IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFOREHON’BLE SHRI SAKTIJIT DEY, VICE PRESIDENT &

MS PADMAVATHY S, AM I.T.A. No. 1867/Mum/2025 (Assessment Year: 2007-08)

GS Mahanagar Co-operative Deputy Commissioner of Income Bank Limited Tax circle 1(3)(2), Mumbai Ground Floor, Hiramani Super Aayakar Bhavan, M.K. Road, Mumbai Market, Dr. B.A. Road, Lalbaug, Vs. 400020 Mumbai 400012 PAN: AAAAM3138Q Appellant) : Respondent Assessee by : Shri Dinesh Kukreja Adv. &

Ms. Priyanshi Chokshi Adv.

Revenue by : Shri. Swapnil Choudhary Sr. AR Date of Hearing : 28.10.2025 Date of Pronouncement : 04.11.2025 O R D E R Per Padmavathy S, AM:

This appeal by the assessee is against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre (NFAC), Delhi passed u/s. 250 of the Income Tax Act, 1961 (the 'Act') dated 27.08.2024 for AY 2007-08. The assessee raised the following grounds-

“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in denying deduction of Rs.

39,24,481 under Section 36(1)(viia) of the Income Tax Act, 1961 (Act')

towards the provision for bad and doubtful debts.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) and the Ld. AO erred in holding that the Appellant had not made any provision towards bad and doubtful debts in the books of account, ignoring the documents and information submitted by the Appellant.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) and the Ld. AO erred in holding that the Appellant was required to debit the amount of provision for bad and doubtful debts to the profit and loss account for the year under consideration for the purpose of claiming deduction under Section 36(1)(viia) of the Act.

4. The Appellant craves leave to, add to or alter, by deletion, substitution, or otherwise, any or all of the foregoing grounds of appeal at or before the hearing, and to submit such statements, documents, and papers as may be considered necessary either at or before the appeal hearing.”

2. The assessee filed the return of income for AY 2007-08 on 29.09.2007 declaring a total income of Rs. 4,84,01,934/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The AO completed the assessment u/s. 143(3) 27.11.2009 after making disallowance towards software expenses to the tune of Rs. 28,25,216/- and deduction claimed u/s. 36(1)(viia) of the Act amounting to Rs. 39,24,481/-. Aggrieved the assessee filed an appeal before the ld. CIT(A) contending the disallowance made u/s. 36(1)(viia) and the ld. CIT(A) confirmed the said disallowance. The assessee preferred further appeal before the Tribunal and the Tribunal vide order dated 02.11.2018 restore the matter back to the file of the AO for re-appreciation of factual matrix and re-adjudicate the same as per law after providing reasonable opportunity of being heard to the assessee. During the scrutiny proceedings u/s. 143(3) r.w.s. 254 the assessee submitted the following supporting documents to substantiate the claim for deduction u/s. 36(1)(viia)

a. Audited Financials & Annual Report of the assessee Bank for A.Y. 2007-

08.

b. Audited Financials & Annual Report of the assessee Bank for A.Y. 2006-

07 c. Ledger copies of Provision for Bad and Doubtful Debts for A.Y. 2007-08 d. Ledger copies of Provision for Interest Accrued on Standard Assets for A.Y. 2007-08.

e. Copy of "Statement of Memorandum of Changes" issued by Statutory Auditor for A.Y. 2007-08 in pursuance of which Provision for Bad and Doubtful Debts of Rs.45 lacs is created by the assessee.

f. Explanation for creation of Provisions for Interest Accrued on Standard Assets out of appropriation of net profit for F.Y. 2005-06 (i.e. A.Y. 2006-

07).

3. The assessee submitted that the claim of deduction u/s.36(1)(viia) is against the transfer from provision for standard assets to provision for bad and doubtful debts as per the advise of the statutory auditors.