- (1.) The assessee in C.A. No. 1143 of 2011, a Scheduled Bank, filed its return of income for the assessment year 2002- 2003 on 24 th October, 2002, declaring total income of Rs. 61,15,610/-. The return was processed under Section 143(1) of the Income Tax Act, 1961 (for short 'the Act') and eligible refund was issued in favour of the assessee. However, the assessing officer issued notice under Section 143(2) of the Act to the assessee, after which the assessment was completed. Inter alia, the assessing officer, while dealing, under Section 143(3) of the Act, with the claim of the assessee for bad debts of Rs. 12,65,95,770/-, noticed that the argument put forward on behalf of the assessee, that the deduction allowable under Section 36(1)(vii) of the Act is independent of deduction under Section 36(1)(viia) of the Act, could not be accepted. Consequently, he observed that the assessee having a provision of Rs. 15,01,29,990/- for bad and doubtful debts under Section 36(1)(viia) of the Act could not claim the amount of Rs. 12,65,95,770/- as deduction on account of bad debts because the bad debts did not exceed the credit balance in the provision for bad and doubtful debts account and also, the requirements of clause (v) of Sub-section (2) of Section 36 of the Act were not satisfied. Therefore, the assessee's claim for deduction of bad debts written off from the account books was disallowed. This amount was added back to the taxable income of the assessee, for which a demand notice and challan was accordingly issued. This order of the assessing officer dated 24 th January, 2005, was challenged in appeal by the assessee on various grounds.
(2.) The Commissioner of Income Tax (Appeals) [hereafter referred to as 'the CIT(A)'], vide its order dated 7 th April, 2006, partly allowed the appeal, particularly in relation to the claim of the appellant Bank for bad debts. Relying upon the judgment of a Division Bench of the Kerala High Court in the case of South Indian Bank Ltd. v. CIT, 2003 262 ITR 579, the CIT(A) held that the claim of the appellant was fully supported by the said decision and since the entire bad debts written off by the bank under Section 36(1)(vii) were pertaining to urban branches only and not to the provision made for rural branches under Section 36(1)(viia), it was entitled to the deduction of the full claimed amount of Rs. 12,65,95,770/-. Consequently, he directed deletion of the said amount.
(3.) For the years of assessment in question and being aggrieved from the order of the CIT(A), the Revenue as well as the assessee filed appeals before the Income Tax Appellate Tribunal, Cochin (for short, the 'ITAT'). All the appeals were heard together and vide its order dated 16 th April, 2007, while relying upon the judgment of the jurisdictional High Court in the case of South Indian Bank Ltd. , the ITAT dismissed the appeal of the Revenue on this issue and also granted certain other benefits to the assessee in relation to other items.;