DHANI LOANS AND SERVICES LIMITED,HARYANA V. ACIT, CC-2, DELHI

ITA 2470/DEL/2025

AI Insights

The case involves Dhani Loans & Services Ltd., which appealed against the order of the Principal Commissioner of Income Tax (Central), Delhi-1. The PCIT had invoked section 263 of the Income Tax Act, 1961, claiming that the assessment order was erroneous and prejudicial to the interest of the Revenue because the assessee had incorrectly claimed deductions under sections 36(1)(vii)(ac) and 36(1)(viia) for provisions for bad and doubtful debts. The Tribunal examined the submissions and evidence, including the computation of income and responses to notices under sections 142(1) and 143(3), and concluded that the Assessing Officer had correctly allowed the deductions after proper verification, thus quashing the PCIT's order.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840107 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2021-2022
• Appeal Filed On: 16-04-2025
• Other Referred Cases: PCIT v. Sunbeam Auto (P.) Ltd, The Malabar Industrial Co. Ltd. Vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: MANOJ KUMAR
• Keywords: Bad and doubtful debts; Wrong claim; Revision of order; Provision of bad debts
• Section: 143(3); 142(1); 263

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “B” BENCH: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2470/Del/2025 [Assessment Year : 2021-22] Dhani Loans & Services Ltd. Plot No.108, Fifth Floor, IT Park, Udyog Vihar, Phase-1, Gurgaon, Haryana-122016. PAN-AAACM0725H vs ACIT Central Circle-2 New Delhi APPELLANT RESPONDENT Assessee by Shri Manoj Kumar, CA Revenue by Ms. Pooja Swaroop, CIT DR Date of Hearing 23.12.2025 Date of Pronouncement 25.02.2026 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the assessee against the order dated 25.03.2025 by Ld. Pr. Commissioner of Income Tax (Central), Delhi-1 [“Ld. PCIT”] 2019-20 passed u/s 263 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 29.12.2022 passed u/s 143(3) of the Act pertaining to Assessment Year 2021- 22. 2. Brief facts of the case are that assessee company filed its return of income on 10.03.2022, declaring total income of INR 1,68,94,31,551/-. The case of the assessee company was selected for Printed from counselvise.com ITA No.2470/Del/2025 Page | 2 scrutiny and after considering the submissions made by the assessee, assessment order was passed accepting the income declared in terms of the order dated 29.11.2022 u/s 143(3) of the Act. Thereafter, Ld. PCIT invoked the provision of section 263 of the Act by observing that the assessee has claimed deduction of INR 8,89,17,450/- being 5% of the total income as u/s 36(1)(viii)(c) of the Act and simultaneously, debited a sum of INR 1,53,93,44,681/- under the head provision for bad and doubtful debts. Ld. PCIT thus, was of the view that assessee has not disallowed the amount of provision and has not claimed the deduction u/s 36(1)(vii)(ac) as per law therefore, allowing such incorrect claim is an error which leads the assessment order erroneous and pre-judicial to the interest of Revenue and issued show case notice on 11.02.2025. In reply, assessee company filed submission wherein it was claimed that assessee has already disallowed the amount of provision of INR 1,53,93,44,681/- and then claimed the deduction u/s 36(1)(vii)(ac) of the Act and therefore, assessment order is not erroneous and pre- judicial to the interest of the Revenue. 3. Ld. PCIT after considering the submissions made by the assessee has held that assessee has made excessive claim of bad debts u/s 36(1)(viia) of Rs.146,68,23,319/- and therefore, the assessment order allowing such incorrect claim is erroneous and pre- judicial to the interest of Revenue and direct the AO to make fresh assessment after examining the allowability of deduction u/s 36(1)(viia) of the Act. Printed from counselvise.com ITA No.2470/Del/2025 Page | 3 4. Against the said order, assessee preferred present appeal before the Tribunal by raising following grounds of appeal:- 1. “That the Ld. PCIT (Central), Delhi-1 has erred in law and on facts in invoking section 263 on Illegal and untenable grounds. Hence, the order u/s 263 may be vacated. 2. That the Ld. PCIT (Central), Delhi-1 has erred in law and on facts in invoking section 263 and setting aside order passed u/s 143(3) as order u/s 143(3) is invalid being passed by the authority not authorised to do it. Hence, the order u/s 263 may be vacated. 3. That the Ld. PCIT (Central), Delhi-1 has erred in law and on facts in invoking section 263 and setting aside order passed u/s 143(3) as order u/s 143(3) in neither erroneous nor prejudicial to the interest of the assessee. Hence, the order u/s 263 may be vacated. 4. That the Ld. PCIT (Central), Delhi-1 has erred in law and on facts in invoking section 263 and setting aside order passed u/s 143(3) on the ground not disallowing provision for bad and doubtful debts to the extent of Rs.1,53,93,44,681.00 ignoring the fact that it is already disallowed by the assessee in the computation of taxable income. Hence, the order u/s 263 may be vacated. 5. That the appellant craves leave to add, substitute, modify or delete any grounds of appeal on or before the date of hearing. All the above grounds of appeal are independent of each other's.” 5. Before us, Ld.AR for the assessee submits that during the course of assessment proceedings, assessee has filed return of income wherein as per computation of income, the exceptional item of bad debt provision made of INR 1,53,93,44,681/- stood added back to the total income. For this ld. AR drew our attention to the computation of income available at page 4 of Paper Book amount of exception item i.e. Expected credit loss on financial assets of INR 153,93,44,681/- is added. As per page 5 of the Paper Book, which is the working sheet of ICDS adjustment submitted before the AO, includes the amount of bad debt recovered of INR 15,20,54,358/- Printed from counselvise.com ITA No.2470/Del/2025 Page | 4 which is also offered for tax. Ld.AR submits that that assessee finally declared total income of INR 1,68,94,31,551/- in the return of income filed for the year under appeal wherein the impact of ICDS service of INR 4,80,37,68,226/- (153,93,44,681 + 326,44,23,545) is offered as income which comprises of INR 1,69,13,99,039/- (INR 153,93,44,681/- + INR 15,20,54,358/-) on account of provision of bed debts and recovery from bad debts. Ld. AR thus, submits that when the provisions for bad debts and also recovery from bad debts claimed earlier have already been offered for tax and not claimed as deduction, there is no error in the assessment order. Ld.AR further drew our attention to page 6 of PB, which is copy of notice issued u/s 142(1) dated 24.11.2022 wherein vide Point No.5A (PB-8), AO asked to file complete details of provision for bad and doubtful debts of INR 153 crores. Ld. AR further stated that in the same query letter vide Point No.8 (PB-9), the assessee asked to explain ICDS deviation of INR 480 crores. Ld.AR submits that assessee vide its submissions dt. 29.11.2022 filed online through e-filing portal made the replies with respect to bifurcation of ICDS deviation of INR 480 crores (PB- 4) and further filed its detailed working which are placed at pages 5, 16, 19A & 19B of PB. Ld. AR further submits that all these documents were also submitted before Ld. PCIT alongwith reply filed during 263 proceedings online on 08.02.2025. Ld. AR thus, submits that since assessee has not claimed any deduction towards the provision of Bad debts and the AO after due verification of facts accepted the returned income thus there is no error in the assessment order of the AO and therefore, requested for that the Printed from counselvise.com ITA No.2470/Del/2025 Page | 5 assessment order should not be held as erroneous and pre-judicial to the interest of Revenue. 6. Per contra, ld. CIT DR for the Revenue submits that ld. PCIT on perusal of the return of income filed by the assessee observed that it had claimed deduction towards provision for bad debts of INR 153.93 crores and further claimed excess deduction of INR 7.25 crores u/s 36(1)(via) and therefore, these are wrong claim made by the assessee and thus Ld. PCIT has rightly held the assessment as erroneous and pre-judicial to the interest of the Revenue. He prayed accordingly. 7. Heard the contentions of both the parties at length and perused the material available on record. In the instant case, sole allegation of the Ld. PCIT while holding the assessment as erroneous and pre- judicial to the interest of the Revenue that AO has not made proper enquires and thus, he invoked the provisions of Explanation 2 of section 263 of the Act. Assessee claimed provision of bad debts of INR 153.93 crores in the Profit & Loss account which was added back to the total income which fact is clear from the perusal of the computation of income available in PB page 4 & 5. It is further observed from the computation of income itself, that assessee has claimed deduction towards the provisions for Bad & Doubtful debts at INR 8,89,17,450/- as allowable u/s 36(1)(viia) of the Act. The allegation of ld. PCIT was that the AO has allowed excess deduction of INR 146,68,23,319/- to the assessee. It is further observed that during the course of assessment proceedings, AO made specific Printed from counselvise.com ITA No.2470/Del/2025 Page | 6 queries vide notice issued u/s 142(1) of the Act dated 24.11.2022 wherein AO asked the assessee to file all the relevant details regarding provision for bad and doubtful debts and asked to file details of ICDS deviation. The assessee vide reply dated 29.11.2022 filed Annexure-5, placed at page 19A & 19B of PB, wherein computation of income and details of ICDS adjustment were submitted before the AO. The said Annexure is reproduced as under:- Printed from counselvise.com ITA No.2470/Del/2025 Page | 7 8. From the perusal of the above, it could be seen that assessee has offered income on account of ICDS adjustment of INR 4,80,37,68,226/- which includes a sum of INR 169,13,99,039/- under the head expected credit loss on financial assets. It is further seen that the amount of INR 1,69,13,99,039/- comprises of 02 figures which are: (i) Provision for bad and doubtful debts : INR 1,53,93,44,680/- (ii) Recovery from bad debts : INR 15,20,54,358/-. Printed from counselvise.com ITA No.2470/Del/2025 Page | 8 9. It is further observed that in the same computation of income reproduced as Annexure -5 herein above, the assessee has claimed expenditure admissible u/s 36(1)(viia) of INR 8,89,17,450/- and, therefore, the allegation of Ld. PCIT that the assessee has claimed deduction on account of provision of bad and doubtful debts of INR 1,53,93,44,681/- is not correct and this fact has already been examined by the AO who had after applying his mind allowed the same. Once the AO has made the inquiry and reached to the conclusion that assessee has rightly claimed the deduction u/s 36(1)(via) of eh Act, it cannot be said that the AO has not made the inquiry or had not applied his mind. The Hon’ble Supreme Court in the case of PCIT v. Sunbeam Auto (P.) Ltd (2024) 297 Taxman 375(SC) has held that there is a difference between the inadequate inquiries or no inquiries and where the AO has made the inquiries and after considering the submissions filed, he reached to the conclusion which was found acceptable and it could not be held that AO has not made any inquiry or allowed the incorrect claim to the assessee. Similar view is taken by the hon’ble Supreme court in the case of The Malabar industrial Co. Ltd. Vs. CIT reported in (2000) 243 ITR 83 (SC). 10. In view of the above facts and after discussing overall material, we are of the view that the ld. PCIT has no material u/s 263 of the Act to hold the assessment order passed as erroneous and prejudicial to the interest of revenue. Accordingly, the order of Ld. PCIT passed Printed from counselvise.com ITA No.2470/Del/2025 Page | 9 u/s 263 is devoid of merit and is hereby quashed. All the grounds of appeal of the assessee are thus, allowed. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 25.02.2026. Sd/- Sd/- (YOGESH KUMAR U.S) JUDICIAL MEMBER Date:-25.02.2026 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "