Section 154 Cannot Be Used to Make Fresh Disallowance of Asset Write-Off Claim: Bangalore ITAT

Jana Small Finance Bank Ltd. Vs ITO (ITAT Bangalore)

Section 154 Cannot Be Used to Make Fresh Disallowance of Asset Write-Off Claim: Bangalore ITAT

rectification powers are confined to correcting mistakes apparent from the record and cannot be used to review completed assessments or introduce new disallowances.

In this case, the assessee-bank’s assessment had undergone multiple rounds of scrutiny, appeal and remand. However, in none of the earlier assessment orders passed under section 143(3) did the Assessing Officer raise any objection regarding the claim for loss on write-off of assets. Subsequently, the AO sought to disallow the claim through a rectification order under section 154 and also made consequential adjustments relating to refund and interest.

The Tribunal noted that the alleged omission to disallow the write-off claim in the original assessment could not be treated as a mistake apparent from the record. Whether such a claim is allowable or not requires examination and adjudication and therefore falls outside the limited scope of section 154. A rectification proceeding cannot be converted into a mechanism for revisiting issues that were never the subject matter of the original assessment.

Holding that the disallowance of the loss on written-off assets was beyond the jurisdiction conferred by section 154, the Tribunal quashed that portion of the rectification order. Since the disallowance itself was deleted, the issue relating to levy of interest under sections 234A and 234B was restored to the Assessing Officer for recomputation in accordance with the Tribunal’s findings.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 22/11/2025 in respect of the A.Y. 2014-15.

2. The brief facts of the case are that the assessee is a company engaged in the business of banking and financial services. The assessee filed their return of income on 28/11/2014. Thereafter the return was revised on 29/03/2016. The assessee had discharged the tax liability as per the revised return filed by them. The revised return was selected for limited scrutiny and the case was subsequently converted into complete scrutiny. Notice u/s. 143(2) was issued and thereafter the assessee had also furnished the various details which was sought for by the AO. Thereafter the assessment has been completed u/s. 143(3) of the Act on 29/12/2017. In the said proceedings, the AO had disallowed some claims for which the assessee filed an appeal before the Ld.CIT(A). The assessee also filed an application to admit the additional evidences. The Ld.CIT(A) had not accepted the additional evidences and also dismissed the appeal. As against the said order, the assessee filed an appeal before the Tribunal. The Tribunal after hearing the arguments of both sides had set aside the order of the Ld.CIT(A) and restored the matter to the AO for denovo adjudication. Thereafter the AO had issued notice and the assessee also filed their submissions. The assessment u/s. 143(3) was made on 31/03/2022. The assessee also challenged the said order before the Ld.CIT(A).

3. In the meanwhile, the revenue had proposed to rectify the 143(3) order made on 31/03/2022. The assessee also filed their objections. In spite of the said objections, the AO had passed the rectification order on 30/05/2024. In the rectification order, the AO had disallowed the loss of assets written off and the other adjustments of refund and interest.

4. The assessee not satisfied with the said rectification order had filed an appeal before the Ld.CIT(A) and submitted that the disallowance of loss of assets written off by way of rectification order is not correct. Similarly, the non-granting of the tax credits and the interests were also disputed by the assessee. The Ld.CIT(A) had partly allowed the appeal by confirming the disallowance of the loss of assets written off.

5. As against the said order, the present appeal has been filed before this Tribunal.

6. At the time of hearing, the Ld.AR submitted that the rectification order made u/s. 154 is not a valid one since the said order does not contain the DIN No. The Ld.AR further submitted that the disallowance of the loss of assets written off in the rectification proceedings are not permissible since the same is not an error apparent on the face of the record. The Ld.AR further submitted that the AO had not considered the said claim in the earlier two orders and therefore the disallowance cannot be made in the rectification order and therefore prayed to allow the appeal. The Ld.AR also submitted that the levy of interest u/s. 234A and 234B of the Act are also not correct since the disallowance is not warranted and therefore the said interests are liable to be deleted. The Ld.AR also filed paper books and furnished the various records in support of their claim.

7. The Ld.DR submitted that the order of the lower authorities are in accordance with the provisions of the Act and therefore the same may be confirmed.

8. We have heard the arguments of both sides and perused the materials available on record.

9. We have perused the original assessment orders passed on 29/12/2017 and 31/03/2022. We have also perused the earlier order of the appellate authority. In all the proceedings, the AO had not whispered anything about the disallowance for the loss on written off of assets. For the first time, the AO had proposed to disallow the said claim by way of rectification order. We have also gone through the provision 154 of the Act which gave powers to the authorities to rectify any mistake apparent from the record. In the present case, the non-consideration of the disallowance for the loss on written off of assets by the AO could not be treated as a mistake apparent from the records. Therefore we are of the view that the disallowance for the loss on written off of assets made in the rectification proceedings are not in accordance with the provisions of the Act. Even though the assessee had relied on several judgments of the various Hon’ble High Courts including the orders of this Tribunal, we are satisfied that the facts are clear and therefore we are convinced that the rectification order passed u/s. 154 of the Act in which the disallowance for the loss on written off of assets was made, is not sustainable in law.

10. The assessee had raised several other grounds including the non-mentioning of the DIN Number in the 154 proceedings but we are not adjudicating the said grounds since the assessee had made out a case that the rectification proceedings are not sustainable.

11. Insofar as the interest portion is concerned, we remit these levies to the AO to decide the same after deleting the disallowance made for the loss on written off of assets, as directed by us.

12. In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 16^thJune, 2026.