TMI Blog2023 (7) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... of loans, it was held that the government could not be held to be doubtful debtor and therefore, the provision so made could not be considered as provision u/s 36(1)(viia). So far as the provision against standard asset is concerned, we find that the assessee is classifying the debt asset as per RBI mandate and making provisions against the same at specified rates. The assessee is required to make general provision against standard asset also since there would always be an inherent risk of even standard debts going bad in future. It could also be seen that Ld. Pr. CIT has referred to contrary decisions of Tribunal and accordingly, it could be said that the issue was a debatable one. The debatable issues, in our considered opinion, could not be subjected to revision. When Ld. AO has adopted one of the possible views which is not contrary to any law, the revision of the same could not be held to be justified. Therefore, the impugned order, to that extent, stands quashed for all the years under consideration. Reserve for short provision for waiver of loans - We concur that government could not be held to be doubtful debtor and therefore, the provision so made could not be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). (b) The Assessing Officer (AO) has passed the order after enquiry and verification of the records of the Assessee and following the direction issued by ITAT by its earlier order dated 04.07.2018. Therefore, revision under Section 263 is not applicable. (c) The Order of the AO is not erroneous and not prejudicial to the interests of the revenue and is a plausible view taken by the AO, with reasons given for passing of the Order, therefore the exercise of powers under Section 263 of the Act by the PCIT and revision of the order of AO is erroneous and liable to be set aside. (d) In the view of the bank, there is a likelihood of standard assets also becoming doubtful/bad debt in future and provisioning for which is also permitted by the Reserve Bank of India. AO has considered the direction of ITAT and allowed deduction after considering the relevant provisions under Section 36(1)(viia). Therefore, the revision order passed by the PCIT under Section 263 of the Act, is completely erroneous. (e) The deduction towards Reserve for short provision waiver loan has been reversed and offered to Income Tax in next Assessment Year (2010-2011). (f) The provision of bad and doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of any provision for bad and doubtful debts made by- (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half per cent. of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten per cent. of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent. of the amount of such assets shown in the books of account of the bank on the last day of the previous year : Provided further that for the relevant assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is debited in the profit and loss account, then it is can be allowed, provided it is within the limits specified. To reconsider the same, the matter was restored back to the file of Ld. AO to recompute impugned deduction. 3.2 Pursuant to the same, an assessment was framed by Ld. AO on 26.12.2019. The Ld. AO considered RBI guidelines in Master Circular- Prudential norms on income recognition which mandate classification of NPA assets into standard assets, sub-standard assets, doubtful assets and loss assets. Against all these assets, the assessee was to make provision at specified rates which are mentioned in para-6 of the assessment order. Against standard assets, the provision was required to the extent of 0.25% to 0.40%. The Ld. AO held that provision for standard asset was created as per RBI mandate and therefore, the same could be considered for deduction u/s 36(i)(viia). The assessee also created reserve for short provision waiver which was also accepted by Ld. AO while working out deduction u/s 36(1)(viia). Considering both these items, Ld. AO re-computed impugned deduction u/s 36(1)(viia). 3.3 However, this order was subjected to revision by revisionary authority on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Bank Ltd. (2019 SCC Online ITAT 24588). 3.7 Regarding reserve for short provision for waiver of loan amounting to Rs.320.95 Lacs, it was held that the government could not be treated as doubtful debtor. The Ld. AO failed to examine this fact. Finally, the order was held to be erroneous and prejudicial to the interest of the revenue and Ld. AO was directed to pass another assessment order considering impugned issues in accordance with law after affording opportunity of hearing to the assessee. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 4. We find that Ld. AO framed the assessment pursuant to the directions of the Tribunal wherein it was held that the use of the word any before the words provision for bad and doubtful debts would indicate that nomenclature under which the provision is made, may not be a critical factor in determining the allowance. Once a provision, under whatever name, is debited in the profit and loss account, then it is can be allowed, provided it is within the limits specified. However, none of the lower authorities had carefully gone into nature of the debits. It was for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the facts as well as issue is pari-materia the same, the revision of the order could not be held to be justified. The impugned order dated 26.03.2022 stand quashed. Assessment Year 2011-12, 2012-13 2014-15 8. In AY 2011-12, Ld. Pr. CIT has sought revision of the order on similar lines to examine the issue of provision made by the assessee against standard asset for the purpose of computation u/s 36(1)(viia). Since the fact as well as issue is pari-materia the same, the revision of the order, to that extent, could not be held to be justified. Another reason for revision is the reserve for DCB difference amounting to Rs.8.88 Lacs as created by the assessee. The same was considered by Ld. AO as provision for the purpose of computation u/s 36(1)(viia). This amount represents fraudulent transactions done by certain staff members. This is stated to be a recoverable amount and not bad debt of loans and advances disbursed to the customers. The Ld. Pr. CIT observed that the same do not qualify for deduction u/s 36(1)(viia). From the stated facts itself, we prima face concur that the provision so made could not be considered as provision for bad debts u/s 36(1)(viia). ..... 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