Mumbai ITAT Remands Taxability of ₹3.14 Crore Provision Reversal for Verification

Court : Income Tax Appellate Tribunal, Mumbai Bench

Brief :

The dispute arose from the reassessment of KBC Bank Naamloze Vennootschap, a foreign banking company, for Assessment Year 2016–17. It primarily concerned the tax treatment of a ₹3.14 crore reversal of a general provision for standard assets.

The bank contended that no deduction had been claimed when the provision was originally created. Upon reversal, the amount was recorded as a negative expense, thereby increasing the profit shown in the profit and loss account. It was subsequently reduced while computing taxable income because the corresponding provision had not been allowed as a deduction in earlier years.

The appeal also involved a ₹1.04 crore adjustment relating to a provision for forfeiture of security under Section 115JB, a TDS credit claim of ₹2.05 crore, refund computation, interest under Sections 234B and 234C, and consequential penalty proceedings. The bank did not pursue its challenge to the validity of the reassessment proceedings.
 

Citation :

KBC Bank Naamloze Vennootschap v. Assistant Commissioner of Income Tax, International Tax Circle 3(1)(2), Mumbai
ITA No. 8160/Mum/2025 | 2026 LLBiz ITAT (MUM) 243 | Assessment Year 2016–17

Judgement :

The Mumbai ITAT held that the ₹3.14 crore provision reversal could not be taxed again if it had already increased the profit disclosed in the profit and loss account and was appropriately adjusted in the computation of taxable income. A further addition in such circumstances would result in taxation of the same amount twice.

As complete financial records were not available before the Tribunal, the matter was remanded to the Assessing Officer to verify the accounting entries and tax computation and decide the issue afresh.

Regarding the ₹1.04 crore adjustment under Section 115JB, the Tribunal observed that an amount voluntarily added back by the assessee while computing book profit could not be added again by the Assessing Officer. The officer was directed to verify the computation and delete the duplicate adjustment if the bank’s claim was correct.

The claim for TDS credit of ₹2.05 crore and issues relating to refund calculation, interest under Sections 234B and 234C, and penalty proceedings were also restored to the Assessing Officer for fresh verification or consequential determination. Accordingly, the appeal was partly allowed for statistical purposes. CA Sansaar

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