DCIT CIRCLE 3(4), MUMBAI, MUMBAI V. UNION BANK OF INDIA (ERSTWHILE CORPORATION BANK), MUMBAI

ITA 60/BANG/2025

AI Insights

The case revolves around the dispute concerning the deduction of bad debts claimed by Union Bank of India (formerly Corporation Bank) under section 36(1)(vii) of the Income-tax Act, 1961, for the assessment year 2007-08. The Deputy Commissioner of Income Tax (DCIT) initially disallowed the deduction during the assessment, leading to the bank's rectification application under section 154, which was also rejected by the Assessing Officer (AO). The NFAC later allowed the rectification, citing a mistake apparent from the record, referencing a decision by the Hon'ble High Court of Karnataka that non-rural debts need not be adjusted against provisions. The DCIT's appeal to the Tribunal contested the NFAC's decision, arguing that the issue was debatable and not a mistake apparent from the record.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783217 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2025
• Other Referred Cases: Saurashtra Kutch Stock Exchange Ltd, Vijaya Bank Vs Commissioner of income Tax, Catholic Syrian Bank Ltd Vs Commissioner Of Income Tax, Karnataka Bank
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S. ANANTHAN
• Keywords: Bad and doubtful debts; Rectification of order
• Section: 143(3); 154

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.60/Bang/2025 Assessment year : 2007-08 The Deputy Commissioner of Income Tax, Circle 3(4), Mumbai. Vs. Union Bank of India [erstwhile Corporation Bank], Central Account Department, 6th Floor, Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai – 400 021. PAN: AAACU 0564G APPELLANT RESPONDENT Appellant by : Shri Muthu Shankar, CIT(DR)(ITAT), Bengaluru. Respondent by : Shri S. Ananthan, CA Date of hearing : 18.09.2025 Date of Pronouncement : 04.11.2025 O R D E R Per Prashant Maharishi, Vice President 1. This appeal is filed by the DCIT, Circle 3(4), Mumbai (the assessee/appellant) for the assessment year 2008-08 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 10.10.2022 wherein the appeal filed by Printed from counselvise.com ITA No.60/Bang/2025 Page 2 of 5 the assessee against the rectification order dated 13.6.2016 passed u/s. 154 of the Income-tax Act, 1961 [the Act] dated 13.6.2016 was allowed. 2. Therefore the ld. AO is aggrieved and is in appeal before us on the following grounds of appeal :- “(i) Whether on the facts and in circumstances of the case and in law, the Ld.CIT[A] NFAC erred in holding the issue to be a mistake apparent from record & setting aside the rejection of rectification application u/s 154 by the AO, by ignoring the fact that the issue involved is debatable in nature and not a mistake apparent from record? ii Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A), NFAC erred in relying on the decision of Hon'ble Supreme Court in the case of Saurashtra Kutch Stock Exchange Ltd, ignoring the fact that the issue is debatable, as the facts and circumstances of the present case is different to that of Vijaya Bank Vs Commissioner of income Tax (civil appeal no. 3286- 3287 of 2010) & Catholic Syrian Bank Ltd Vs Commissioner Of Income Tax CIVIL APPEAL NO. 1143 OF 2011. iii. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) NFAC was justified in directing the AO to delete the disallowance of bad debts amounting to Rs. 1619.82 crores pertaining to non-Rural bad debts claimed u/s 36(1) (vii) of the Act. iv. Whether the Ld. CIT(A), NFAC was right in holding that the provisions of 36(1)(via) of the Act do not apply to bad debts made by non rural branches particularly after insertion of explanation 2 to clause (viia) of subsection (1) of section 36 by the Finance Act 2013 with effect from 1 April 2014.” 3. The brief facts of the case show that assessee is a company, filed its return of income on 25.10.2007 claiming deduction of Rs. Rs. 129,35,38,845 u/s. 36(1)(vii) in respect of non-rural debts written off Printed from counselvise.com ITA No.60/Bang/2025 Page 3 of 5 by the assessee bank. Subsequently during the assessment proceedings this claim was withdrawn for the reason that the AO was of the view that such bad debts written off related to non-rural branches also had to be reduced against the provision. The assessment was completed u/s. 143(3) of the Act dated 31.12.2009. 4. Subsequently the assessee filed a rectification application u/s. 154 on 19.3.2012 pointing out the mistake apparent from the record in not allowing the deduction u/s. 36(1)(vii) in respect of non-rural debts written off by the assessee bank. The AO dismissed the application for rectification. 5. The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) noted that the rectification application u/s. 154 rejected by the AO is not sustainable. Therefore the ld. AO is in appeal before us. 6. The ld. DR supported the order of the ld. AO and the ld. AR supported the order of the ld. CIT(A). 7. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The ld. AO categorically noted vide order dated 13.6.2016 holding that there is no mistake apparent from the record. 8. The brief facts show that in the original assessment proceedings the assessee was not allowed the bad debts as deduction. The claim of the assessee is that it had written off bad debts of non-rural branches amounting to Rs.77,56,75,698. During the course of assessment Printed from counselvise.com ITA No.60/Bang/2025 Page 4 of 5 proceedings, the claim was withdrawn for the reason that the Revenue was of the view that bad debts written off by the non-rural branches is also required to be adjusted against the provision allowed u/s. 36(1)(via) of the Act. However, it was found that the Hon’ble jurisdictional High Court in the case of Karnataka Bank [2009] 316 ITR 345 held that non-rural debts need not be adjusted against such provisions. Thus it was stated that the assessment is completed without considering the decision of the Hon’ble jurisdictional High Court Therefore, assessee preferred an application before the AO which was rejected. 9. The ld. CIT(A) in para 5 has categorically held that the decision rendered by the Hon’ble High Court do not make a new law and only clarified the legal position and therefore non-consideration of the decision of the Hon’ble jurisdictional High Court constitutes a mistake apparent from the record and allowed the rectification u/s. 154 of the Act. 10. This view is further supported by the Circular No.68 [F.No.245/17/71- A&PC] dated 7.11.1971 wherein it is clarified that a mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from the record and rectification application u/s. 154 would be in order. Therefore it has been decided that when assessee moves an application u/s. 154 pointing out that in the later decision the Hon’ble Supreme Court pronounces the correct legal position, a mistake has occurred, the application shall be acted upon if filed in time. Therefore in view of the Circular issued by the Income Tax Department, no fault can be found with the order of the ld. CIT(A). In view of this, we hold that the ld. CIT(A) has correctly held that non-granting of deduction u/s. 36(1)(vii) of Printed from counselvise.com ITA No.60/Bang/2025 Page 5 of 5 the Act of Rs. 77,56,75,698 is a mistake apparent from the record and hence the same is allowable to the assessee. 11. In the result, the appeal filed by the Revenue is dismissed. Pronounced in the open court on this 04th day of November, 2025. Sd/- Sd/- ( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 04th November, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "