Shriram Finance Ltd. Vs PCIT (ITAT Chennai)
The Income Tax Appellate Tribunal (ITAT) considered the assessee company’s appeal against the order dated 25.03.2025 passed by the Principal Commissioner of Income Tax under Section 263 of the Income-tax Act, 1961 for Assessment Year 2021-22. The revision order had partly set aside the assessment completed under Section 143(3) read with Section 144B and directed the Assessing Officer to conduct further verification on specified issues.
The assessee, a Non-Banking Finance Company (NBFC), had filed its return declaring income of Rs. 4,758,39,14,590. The return was selected for scrutiny under CASS, and the assessment was completed by the e-Assessment Unit under Section 143(3) read with Section 144B on 23.12.2022 accepting the returned income.
Subsequently, the Principal CIT examined the assessment records and observed that certain matters had not been verified during assessment. These included the claim of rent under Ind AS amounting to Rs. 98.62 crore, where a difference existed between the deduction claimed and the lease liability cash outflow disclosed in the financial statements, and the deduction relating to provision for impairment of loans and bad debts. The Principal CIT noted that while computing taxable income the assessee had adjusted bad debts against the provision for impairment but had not considered the opening credit balance in the provision for bad debts account from the preceding assessment year. According to the Principal CIT, the excess claim of bad debts of Rs. 221.39 crore required examination. A show cause notice under Section 263 was issued, and after considering the assessee’s explanation, the Principal CIT held that the Assessing Officer had failed to conduct necessary enquiries and that the assessment order was erroneous and prejudicial to the interests of the Revenue within Explanation 2 to Section 263. The assessment was therefore set aside for fresh examination of the identified issues after providing the assessee an opportunity of hearing.
