sheet as on 31.3.2014 as “provision for bad and doubtful account”. Thus, as per proviso to section 36(1)(vii) of the Act, the amount of loss on TOS, which was in the nature of rural debts which was extended as benefit to the weaver in the rural areas, which should have been first set off against credit balance available in the balance sheet, which was more than the actual rural bad debts was not available u/s.36(1)(vii). The rider created by the legislature by way of insertion of proviso to section 36(1)(vii) of the Act raises a clear-cut bar on the allowability of claim of the assessee made before the AO during the original assessment proceedings under the head “loss on OTS account” in a situation, when the amount standing in the balance sheet as “provision for bad & doubtful debts” is higher than the amount of bad debts shown as “loss on OTS a/c.”. We are inclined to hold that since the AO has ignored the relevant provisions of the Act before allowing the claim of the assessee of loss on OTS account and without making proper and adequate enquiry and the view taken thereafter was also not sustainable, therefore, the impugned order passed by ld Pr. CIT revising the order u/s.263 is fully justified and correct alleging the impugned assessment order as erroneous and prejudicial to the interest of the revenue and there is no valid reason to interfere with the same. - Appeal of the assessee is dismissed.
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