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TMI Blog2024 (8) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. Addition of Provision for doubtful debts of Rs. 1.67.51.026 to book profit under section 115JB 2.1. The learned Principal Commissioner of Income Tax, Central, Bangalore erred in concluding that the issue of book profit calculation under section 115JB has not been examined and verified by the AO in the assessment order passed under section 153A dated 25.9.2021 for AY 2017- 18. 2.2. The learned Principal Commissioner of Income Tax, Central, Bangalore erred in concluding that the addition of Provision for doubtful debts of Rs. 1,67,51,026 in computing book profit under section 1151B has not been considered and hence the assessment order is erroneous a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without prejudice to one another. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeal according to law. The appellant prays accordingly." 2. Brief facts of the case are as under: 2.1. Assessee filed its original return of income for year under consideration on 22/03/2018 declaring total income of Rs. 4,66,38,270/-. The assessment was completed u/s. 153A r.w.s. 143(3) of the act on 25/09/2021. 2.2. Subsequently, the show cause notice u/s. 263 of the act was issued to revise the assessment order passed u/s. 153 of the act dated 25/09/2021 by the Ld.PCIT o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, merely debiting a bad debt to the profit and loss account would not constitute actual write off.; * Hon'ble Supreme Court in case of CIT vs. Vijaya Bank Ltd. reported in TS-120-SC-2010-O dated 15/04/2010 * Hon'ble Karnataka High Court in case of CIT vs. Kirloskar Systems Ltd. reported in TS-587-HC-2013(KAR)-O dated 28/10/2013 * Hon'ble Gujarat High Court in case of CIT vs. Vodafone Essar Gujarat Ltd. reported in TS-5721-HC-2017(Gujarat)-O dated 04/08/2017 * Hon'ble Karnataka High Court in case of CIT vs. Yokogawa India Ltd. reported in TS-5560-HC-2011 dated 29/08/2011 2.4. The Ld.PCIT however after considering the submissions of the assessee relied on the decision of Hon'ble Karnataka High Court in case of State Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 under the head other expenses. Thereafter, referring to page 55 being note 12 to the balance sheet for the year under consideration, the Ld.AR submitted that the said amount was reduced from trade receivables and that what is appearing in the balance sheet net amount. 3.2. He emphasised that Hon'ble Supreme Court in case of HCL Comnet Systems and Services Ltd. reported in (2008) 174 Taxman 118 has observed that the then existing clause (c) did not cover a case where an assessee makes the provision for bad or doubtful debts and with the insertion of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In observing so, Ld.PCIT relied on the clause (i) of explanation (1) of section 115JB(2) of the act. 4.1. On perusal of the financials of the assessee, having regard to the profit and loss account and the balance sheet, we note that there is a corresponding reduction of Rs. 1,67,51,026/- from the loans and advances on the asset side of the balance sheet and consequently showing the net of provision for bad debt. Hon'ble Supreme Court in case of HCL Comnet Systems and Services Ltd. (supra) has observed that such actual write off would not be hit by clause (i) of explanation to section 115JB. Thus it cannot be only considered as a mere provision of account of bad and doubtful debts debited in the P&L account. 4.2. It is noted that Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances in the balance sheet will not only mean that there was an actual write off of bad and doubtful advances in the P&L account, but also that there was no deduction claimed on account of provision by the assessee." 4.4. The assessee before this Tribunal has followed identical accounting of the provision for bad and doubtful debt as observed in para 3.1 hereinabove. Accordingly, we are of the view that the directions by the Ld.PCIT to the Ld.AO to complete the assessment proceedings afresh in the light of the observations in the impugned order is bad in law. Accordingly, the grounds raised by the assessee stands allowed. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 21st August, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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