ITAT Rules in Favor of Public Sector Bank Across Key Corporate

ITAT Rules in Favor of Public Sector Bank Across Key Corporate Tax and Accounting Disallowances

Issue

FCTR Balance & Sec 43AA: Whether the opening balance of Foreign Currency Translation Reserve (FCTR) accumulated from non-integral foreign operations in preceding years can be brought to tax under Section 43AA read with ICDS-VI.
MAT Applicability on Banks: Whether Minimum Alternate Tax (MAT) provisions under Section 115JB apply to a public sector bank preparing financial statements under the Banking Regulation Act.
Sec 14A Disallowance on Stock-in-Trade: Whether proportionate interest expenditure under Section 14A read with Rule 8D(2)(ii) can be disallowed when securities are held as stock-in-trade yielding business income.
Refund Interest Order of Adjustment (Sec 244A): Whether partial tax refunds granted by the Revenue must be adjusted first against the interest component or the principal tax component.
Excess Write-off of Bad Debts: Whether bad debts written off in excess of the credit balance available in the provision account under Section 36(1)(viia) are allowable under Section 36(1)(vii).
Interest Accrued but Not Due: Whether interest on securities/debentures is taxable on a daily accrual basis or only on specified due dates.
Tier-I Perpetual Bond Interest: Whether interest paid on Innovative Perpetual Debt Instruments (IPDIs) issued to raise Tier-I capital is deductible under Section 36(1)(iii).
NPA Interest Recognition: Whether interest income on non-performing assets (NPAs) can be taxed on an accrual basis contrary to RBI non-recognition guidelines.
RBI KYC Penalty/Fee: Whether monetary payments made to the RBI for non-compliance with internal KYC guidelines are penal in nature and thus non-deductible under Section 37(1).
HTM Premium Amortisation: Whether amortisation of premium paid on Held-to-Maturity (HTM) securities is allowable pursuant to ICDS-VIII and RBI guidelines.
Wage Revision Provision: Whether a provision for wage arrears based on ongoing bipartite negotiations constitutes an allowable accrued business expenditure.
Depreciation on Investment Stock: Whether a provision for diminution in the value of securities held as stock-in-trade (valued at cost or market value, whichever is lower) is allowable as a business loss/deduction.

Facts

The assessee, a public sector bank, followed standard accounting practices accumulating non-integral foreign operation exchange variations in FCTR. Upon Section 263 revision, the Assessing Officer (AO) taxed the opening balance of FCTR relying on Section 43AA and ICDS-VI.
The AO invoked Section 115JB (MAT) to tax the book profits of the assessee bank for AYs 2017-18 to 2020-21.
The AO made disallowance under Section 14A read with Rule 8D(2)(ii) regarding interest expenses on securities held by the bank as stock-in-trade.
During refund computation under Section 244A for AYs 2011-12 and 2012-13, the Revenue adjusted partial refunds against the tax component first instead of the accrued interest component.
For bad debts written off exceeding the opening credit balance maintained under Section 36(1)(viia), the AO disallowed the excess write-off claimed under Section 36(1)(vii).
The AO added interest accrued but not due on securities/debentures at year-end on a daily accrual basis, ignoring that formal rights to receive interest attached only on due dates.
Disallowances were also made by the AO regarding interest paid on IPDIs (Tier-I capital), non-recognized interest on NPAs following RBI guidelines, payments to RBI for KYC non-compliance, amortisation of premium on HTM securities, provision for wage revision under ongoing negotiations, and provision for depreciation on investment securities.
The Commissioner (Appeals) deleted most additions/disallowances based on binding precedent from the jurisdictional High Court and earlier Tribunal rulings in the assessee’s own case.

Decision

FCTR Opening Balance Not Taxable: Held, yes. Section 43AA is merely a computation mechanism and does not override the charging provisions of Sections 4 and 5. ICDS-VI transitional provisions cannot bring to tax unrealized gains of prior years, and the Act prevails in case of conflict.
MAT Inapplicable to Banks: Held, yes. Section 115JB provisions do not apply to public sector banks governed by the Banking Regulation Act; hence, book profits are not subject to MAT.
Sec 14A Disallowance Deleted: Held, yes. Securities being stock-in-trade yielding taxable business income are outside the scope of disallowance under Rule 8D(2)(ii) in the absence of factual or legal changes.
First-Adjustment Rule for Refund Interest: Held, yes. Partial refunds under Section 244A must be allocated first towards the interest component and subsequently towards the principal tax component.
Excess Bad Debts Deductible: Held, yes. Bad debts written off beyond the Section 36(1)(viia) provision balance are fully deductible under Section 36(1)(vii).
Taxation of Interest Only on Due Dates: Held, yes. Interest on securities becomes income only on specified due dates; year-end reversed book entries do not create real accrued income.
Perpetual Bond Interest Allowable: Held, yes. Interest paid on IPDIs (Tier-I capital) is allowable business expenditure under Section 36(1)(iii).
RBI NPA Recognition Upheld: Held, yes. Interest on NPAs cannot be taxed on accrual when non-recognized in alignment with statutory RBI guidelines.
KYC Regulatory Payments Deductible: Held, yes. Payments to RBI for KYC non-compliance are incurred in the normal course of banking and are not fines/penalties for an offence prohibited by law under Section 37(1).
HTM Amortisation Allowed: Held, yes. Amortisation of premium on HTM securities is allowable per ICDS-VIII (Part B) and RBI regulatory directives.
Wage Revision Provision Upheld: Held, yes. Estimated provisions for pending wage settlements represent an accrued, non-contingent liability.
Investment Depreciation Allowed: Held, yes. Provision for diminution in value of securities held as stock-in-trade (valued at lower of cost or market value) is allowable under Section 28(i).

Key Takeaways

ICDS & Computation Provisions Cannot Alter Accrual Rules: Section 43AA and ICDS provisions cannot be used retroactively to tax accumulated past reserves that do not constitute income under Sections 4 and 5 of the Act.
Banking Sector Relief on MAT: Public sector banks preparing financial accounts under the Banking Regulation Act remain exempt from MAT calculations under Section 115JB.
Priority Rule in Tax Refund Interest: In Section 244A computations, partial payments by the tax department must follow standard financial adjustment principles: clearing outstanding interest before reducing principal tax liability.
RBI Framework Supremacy: Accounting treatments mandated by RBI directives—such as NPA non-accrual, HTM premium amortisation, and inventory valuation—prevail for commercial banks and override generic tax disallowances.

IN THE ITAT MUMBAI BENCH ‘B’

Deputy Commissioner of Income-tax

Bank of Baroda

SAKTIJIT DEY, Vice President
and Girish Agrawal, Accountant Member

IT APPEAL Nos. 1240, 4368, 4369, 4398, 5275, 5276, 5522, 5523, 5524, 5564, 5712 (MUM) OF 2025
CO No. 237 (MUM) OF 2025
[Assessment years 2009-10, 2011-12, 2012-13, 2017-18, 2018-19, 2019-20 and 2020-21]

MAY 29, 2026

C. Naresh, CA, S. Anathan, Ms. R. Lalitha, ARs and Percy Pardiwala, Sr. Adv. for the Appellant. Jaya Ragavan, CIT DR for the Respondent.

ORDER

Girish Agrawal, Accountant Member.- All these 11 appeals filed by Revenue and assessee and one cross objection filed by the assessee comprising of relevant Assessment Years are against the orders of ld. CIT(A), National Faceless Appeal Centre, Delhi passed against the assessment orders by ACIT/DCIT, Circle 2(1)(1), Mumbai. Consolidated details of these appeals and cross objection are tabulated below:

Sr. No.	ITA No.	Order of CIT(A)		Assessment order			Assessment year	Appeal by
Sr. No.	ITA No.	No.	Date	Passed by	Date	Passed u/s.	Assessment year	Appeal by
1.	5712/M/20 25	ITBA/NFAC/S/250/2 024-25/1074289792(1)	10.03. 2025	DCIT, CC 2(1)(1), Mumbai	31.03.2021	143(3) r.w.s. 250	2009-10	Revenue
2.	5522/M/20 25	ITBA/NFAC/S/250/2 024-25/1074281803(1)	10.03. 2025	DCIT, CC 2(1)(1), Mumbai	30.12.2019	143(3) r.w.s. 254	2011-12	Revenue
	5523/M/20 25	ITBA/NFAC/S/250/2 024-25/1074282992(1)	10.03. 2025	DCIT, CC 2(1)(1), Mumbai	30.12.2019	143(3) r.w.s. 254	2012-13	Revenue
3.	4398/M/20 25	ITBA/NFAC/S/250/2 024-25/1072330598(1)	20.01. 2025	ACIT, CC 2(1)(1), Mumbai	30.03.2022	143(3) r.w.s. 147	2017-18	Revenue
4.	C. O. 237/M/202 5	ITBA/NFAC/S/250/2 024-25/1072330598(1)	20.01. 2025	ACIT, CC 2(1)(1), Mumbai	30.03.2022	143(3) r.w.s. 147	2017-18	Assessee
5.	4369/M/20 25	ITBA/NFAC/S/250/2 024-25/1071678952(1)	30.12. 2024	ACIT, CC 2(1)(1), Mumbai	19.03.2019	143(3)	2017-18	Revenue
6.	5275/M/20 25	ITBA/NFAC/S/250/2 024-25/1072722475(1)	30.01. 2025	DCIT, CC 2(1)(1), Mumbai	30.03.2020	143(3)	2018-19	Revenue
7.	5524/M/20 25	ITBA/NFAC/S/250/2 024-25/1072732254(1)	30.01. 2025	ACIT, CC 2(1)(1), Mumbai	30.09.2022	143(3)	2019-20	Revenue
8.	5276/M/20 25	ITBA/NFAC/S/250/2 024-25/1072741843(1)	30.01. 2025	ACIT, CC 2(1)(1), Mumbai	29.09.2021	143(3)	2019-20	Revenue
9.	5564/M/20 25	ITBA/NFAC/S/250/2 024-25/1073354774(1)	17.02. 2025	ACIT, CC 2(1)(1), Mumbai	13.10.2022	143(3)	2020-21	Revenue
10.	1240/M/20 25	ITBA/NFAC/S/250/2 024-25/1071679895(1)	30.12. 2024	ACIT, CC 2(1)(1), Mumbai	28.12.2023	143(3) r.w.s. 254	2017-18	Assessee
11.	4368/M/20 25	ITBA/NFAC/S/250/ 2024-25/1071679895(1)	30.12. 2024	ACIT, CC 2(1)(1), Mumbai	28.12.2023	143(3) r.w.s. 254	2017-18	Revenue

2. There are delays in filing ten appeals, details of which are tabulated below. Petition for condonation of delay is placed on record. Upon perusal of the same and hearing both sides, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay. Accordingly, we take up the appeals for adjudication.

Sr. No.	ITA No.	Assessment year	Appeal by	No. of days delay
1.	5712/Mum/2025	2009-10	Revenue	105
2.	5522/Mum/2025	2011-12	Revenue	95
3.	5523/Mum/2025	2012-13	Revenue	95
4.	5276/Mum/2025	2019-20	Revenue	147
5.	4368/Mum/2025	2017-18	Revenue	124
6.	4369/Mum/2025	2017-18	Revenue	124
7.	5275/Mum/2025	2018-19	Revenue	147
8.	5524/Mum/2025	2019-20	Revenue	156
9.	5564/Mum/2025	2020-21	Revenue	127
10.	4398/Mum/2025	2017-18	Revenue	95

2.1 . General facts common for dealing with these appeals are that assessee is a public sector bank engaged in the business of banking and other related financial activities. There being commonality in the grounds raised in the appeals filed, we find it appropriate to take up all the appeals together for adjudication by passing this consolidated order. The common issues raised in the appeals by the Revenue and assessee with their respective ground numbers are tabulated below:

Appeal by

Rev

Asse-ssee

Rev

Asse-ssee

Rev

Assessment year

2009 10

2011 12

2012 13

2017 18

2018 19

201920

2020 21

Sr. No.

ITA Nos.

5712

5522

5523

1240

4368

4369

4398

CO 237

5275

5276 #

5524

5564

Issues

Disallowance u/s 14A read with Rule 8D(2)(ii)

1 to 3

1 to 2. 6

1, 3 to 5

– –

—

1 to 3

– –

—

1 to 3

Bad debts written off

– –

—

– –

Taxability of interest accrued but not due

– –

5 to 6

—

5 to 6

– –

5 to 6

Disallowance of Interest paid on perpetual bonds

– –

7 to 10

– –

8 to 11

4 to 7

7 to 10

Disallowance of amortisation of premium on HTM securities

_ _

Disallowance of amounts paid for not following the internal guidelines of regulators

_ _

Disallowance of provision for wage revision

_ _

Disallowance of provision for depreciation on investments

—

– –

—

14 to 16

– –

14 to 16

Applicability of provisions of section 115JB

—

– –

1 to 2

15 to 16

– –

17 to 18

10 to 11

17 to 18

Taxability of notional unrealised interest on NPA

_ _

11 to 13

_ _

Reopening of Assessment

_ _

1 to 3

_ _

Recovery of Bad Debt Written off

– –

—

– –

—

Taxability of opening balance of Foreign Currency Translation Reserve

– –

1 to 2

– –

—

– –

—

Interest u/s. 244A

– –

3 to 4

—

– –

—

– –

General

– –

—

# Rule 27 invoked by the assessee on legal issue relating to assessment order passed on a non-existing entity, viz. erstwhile Dena Bank which got amalgamated in to the assessee bank.

2.2 We have heard both the parties at length and perused the material placed on record including tabulated details, synopsis, detailed written submissions, judicial precedents and paper books. Submissions made by both the parties are dealt by us while adjudicating the respective issues. Therefore, the same are not narrated separately for the sake of brevity and to avoid repetition.

3. We first take up appeal in ITA No.1240/Mum/2025. The only issue in this appeal is in respect taxability of opening balance in the Foreign Currency Translation Reserve (FCTR) in view of provisions of Income Computation and Disclosure Standard-VI (ICDS) vis-a-vis charging provisions of section 4 and 5 of the Act whereby total income of the previous year alone is liable to tax. Before we go into the issue for adjudication, we recapitulate certain basic and relevant facts in this regard.

3.1. Assessee filed its return of income on 30.11.2017, reporting total income at Rs.5272,63,72,980/- under the normal provisions of the Act. The same was revised with total income at Rs.4535,87,04,470/-. Assessment was completed u/s. 143(3) which was subsequently subjected to revisionary proceedings u/s. 263 wherein ld. PCIT held that the said assessment was completed without making addition in respect of opening balance of FCTR of Rs.2238,55,01,000/- so as to be in compliance with CBDT circular No. 10/2017, dated 23.03.2017, making the assessment order erroneous in so far as prejudicial to the interest of Revenue. Against the said revisionary order passed u/s. 263, matter went before the Coordinate Bench of ITAT in BANK OF BARODA v. Pr. CIT [IT Appeal No. 1687 (Mum) of 2020, dated 08.03.2022]. The Coordinate Bench directed the Assessing Officer to decide the issue afresh on merits and vacated the finding of the ld. PCIT. In this regard, we perused the said order and took note of the observations made in para-7 whereby the Coordinate Bench notes that issue with respect to taxability of FCTR has not been examined or even claimed to be examined by the ld. Assessing Officer at any stage. Coordinate Bench also took note of the CBDT circular and noted that Assessing Officer has not at all considered its impact. Thus, while setting aside the matter to the file of ld. Assessing Officer, Coordinate Bench held that non examination of this aspect has led the assessment order erroneous in so far as prejudicial to the interest of Revenue. Since certain observations on merits of the case were made by the ld. PCIT in the revisionary proceedings, the Coordinate Bench vacated the same while directing the Assessing Officer to decide the matter afresh on merits in accordance with the law without getting influenced by the observations made by the PCIT. It held that all the contentions on the merits shall remain open.

3.2. Ld. Assessing Officer gave effect to the order of the Coordinate Bench by passing the impugned assessment order, dated 29.12.2023. He issued statutory notices u/s. 142(1) calling for explanation on the taxability of opening balance of FCTR reported by the assessee in its audited financial statements. Assessee made detailed submissions explaining its case for its non-taxability. After considering the submissions made by the assessee, he held that CBDT circular No.10/2017 applies in the case of the assessee and made addition towards opening balance of FCTR to bring it to tax in the year under consideration. Out of the total amount of opening balance of FCTR of Rs. 2238,55,01,000/-, he gave relief to the extent of FCTR pertaining to “non monetary items” amounting to Rs.1795,72,91,000/- and made the addition towards the balance pertaining to “monetary items” amounting to Rs.442,82,10,000/-.

3.3. In the first appeal filed by the assessee, the addition so made was sustained by the ld. CIT(A). While giving his finding, ld. CIT(A) upheld the addition made based on the provisions of section 43AA(2)(iv) and the explanatory notes to the provisions of Finance Act, 2018 issued vide CBDT circular No. 08/2018, wherein it was stated that FCTR shall be computed in the manner provided in ICDS notified u/s. 145(2). Aggrieved, assessee is in appeal before the Tribunal.

4. We have heard both the parties and perused the material on record, including the judicial precedents cited before us. Before we delve into the issue to adjudicate on the taxability of FCTR for its opening balance, we first understand its accounting methodology adopted giving rise to the same. According to the assessee, it as a bank follows an accounting policy for investment in its foreign branches where its assets and liabilities are translated at the closing spot rates notified by FEDAI at the end of each quarter for translation in respect of non-integral operations. The income and expense are translated at quarterly average rate notified by FEDAI at the end of each quarter. Resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account viz, Foreign Currency Translation Reserve’ (‘FCTR’) till the disposal of the net investment. Assessee claimed a deduction of Rs. 138.76 crores for AY 2017-18, being loss in FCTR on account of monetary items.

4.1. Union of India notified ICDS on 31.03.2015 whose applicability was subsequently postponed to Assessment Year 2017-18. Relevant ICDS for the issue in hand before us is ICDS-VI relating to the effects of changes in foreign exchange rates. On perusal of this standard, its preamble mentions that in case of conflict between the provisions of the Act and this ICDS, the provisions of Act shall prevail to that extent. In clause-2 containing definitions, in sub-clause (k) and clause (l) ‘monetary items’ and ‘non-monetary items’ are defined, which is as under:

(k) “Monetary items” are money held and assets to be received or liabilities to be paid in fixed or determinable amounts of money. Cash, receivables, and payables are examples of monetary items;

(1) “Non-monetary items” are assets and liabilities other than monetary items. Fixed assets, inventories, and investments in equity shares are examples of nonmonetary items;

4.2. Clause-4 requires conversion at last date of the previous year. Sub-clause (b) mentions that depending upon certain conditions, the relevant monetary items shall be reported in the reporting currency at the amount at the last date of the previous year. Clause-9, more particularly, sub-clause (1) and (2) were taken note of by the ld. Assessing Officer whereby foreign currency transactions undertaken on or after 01.04.2016 shall be recognised in accordance with the provisions of the said ICDS. Further, exchange difference arising in respect of monetary or non-monetary items on settlement thereof during the previous year, commencing on 01.04.2016 or on conversion thereof shall be recognised in accordance with the provisions of the standard after taking into account the amount recognised on the last day of the previous year ending on 31.03.2016, for an item which is carried forward from the said year.

4.3. In this regard, CBDT brought out certain clarifications vide circular No. 10/2017. Ld. Assessing Officer made specific reference to question No.16 which was answered by the CBDT on the taxability of opening balance of FCTR relating to non-integral foreign operation recognised as per the Accounting Standard-II, as on 01.04.2016. In the answer, CBDT mentioned that it shall be recognised on monetary items for non-integral operations in Assessment Year 2017-18 ‘to the extent not recognised in the income computation in the past’. Ld. Assessing Officer took this as the basis to hold that FCTR balance as on 01.04.2016 pertaining to exchange difference on monetary items for non-integral operations to the extent not recognised in the income computation in the past of Rs.442,82,10,000/- is to be brought to tax in the year under consideration.

4.4. Contrary to the observations and findings of the ld. Assessing Officer, submissions of the assessee are that it valued its monetary items relating to non-integral operations at the exchange rate on the date of transaction and the balance in the FCTR account being notional would only be a proforma entry. According to it, the foreign currency monetary assets constitute stock in trade of banking business and therefore, mere re-valuation of closing stock without considering opening stock cannot give rise to taxable income even under ICDS-VI. In this connection, reference is made to paragraph 9(3) of ICDS-VI based on which it is submitted that the transitional provision cannot be construed to bring to charge to tax, unearned gain of prior years. Transitional provision provides that for charging any income in the current year relating to outstanding foreign exchange, income already charged to tax in earlier years would be reduced in order to avoid double taxation. Such a transitional provision cannot be construed to bring to charge to tax, notional income pertaining to opening balance of FCTR relating in fact to the earlier years.

4.5. Assessee valued the opening and closing monetary items relating to non-integral operations at year end exchange rates and claimed the difference as a deduction which amounts to Rs. 138.76 crores, being a loss in FCTR. Thus, it complied with the requirements of ICDS-VI which is in compliance with the legal principle of determination of total income. For this, it was submitted that under the well settled principle on valuation of stock, if there is a change in the method of valuation of closing stock, either on account of method not accepted or as a consequence of a statutory impost then, both the opening and closing stock are to be valued on the same basis by applying same methodology so that the correct profit for the year can be computed.

4.6. To buttress the said principle deliberated in the context of valuation of closing stock, reliance was placed on certain judicial precedents which included –

(i)

CIT v. Ahmedabad New Cotton Mills Co. Ltd. [1929] 4 ITC 245 (PC)

(ii)

CIT v. Mahalaxmi Glass Works (P.) Ltd. [2009] 318 ITR 116 (Bombay)

(iii)

CIT v. Bengal Jute Mills Company Ltd. [1992] 107 CTR 34 (Cal)

(iv)

CIT v. Motor Industries Company Ltd. [IT Appeal No. 1064 of 2008, dated 31.10.2014] by Hon’ble High Court of Karnataka

4.7. According to the assessee, it has complied with the requirements of ICDS-VI without violating the legal principle for determination of income based on reals income theory. In this context, we refer to the decision of Hon’ble High Court of Calcutta in the case of Bengal Jute Mills Company Ltd (supra) which had elaborately dealt on the issue relating to revaluation of stocks. Hon’ble Court observed on the general rule of accountancy that value of closing stock of the year becomes value of opening stock the next year. Hon’ble Court observed that where the closing stock is valued differently by rejecting the valuation by the assessee then, value of the opening stock must also be arrived in a similar fashion. If the valuation of the closing stock is arrived by a method different from the one adopted for the opening stock, then it results into a highly distorted figure of profit, which is beyond the charging provisions of section 4 of the Act. Hon’ble Court noted that section 4 imposes a charge on the total income of the previous year of every person. Relevant para-5 in this regard is extracted below:

“5. Sec. 4 of the IT Act, imposes a charge on the total income of the previous year of every person. IF any income has escaped assessment in an earlier previous year, then the ITO may reopen the assessment for the purpose of bringing into tax the income that has escaped assessment. The escapement may be due to undervaluation of stock in the earlier year. But because the income of the earlier year has escaped assessment is not a ground for assessing the current year’s profit at a distorted figure. The general rule of accountancy is that the value of the closing stock of a year becomes the value of the opening stock of the next year. But in a case like this where the ITO has made an allegation of undervaluation and has valued the closing stock at the market rate rejecting the assessee’s valuation, then to arrive at the correct figure of profit, the ITO must also value the opening stock in a similar fashion. If the assessee’s method of valuation of the opening stock is accepted and at the same time that method is rejected for valuation of the closing stock, then a highly emerge. This will be beyond the scope of the charging section. This position was explained at length by Marten, CJ in the case of Ahmedabad New Cotton Mills Co. Ltd v. CIT 3 ITC 91 This judgment was ultimately affirmed by the Privy Council.”

5. In the present case before us, assessee had all along been valuing its monetary items relating to non-integral operations at the exchange rate on the date of transaction and the balance in the FCTR account being notional would only be a proforma entry. To comply with the ICDS-VI in the year under consideration, assessee valued both opening and closing monetary items relating to non-integral operations at the year-end exchange rates and claimed the difference as a deduction. Decision of Privy Council in the case of Ahmedabad New Cotton Mills Company Ltd. (supra) is relevant in the present context which also held similarly as in the case of Bengal Jute Mills Company Ltd. (supra) though this judgment is of much later date:

“…….If the method of altering both valuations is not adopted it is perfectly plain that the profit which is brought forward is not the real one. It may be more or it may be less, but it has no relation to the true profit if the stock is valued on one basis when it goes out without considering the value of the stock when it comes in. When, therefore, there is undervaluation at one end, the effect is to cause both a smaller debit in respect of the stock introduced into the next account and a larger sum for profits realised by the sale, change in market values being immediately reflected in the price obtained for the goods that are sold; in these circumstances to contend that there should be undervaluation at one end and not at the other is to raise an argument which their Lordships’ cannot accept.”

5.1. This judgement of Privy Council was followed by Hon’ble jurisdictional High Court of Bombay in the case of Mahalaxmi Glass Works Pvt. Ltd. (supra). Hon’ble Court while dealing with the issue of effect of change in the value of opening stock leading to chain reaction held by relying on the decision of Privy Council (supra) and Hon’ble High Court of Delhi in the case of CIT v. Mahavir Aluminium Ltd. [2008] 297 ITR 97 (Del) that to give effect to section 145A, if there is any change in the closing stock at the end of the year then, there must necessarily be a corresponding adjustment made in the opening stock of that year, as it would be necessary to compute true and correct profit for the purpose of assessment.

6. For the scope of charging section to bring to tax any income under the Act, we refer to section 4 which reads as under:

“4(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person:

Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, incometax shall be charged accordingly.

(2) In respect of income chargeable under sub-Section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.”

6.1. From the perusal of the above section, it is clear that income-tax shall be charged for that year in respect to total income of the previous year of every person. In this regard, Hon’ble High Court of Karnataka in the case of Motor Industries Company Ltd. (supra) observed on a similar issue arising out of the valuation of stock at the end of the year, changed by the assessing authority with no corresponding change made in the valuation of the opening stock, resulting into distorted figure of income. We note that in this judgement, Hon’ble High Court of Karnataka has considered all the judicial precedents which have been discussed in the above paragraphs including that of Ahmedabad New Cotton Mills Company Ltd. (supra), Bengal Jute Mills Company Ltd. (supra), while concluding on the issue relating to having valuation methodology for opening and closing stock which gives rise to distorted figure of income for the year and holding that opening stock should also be revalued on the same methodology as adopted for closing stock so as to arrive at correct figure of tax chargeable u/s. 4. Relevant para from the said judgement is extracted below:

“As is clear from the charging Section, the income tax shall be charged for the year in respect of total income of the previous year of the very person. Therefore, if the basis for arriving at the valuation at the end of year is changed by the assessing authority without correspondingly changing the valuation of the opening stock then it results in charging income on a distorted figure which is not permissible in law. Therefore, when the assessee changes the valuation of the closing stock, there is no necessity to change the opening stock. But when the assessing authority changes the closing stock it becomes obligatory that the opening stock valuation has to be correspondingly changed on the basis of which the valuation of the closing stock is changed in order to arrive at correct figure of tax which is chargeable as tax under Section 4 of the Act. Therefore, the order passed by the Tribunal holding that the opening stock should also be revalued cannot be found fault with. Accordingly, the substantial questions of law 1 and 2 framed are answered in favour of the assessee and against the revenue.”

7. With regard to CBDT circular No.10/2017 which forms the very basis of the impugned assessment order giving effect to the revisionary order, we note that circulars issued by CBDT to the extent prejudicial to the assessee are not binding. As already noted, edifice for the impugned revisionary order lies in the non-adherence of the CBDT Circular by the ld. AO while passing the assessment order. In this regard, it is important to note about the binding nature of CBDT circular on the Income-tax authorities for which gainful guidance is taken from the decision of Hon’ble Supreme Court in the case of CIT v. Mahavir Aluminium Ltd. [2008] 297 ITR 97 (Del) wherein it was held that circulars bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee.

7.1. In the case of UCO Bank v. CIT 237 ITR 889 (SC), Hon’ble Supreme Court while dealing with the legal status of such circulars, observed as under:

“Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act, which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities.”

7.2. In the matter of CIT v. Smt. Nayana P. Dedhia 270 ITR 572 (Andhra Pradesh), the Hon’ble High Court of Andhra Pradesh held that the guidelines issued by the Board in exercise of powers in terms of section 119 of the Act relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board.

7.3. In the decision of Dy. CIT v. Sunita Finlease Ltd. 330 ITR 491 (Chhattisgarh) it was held by the Hon’ble High Court of Chhattisgarh in para 16 that the administrative Instruction No. 9/2004 issued by the Central Board of Direct Taxes is binding on administrative officer in view of the statutory provision contained in section 143(2), which provides for limitation of 12 months for issuance of notice under section 143(2). While giving its finding, the Hon’ble High Court of Chhattisgarh placed reliance on the decisions in the case of UCO Bank (supra) and Smt. Nayana P. Dedhia (supra).

7.4. Further, Hon’ble High Court of Calcutta in the case of Amal Kumar Ghosh v. Asstt. CIT 361 ITR 458 (Calcutta) dealt with the issue relating to CBDT circular which according to the Department cannot defeat the provisions of law. While giving its observations and finding on the issue, the Hon’ble Court referred to the decision of Hon’ble Chhattisgarh High Court in the case of Sunita Finlease Ltd (supra), which are as under:

7. We have considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act.

8. Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. [emphasis supplied by us by underline]

7.5. Taking into consideration the provisions to section 4 and 5 of the Act, the said above circular is in conflict with the said provisions where there is no real income earned by the assessee which is being attempted by the Revenue to bring it to tax. Addition made by the ld. Assessing Officer is based on inference drawn on the clarification given by the CBDT for the treatment prescribed in ICDS-VI which cannot be applied to bring to tax, an income in the year under consideration where the gains are not recognised in the past.

8. As regards ICDS, we took note of its preamble wherein it mentions that in a case of conflict between the Act and ICDS, provisions of the Act shall prevail. Thus, giving supremacy to the provisions of section 4 and 5 over the clauses in ICDS, in case of conflict. Paragraph 9(3) of ICDS-VI which refers to the transitional provision cannot be construed to bring to charge to tax unearned gain of the prior years. The transitional provision provides that for charging any income to tax in the current year relating to outstanding foreign exchange, element already charged to tax in the earlier years would be reduced in order to avoid double taxation. This provision only seeks to give a relief and cannot be interpreted as has been done in the Circular 10/2017, to bring to tax, the opening balance of FCTR in the year under consideration.

8.1. Section 43AA was inserted by the Finance Act, 2018 with retrospective effect from Assessment Year 2017-18. This section provides for any gain or loss arising on account of any change in foreign exchange rate to be treated as income or loss which is required to be computed in accordance with ICDS notified u/s. 145(2). Ld. CIT(A) has referred to the said provision being a charging section to bring to tax FCTR. We find that section 43AA provides for computation mechanism of gain or loss arising on account of change in foreign exchange rates by referring to ICDS. As already observed by us in the above paragraphs, preamble to ICDS very categorically mentions about the supremacy of the provisions of the Act which shall prevail over the ICDS provisions in the case of a conflict between the two. We have deliberated on the conflict between the provisions of section 4 and 5 with that of ICDS-VI read with CBDT Circular to bring to tax the opening balance of FCTR in the current year. When the provisions of section 43AA are read with provisions to section 4 and 5, it is abundantly clear that income-tax shall be charged for the year in respect of the total income of the previous year. In the present case, the FCTR opening balance relates to the preceding year and bringing it to tax in the year under consideration is violative of the charging section under the Act, i.e., section 4 and 5. We also take note of the fact that assessee has complied with the provisions of ICDS by valuing the opening and closing monetary items relating to non-integral operations at the year-end exchange rates and claiming the difference as a deduction. The approach adopted by ld. Assessing Officer and as confirmed by ld. CIT(A) does not bring parity into the treatment given for the opening balance and the closing balance of FCTR in the year under consideration as both relates to monetary items which are nothing but stock in trade for the assessee.

8.2. In the conspectus of the above detailed deliberations comprising of the factual matrix of the present case, relevant provisions of the Act as well as ICDS-VI and the judicial precedents dealing with various aspects of the issue, we find that addition made by the ld. Assessing Officer in respect of opening balance of FCTR for the monetary items of non-integral operations is not tenable. We delete the addition so made of Rs. 442,82,10,000/-. Ground nos. 1 and 2 raised by the assessee are allowed.

9. In the result, appeal of the assessee is allowed.

10. We now take up ITA No. 4368/Mum/2025. The sole issue raised by the Revenue in this appeal is in respect of applicability of provisions of section 115JB on the assessee bank. Ground no.2 raised by the Revenue in itself brings forward the contention made by the ld. CIT DR that amendment brought by Finance Act, 2012 to section 115JB(2) includes entities preparing financial statements under their governing Acts such as the Banking Regulation Act, 1949 within the ambit of Minimum Alternate Tax. The issue raised by the Revenue before us is no longer res integra as dealt by Hon’ble Special Bench of ITAT, Mumbai in the case of Union Bank of India v. DCIT [IT Appeal No. 424 (Mum) of 2020, dated 6-9-2024]. This judicial pronouncement of the Hon’ble Special Bench has been considered by the Coordinate Bench in assessee’s own case for Assessment Year 2016-17 in BANK OF BARODA v. ACIT [IT Appeal No. 1649 (Mum) of 2019, dated 6-2-2025]. Coordinate Bench in assessee’s own by following the decision of Hon’ble Special Bench held that assessee is not covered under the provisions of section 115JB so as to bring it to tax on book profit. Relevant paragraph in this regard from the decision of Coordinate Bench in assessee’s own case (supra) is extracted for ready reference:

“20. The issue arising in ground No. 4 raising assessee’s appeal pertains to applicability for the provisions of section 1151B of the Act to the assessee bank.

21. During the hearing, the Ld. Representatives appearing for the parties fairly agreed that this issue has recently been decided in favour of the assessee by the Special Bench of the Tribunal. We find that a similar issue came up for consideration before the Special Bench of the Tribunal in Union Bank of India v. DCIT, in ITA No. 424/Mum/2020, for the assessment year 2015-16. Vide its order dated 06.09.2024, the Special Bench of the Tribunal deciding the issue in favour of the assessee banks, including the assessee in appeal before us, held that clause (b) to sub-section (2) of section 115JB of the Act inserted by Finance Act, 2012, w.e.f. 01.04.2013, i.e., from the assessment year 2013-14 onwards, are not applicable to the banks constituted as corresponding new banks in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, provisions of section 115JB of the Act cannot be applied and consequently, on book profit (MAT) are not applicable to such banks. Therefore, respectfully following the decision of the Special Bench of the Tribunal (cited supra), ground no.4 raised in assessee’s appeal is allowed.”

11. Thus, respectfully following the aforesaid judicial precedents, grounds raised by the Revenue are dismissed.

12. In the result, appeal of the Revenue is dismissed.

13. Now we take up ITA No.5712/Mum/2025. The sole issue involved in the appeal filed by the Revenue is in respect of disallowance u/s. 14A r.w.r. 8D(2)(ii) for which relief has been granted by the ld. CIT(A). Relevant facts in this regard are that assessee being a bank, the securities held by it are stock in trade. Interest income and profit on sale of such securities are both offered to tax as business income which is accepted by the Department. Ld. Assessing Officer has made a disallowance by applying the provisions of section 14A r.w.r. 8D(2)(ii) towards proportionate interest expense. From the perusal of the order of ld. CIT(A), we find that reliance has been placed by him for giving relief to the assessee on the decision of Coordinate Bench in assessee’s own case for Assessment Year 2010-11 and 2013-14 in ACIT v. BANK OF BARODA [IT Appeal Nos. 3409 and 3412 (Mum) of 2023, dated 10.07.2024]. The factual matrix in the present case before us is similar to what has been dealt by the Coordinate Bench in the said judicial precedents relied upon by the ld. CIT(A). Also, reference is made to the decision of Coordinate Bench in assessee’s own case for Assessment Year 2009-10 in ACIT v. BANK OF BARODA [IT Appeal No. 5619 (Mum) of 2019, dated 8-3-2021], which has dealt with the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT, New Delhi (SC) and came to a conclusion of upholding the decision of ld. CIT(A) that provisions of section 14A would not apply in respect of investment in shares held as stock in trade in the case of assessee bank. Relevant para from the said judicial precedent of the Coordinate Bench for A.Y. 2009-10 (supra) is extracted below for ready reference:

“4. The ground No.2 raised by the Revenue is challenging the action of the ld. CIT(A) wherein he had directed the ld. AO to exclude the investments that were held as ‘stock in trade’ while computing disallowance u/s.14A of the Act r.w.Rule 8D(2) of the Rules. We find that the ld. CIT(A) had directed the ld. AO to ignore the investment in shares and securities that were held as ‘stock in trade’ for the purpose of computing disallowance u/s. 14A of the Act r.w.Rule 8D(2) of the Rules, by placing reliance on the decision of this Tribunal in case of DCIT v. India Advantage Securities Ltd. , in ITA No.6711/Mum/2011 dated 14/09/2012 ; the decision of Hon’ble Kerala High Court in the case of CIT v. Smt. Leena Ramachandran reported in 339 ITR 296 and also on the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. India Advantage Securities Ltd. , in ITA No.1131 of 2013 dated 17/03/2015. We find that this issue was the subject matter of adjudication by this Tribunal in the case of Central Bank of India v. DCIT in ITA No.3739/Mum/2018 & 3763/Mum/2018 for A.Y.2012-13 dated 29/01/2020, which is authored by the undersigned, wherein it was held that the Hon’ble Apex Court in the case of Maxopp Investment Ltd., reported in 402 ITR 640 had categorically upheld the findings recorded by the Hon’ble Punjab and Haryana High Court in the case of State Bank of Patiala reported in (P & H) with regard to non- applicability of provisions of Section 14A of the Act in respect of investments held as stock in trade in respect of banks. It was also held by this Tribunal that the Hon’ble Punjab and Haryana High Court in above mentioned case had further placed reliance on the CBDT Circular No.18 /2015 dated 02/11/2015. Hence, by respectfully following the said decision, we hold that there was absolutely no error in the action of the ld. CIT(A) in holding that provisions of Section 14A of the Act could not be made applicable in respect of investments in shares held as ‘stock in trade’ in the case of assessee bank. Accordingly, the ground No.2 raised by the Revenue is dismissed.”

13.1. Before us, nothing contrary has been brought on record both on facts and law. Respectfully following the aforesaid judicial precedents, we do not find any infirmity with the findings arrived at by the ld. CIT(A). Accordingly, grounds raised by the Revenue are dismissed.

14. In the result, appeal of the Revenue is dismissed.

15. Now we take up appeal in ITA No. 5522/Mum/2025. In this appeal, Revenue has contested on two issues, one relating to disallowance u/s. 14A r.w.r. 8D(2)(ii) for which relief has been granted and also on the issue relating to interest u/s. 244A. Grounds relating to issue of disallowance u/s. 14A r.w.r. 8D(2)(ii) are similar to what we have already adjudicated upon in appeal for Assessment Year 2009-10 in ITA No. 5712/Mum/2025. There being no material change in the facts and circumstances as well as position of law, our observations and findings apply mutatis mutandis on this issue. Accordingly, following the principle of consistency, findings arrived at by the ld. CIT(A) are upheld. Grounds raised by the Revenue in this regard are dismissed.

15.1. The second issue raised by the Revenue is in respect of section 244A. Claim of the assessee is that there is short grant of interest on account of adjustment of part refunds granted, which has been made first against the tax refunds due and thereafter against the interest refunds due. However, the correct position according to the assessee is that it should be first adjusted against the interest refund due and thereafter from the tax refund due. The issue before us raised by the Revenue is no longer res integra as already decided in favour of the assessee by the Coordinate Bench in assessee’s own case in BANK OF BARODA v. ACIT [IT Appeal No. 1646 (Mum) of 2017, dated 20.12.2018] which in turn followed the decision in the case of Union Bank of India v. Asstt. CIT, LTU, Mumbai [2017] 162 ITD 142/[2016] 52 ITR(T) 221 (Mumbai) . Relevant para from the decision of assessee’s own case (supra) is extracted below:

“5. We have heard the rival submissions. We find that the ld AO had calculated interest u/s 244A of the Act for the period 1.4.95 to 4.7.97 on the refund determined at Rs 200,87,14,868/- and arrived at the interest figure of Rs 56,24,40,163/-. Hence at this stage, the assessee was entitled for entire refund of Rs 257,11,55,031/-. As against this figure, only a sum of Rs 148,78,12,496/-was actually granted to the assessee. Hence at this stage, a sum of Rs 108,33,42,535/- (2571155031- 1487812496) becomes due to the assessee by the revenue. Hence this sum of Rs 108.33 crores automatically partakes the character of principal/tax portion of amounts payable by the revenue to the assessee on which interest is eligible. There is no need to segregate the refunds granted into tax portion and interest portion and subsequently reduce the tax portion of the refund alone from the refund originally determined for calculation of interest u/s 244A of the Act for the period subsequent to 4.7.1997. This action of the ld AO, in our considered opinion, is against the spirit of the provisions of the scheme of taxation. The provisions of section 140A of the Act specifically provides that any part payment of taxes paid by the assessee would first be appropriated towards the interest portion thereon and thereafter remaining would get adjusted towards the tax portion, meaning thereby, the exchequer should never be deprived of its legitimate dues payable by the assessee in time. The same analogy would equally apply when the refund is to be granted to the assessee with interest u/s 244A of the Act. In the instant case, the entire confusion had arose due to the fact that the full amount of refund as determined by the ld AO was not actually granted to the assessee, thereby making the assessee eligible for further interest for the future periods. We find that this aspect had been duly dealt with by the co-ordinate bench of this tribunal elaborately in the case of Union Bank of India v. ACIT reported in dated 11.8.2016 wherein the solitary ground taken up by the assessee before this tribunal was with regard to granting lesser amount of interest u/s 244A of the Act by the ld Ao while computing refund arising as a result of passing impugned order for giving effect to CIT(A)’s order (i.e appeal effect order) for Rs 64.53 crores as against correct amount of Rs 65.73 crores as claimed by the assessee. We find that the issue before us is exactly similar to the question raised before this tribunal in the case of Union Bank of India supra except with variance in figures and dates. Hence the decision rendered in the case of Union Bank of India supra would apply with equal force for the assessee before us.”

15.2. Following the principle of consistency and in the given set of facts, we uphold the finding of the ld. CIT(A). Grounds raised by the Revenue in this regard are dismissed.

16. In the result, appeal of the Revenue is dismissed.

17. In ITA No. 5523/Mum/2025, Revenue has raised the same two issues as raised in ITA No. 5522/Mum/2025 relating to disallowance u/s. 14A r.w.r. 8D(2)(ii) and interest u/s. 244A. Both the issues have been adjudicated by us in the said appeal whose observations and findings applies mutatis mutandis. Accordingly, appeal by the Revenue is dismissed.

18. Now we take up appeal in ITA No. 4398/Mum/2025 for which Revenue is in appeal contesting on the jurisdictional issues of validity of reopening and passing re-assessment order thereafter for which ld. CIT(A) has given relief to the assessee.

18.1. Facts briefly stated are that original assessment u/s. 143(3) was completed on 19.03.2019 which has been subjected to revision on various occasions to give effect to orders of first appeal, revisionary proceedings, etc. Subsequently, assessment made u/s. 143(3) was reopened by issuing notice u/s. 148 on 25.03.2021. In assessee’s case, the reopening was proposed for adding the amount of recovery in respect of bad debts written off even when the said amount was already credited to P & L a/c and offered to tax. As per the movement of technical/ prudential written off accounts given in the annual report, it was noticed that sum of Rs. 459.63 crore was shown as recoveries from previously technically/prudentially written off accounts whereas only a sum of Rs. 326.83 was credited to Profit and Loss account and offered to tax. Accordingly, ld. Assessing Officer sought to tax the differential amount of Rs. 132.80 crore. Assessee explained that the said amount is on account of other deductions like exchange difference arising in case of write off done by foreign branches, upgradation/shifting of account from recovery toward interest (booked under interest income of bank) etc. The submissions made was not accepted by the ld. Assessing Officer and the assessment reopened and reassessment order u/s 147 passed against which the present appeal is filed.

18.2. Contention of the assessee is that there is no new tangible material in respect of the issue considered while recording reasons to believe and reopening is based only on details already on record. Addition made towards recovery in respect of bad debts written off is based on accounts already available in the assessment records which have been examined by the ld. Assessing Officer while completing assessment u/s. 143(3). Other additions made by ld. Assessing Officer are also based on material already on record which was subjected to examination in the original assessment.

18.3. In the first appeal, ld. CIT(A) elaborately dealt with the contentions of the assessee. He took note of the submissions made by the assessee that for the reasons to believe recorded for the impugned reopening, there is no new tangible material and is based on return of income, tax audit report, annual report which are already on record and therefore, the reopening is invalid. Reliance was placed on the decision of Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC) and several other judicial precedents including that of Hon’ble jurisdictional High Court of Bombay in the case of Great Eastern Shipping Co. Ltd. v. National Faceless Assessment Centre/ National e-Assessment Centre [2024] 463 ITR 145 (Bombay)/Writ Petition No. 3983 of 2021 as well as in the case of Pr. CIT v. NESCO Ltd. 456 ITR 600 (Bombay) andShri Saibaba Sansthan Trust (Shirdi) v. Union of India [2024] (Bombay). Ld. CIT(A) after going through the records and the reasons to believe and considering the judicial precedents relied upon, came to conclusion that ld. Assessing Officer had merely relied on the financial records submitted by the assessee, there being no new tangible material to warrant the said reopening. He thus, held the reopening u/s. 147 as invalid and quashed the impugned reassessment order. Merits of the case were not adjudicated upon by the ld. CIT(A).

19. For the ground raised by the Revenue before us, we perused the reasons to believe recorded by the ld. Assessing Officer for invoking the reopening proceedings u/s. 147 which are placed in the paper book at page 3, 4 and 5. From our perusal, we note that in para-3, ld. Assessing Officer mentions “from the records of the assessee it is seen that the tax auditor in the tax audit report (clause 25), reported that..”. In the same para, he also refers to ‘annual report’ of the assessee with specific mention to ‘schedule 18 (A-2.7.1) – Notes on accounts’ from where he takes note of recoveries made from previously technical/prudential written off accounts. Further in para – 4, he mentions that “taking into consideration of the above and the data in the return of income, the data from the assessment records.”. Furthermore, to form a considered view about the failure of the assessee to disclose fully and truly all material facts necessary for the assessment, he again mentions in para-5 about the material available on record on the basis on which he arrives at a belief that income chargeable to tax to the tune of Rs.238.19 crores has escaped assessment.

20. In the conspectus of the above reasons to believe recorded by the ld. Assessing Officer and the findings arrived at by ld. CIT(A), we find that the approach of the ld. Assessing Officer tantamount to reviewing his own order originally passed u/s. 143(3) by resorting to the impugned reopening without bringing any new tangible material. It is a settled positon that reopening on the material and information which is already available on record while passing of original assessment order amounts to change of opinion and is not permitted under the law. Reliance placed on the above stated judicial precedents gives force to the findings arrived at by ld. CIT(A). Before us, nothing cogent is brought on record by the Revenue to controvert the factual position as contained in the reasons to believe recorded by the ld. Assessing Officer. Accordingly, the reopening proceedings initiated by the ld. Assessing Officer in absence of any fresh tangible material is bad in law, rendering the impugned reassessment order also bad in law. We uphold the finding arrived at by the ld. CIT(A). Grounds raised by the Revenue are dismissed.

21. In the result, appeal of the Revenue is dismissed.

22. Assessee has filed its cross objection in CO 237/Mum/2025 against the above appeal only to contest that ld. CIT(A) has not adjudicated on the merits of the case though the reopening itself has been quashed. Since the reopening itself has been held to be bad in law, rendering the impugned reassessment order invalid, adjudication of the merits of the case becomes a mere academic exercise. Accordingly, assessee contesting through its cross objection for adjudication on the merits of the case is not warranted. Thus, grounds raised by the assessee in its cross objection are dismissed.

23. In the result, cross objection of the assessee is dismissed.

24. Now we take up ITA No.4369/Mum/2025 by Revenue. Issues raised by the Revenue are already tabulated above which are adjudicated seriatim.

24.1. Ground nos. 1, 2 and 3 are in respect of disallowance u/s. 14A r.w.r. 8D(2)(ii). This issue has already been adjudicated upon by us in the above paragraphs and is further squarely covered by the decision of Coordinate Bench in assessee’s own case in ITA Nos. 1649/Mum/2019, dated 06.02.2025, 5659/Mum/2019, 3409 and 3412/Mum/2023. There is nothing brought on record to controvert the factual matrix and the position of law on this issue. Accordingly, following the principle of consistency, these grounds raised by the Revenue are dismissed.

24.2. Ground no.4 is in respect of bad debts written off. Ld. Assessing Officer has disallowed bad debts written off of Rs.902,32,55,410/-. Ld. Assessing Officer while construing the provision account u/s. 36(1)(viia) held that debit towards bad debts written off in the provision account has to be restricted to the extent of opening credit balance. According to the ld. Assessing Officer, since in no case the debit to provision account can be more than the opening credit balance and therefore, if the bad debts written off is more than the opening credit balance, the same will be ignored. According to him, deduction allowed u/s. 36(1)(viia) in the current Assessment Year will automatically become the opening credit balance in the provision account for the next year. The bad debts written off in the next year has to be then reduced from the said opening credit balance for the preceding assessment year.

24.3. Against this, contention of the assessee is that there cannot be a notional debit to the provision account of part of bad debts written off alone. Section 36(2)(v) stipulates that the entire bad debt or part thereof which is written off has to be debited to the provision for bad and doubtful account u/s. 36(1)(viia). Requirement of the Act in this regard u/s. 36(1)(viia) is that any bad debt or part of a debt which is written off as irrecoverable has to be debited to the provision account. Assessee recomputed the provision account based on the submissions so made and claimed for a deduction of Rs.2559.36 crores to be allowed u/s. 36(1)(vii). The computation so furnished is reproduced as under:

Computation of deduction u/s.36(1)(vii)
A	Opening Balance as on 01.04.2016	(-)720,48,41,247/-
B	Provision claimed during the year
	FY 2013-14	1933,64,53,589/-
	FY 2014-15	2415,45,33,771/-
	FY 2015-16	2423,81,76,720/-
	Total(B)	6772,91,64,350/-
C	Write off during the year
	FY 2013-14	963,52,00,000/-
	FY 2014-15	1578,56,00,000/-
	FY 2015-16	1554,15,00,000/-
	Total (C)	4096,23,00,000/-
	Opening Balance as on 01.04.2017 (A+B+C)	1956,20,23,103/-
	Write off during the year	4115,21,58,000
	Allowable disallowance u/s.36(1)(viia)	2159,01,34,897/-

24.4. Ld. CIT(A) has elaborately discussed the provisions of section 36(1)(vii) r.w.s. 36(1)(viia) and 36(2)(v). After careful consideration, he negated the contention of ld. Assessing Officer that the provision allowed u/s. 36(1)(viia) in the current year shall become the opening credit balance for the next year as it defies accounting logic. In this regard, reference was made to the decision of Coordinate Bench in the case of Bank of India v. ACIT [IT Appeal No. 1451 (Mum) of 2023, dated 30.01.2026] which also dealt with similar factual matrix, wherein amount of bad debts written off exceeded the credit balance in the provision account. The Coordinate Bench after deliberating on the relevant provisions of the Act and dealing with CBDT Instruction No. 17 of 2008, dated 26.11.2008, came to the conclusion in allowing the claim of assessee for deduction of entire bad debts written off as irrecoverable u/s. 36(1)(vii), since provision for bad and doubtful account, maintained u/s. 36(1)(viia) does not have any credit balance as on 01.04.2015. Relevant paras in this regard from the said judicial precedent are extracted below:

“31. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee reduced the actual bad debts from the credit balance in the provision made under section 36(1)(viia) and the resultant debit balance in the account made under section 36(1)(viia) was carried forward as the opening balance of the next year. At the same time, the amount of bad debts exceeding the credit balance in the provisions account made under section 36(1)(viia) was claimed under section 36(1)(vii) of the Act. The assessee credited the provision under section 36(1)(viia) of the next year, having a debit opening balance, and again reduced the actual bad debts claimed for the year from this account. Thus, the amount exceeding the provision under section 36(1)(viia) is claimed under section 36(1)(vii) of the Act. As the provision account maintained under section 36(1)(viia) did not have any credit balance as on 01/04/2015, no amount was reduced from the aggregate bad debts amounting to Rs.2356.44 crore claimed during the year under section 36(1)(vii) of the Act. On the other hand, the AO objected to the methodology of preparing the bad debt provision account and the amounts claimed under section 36(1)(viia) and section 36(1)(vii) of the Act. As per the AO, the methodology of the assessee leads to double deduction of bad debts. Accordingly, the AO recomputed the provision account and recalculated the bad debts allowable to the assessee under section 36(1)(vii) out of the provision credit balance under section 36(1)(viia) of the Act.

32. Before proceeding further, it is pertinent to note the provisions of the Act, which are relevant for the decision on this issue. Section 36(1)(vii) of the Act provides as under: –

“(vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year:

Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:”

33. Thus, as per section 36(1)(vii) of the Act, the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee is allowable as a deduction while computing the income of the assessee under section 28 of the Act. The first proviso to section 36(1)(vii) of the Act restricts the said deduction and provides that the amount of bad debts which is allowable as a deduction shall be the amount which exceeds the credit balance in the provision for bad and doubtful debts account made under clause (viia) of section 36(1).

34. The provisions of section 36(1)(viia), which are relevant for this case, are reproduced as follows: –

“(viia) in respect of any provision for bad and doubtful debts made by—

(a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner :

Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year:

Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words “five per cent”, the words “ten per cent” had been substituted :

Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head “Profits and gains of business or profession.”

Explanation.—For the purposes of this sub-clause, “relevant assessment years” means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;”

35. Thus, as per the provisions of section 36(1)(viia) of the Act, the provision for bad and doubtful debts account shall include an amount not exceeding 7.5% of the total income and an amount not exceeding 10% of the aggregate average advances made by the rural branches of such bank. As ITA No.1451, 1452, 1547 & 1548/Mum/2023 (A.Ys. 2016-17 & 2018-19) 25 regards the deduction for bad debts, it is also relevant to note the provisions of section 36(2)(v) of the Act, which reads as follows: –

“(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply—

……………

(v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.”

36. Therefore, the proviso to section 36(1)(vii) requires maintenance of the provision of bad and doubtful debt account under section 36(1)(viia) of the Act. Further, the deduction in respect of provision for bad and doubtful debt accounts allowable under section 36(1)(viia) of the Act is required to be credited to this account by the bank. Section 36(2)(b) of the Act requires bad debts written off by the bank to be debited to the provision for bad and doubtful debts account under section 36(1)(viia) of the Act. Further, as noted in the foregoing paragraphs, bad debts written off in excess of the opening credit balance in this account shall be allowable as a deduction under section 36(1)(vii) of the Act. Vide Instruction No.17 of 2008, dated 26/11/2008 issued by the CBDT provided the clarity regarding the manner of computation of deduction under section 36(1)(vii) of the Act as follows: –

“INSTRUCTION NO. 17/2008, DATED 26-11-2008

In a recent review of assessment of Banks carried out by C&AG, it has been observed that while computing the income of banks under the head ‘Profit and Gains of Business & Profession’, deductions of large amounts under different sections are being allowed by the Assessing Officers without proper verification, leading to substantial loss of revenue. It is, therefore, necessary that assessments in the cases of banks are completed with due care and after proper verification. In particular, deductions under the provisions referred to below should be allowed only after a thorough examination of the claim on facts and on law as per the provisions of the Income-tax Act, 1961 :

(i) Under section 36(1)(vii) of the Act, deduction on account of bad debts which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of such debts to the provision for bad and doubtful debt account under section 36(1)(viia) of the Act, as required by section 36(2)(v) of the Act.

(ii) While considering the claim for bad debts under section 36(1)(vii), the Assessing Officer should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad and doubtful debt account created under section 36(1)(viia) of the Act. The credit balance for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year.

…………………………….”

37. Having perused the provisions of sections 36(1)(vii), 36(1)(viia) and 36(2)(v) of the Act in the light of Instruction No.17 of 2008 issued by the CBDT, we do not find any infirmity in the provision for bad and doubtful debts account under section 36(1)(viia) of the Act, prepared by the assessee in the following manner: –

AY	Opening Balance	Claim u/s. 30(l)(uiia)	Bad Debts written off	Closing Balance
1995-90		101.16	260.32	(159.16)
1990-97	(159.16)	48.99	296.36	(406.53)
1997-98	(406.53)		254.48	(00). 00)
1998-99	(661.00)		308. 75	(759. 75)
1999-00	(969. 75)		295.35	(1,20.50 0)
2000-01	(1,265.10)	102.87	200.01	(1,36.2.414)
2001-02	(1,302.24)	222.45	278.87	(1,486.00)
2002-03	(1,418.66)	269.03	552.14	(1,7018)8)
2003-04	(1,701.78)	380.98	578.74	(1,899.54)
2004-05	(1,899.54)	375.96	550.03	(2,076.01)
2005-06	(2,073.61)	381.47	346.89	(2,030.03)
2006-07	(2,039.03)	529. 71	603.38	(2,142.70)
2007-08	(2,112.70)	786.07	400.81	(1,7243-3)
2008-09	(1,727.43)	947.56	585.88	(1,305.70)
2009-10	(1,365.76)	645.1 7	454.20	(1,1 44.79)
2010-11	(1,1 74.79)	1,167.49	936.85	(144.14)
2011-12	(944.14)	1,365.95	989.93	(528.12)
2012-13	(568.12)	1,141.34	3,012.42	(2,4019.20)
2013-14	(2,439.20)	2,039.28	4,550.50	(4,950.42)
2014-15	(4,950.42)	2,078.70	3,214.68	(0,084.40)
2015-16	(6,086.40)	2,926.41	2,619.63	(6,779.02)
2016-17	(5,779.02)

38. In this regard, it is pertinent to note the following observations of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd. v. CIT, reported in (2012) 343 ITR 270 (SC) : –

“17. The provisions of Section 36(1)(vii) would come into play in the grant of deductions, subject to the limitation contained in Section 36(2) of the Act. Any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year is the deduction which the assessee would be entitled to get, provided he satisfies the requirements of Section 36(2) of the Act. Allowing of deduction of bad debts is controlled by the provisions of Section 36(2). The argument advanced on behalf of the Revenue is that it would amount to allowing a double deduction if the provisions of Sections 36(1)(vii) and 36(1)(viia) are permitted to operate independently. There is no doubt that a statute is normally not construed to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. As far as the question of double benefit is concerned, the Legislature in its wisdom introduced Section 36(2)(v) by the Finance Act, 1985 with effect from 01.04.1985. Section 36(2)(v) concerns itself as a check for claim of any double deduction and has to be read in conjunction with Section 36(1)(viia) of the Act. It requires the assessee to debit the amount of such debt or part thereof in the previous year to the provision made for that purpose.”

39. Since the provision for bad and doubtful debt account maintained under section 36(1)(viia) of the Act does not have any credit balance as on 01/04/2015, we agree with the submissions of the assessee in claiming the deduction of the entire bad debt written off as an irrecoverable under section 36(1)(vii) of the Act. Accordingly, the impugned addition made by the AO on this issue is deleted. As a result, Ground No.5, raised in assessee’s appeal, is allowed.”

24.5 . In another decision, by the Coordinate Bench in the case of DCIT v. Small Industries Development Bank of India [IT Appeal No. 7143 (Mum) of 2008, dated 15.02.2012], it was held that whole of the bad debts written off would be deductible u/s. 36(1)(vii) when there was no credit balance in the provision account as whole of the bad debts written off would in effect be in excess of credit balance which is nil in the provision account.

24.6 . Ld. CIT DR submitted to remit the matter back to the file of ld. Assessing Officer for verification of the computation to arrive at the credit balance in the provision account and then consider the claim of the assessee towards bad debts written off.

24.7 . Having considered the factual matrix, relevant provisions of the Act and judicial precedents cited upon, we are in agreement with the claim made by the assessee and uphold the findings arrived at by the ld. CIT(A). Ground no.4 raised by the Revenue is dismissed.

25. Ground nos. 5 and 6 are towards taxability of interest accrued but not due on investments amounting to Rs.2078,31,29,476/-. Ld. Assessing Officer did not accept the claim of deduction of interest because the same was on cash basis but not on accrual basis in the computation of income.

25.1. Claim of the assessee is that interest on securities on debentures do not accrue from day to day but only on fixed days. Interest so accruing and becoming due on such fixed days can alone be taxed under the provisions of the Act. Accounting entries passed in the books of accounts on closing of accounts does not determine or results into accruing of income, more particularly when such interest is reversed on the very next day.

25.2. On these facts, ld. CIT(A) by taking cognizance of decision of Coordinate Bench in assessee’s own case for Assessment Year 2016-17 in ACIT v. BANK OF BARODA [IT Appeal No. 2777 (Mum) of 2019, dated 6-2-2025] as well as by placing reliance on the decision of the Hon’ble jurisdictional High Court of Bombay in the case of DIT (International Taxation) v. Credit Suisse First Boston (Cyprus) Ltd. (Bombay) deleted the disallowance made by the ld. Assessing Officer.

25.3. In the present case before us, there is no change in the factual matrix and the position of law which the ld. CIT(A) has followed. By following the principle of consistency, we do not find any infirmity in the finding arrived by the ld. CIT(A). Accordingly, ground nos. 5 and 6 raised by the Revenue are dismissed.

26. Ground no. 7 to 10 are in respect of disallowance of interest paid on perpetual bonds. Assessee had claimed deduction on account of interest of Rs.267,88,90,980/- on issuance Of Innovative Perpetual Debt Instrument (IPDI) which qualifies as Tier-1 capital of bank. According to the assessee, IPDI issued by the banks are in the nature of borrowing only. They are reckoned as Tier-1 capital only for the limited purpose of ascertaining the capital adequacy norms as per RBI guidelines. Though they are stated to be perpetual, banks still have an option of issuing a call option after a period of 10 years. Banks pay interest on these bonds are prefixed rates which may either be fixed or floating. These outstanding IPDI is reported in the balance sheet under the head “Borrowings”. Interest paid on these bonds is subjected to TDS provisions for which a recipient gets credit. An important fact is worth noting in this regard that out of Rs.4911.70 crores of bonds outstanding as on 31.03.2017, a sum of Rs. 2911.70 crores had been repaid which demonstrates that these IPDI are periodically repaid, hence not in the nature of capital as construed by the ld. Assessing Officer.

26.1. In the backdrop of above stated factual matrix, the issue before us is no longer res integra as already covered in favour of assessee by the decision of Coordinate Bench in assessee’s own case for Assessment Year 2016-17 in BANK OF BARODA (supra). Ld. CIT(A) has given his finding by placing reliance on the aforesaid decision in assessee’s own case. Nothing contrary has been brought on record, both on fact and law. Accordingly, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A). Respectfully following the judicial precedents, ground nos. 7 to 10 raised by the Revenue are dismissed.

27. Ground nos. 11 to 13 are in respect of taxability of notional unrealised interest of non-performing assets (NPA). Ld. Assessing Officer has disallowed Rs.110,68,82,107/- by invoking rule 6EA r.w.s. 43D by observing that benefit of non-recognition of interest in NPAs can be granted only when the irregularities exist for a period of six months or more. According to the assessee, it had strictly followed the guidelines of RBI and had not recognised income in respect of accounts classified as non-performing assets as there was uncertainty of recovery of interest. On these stated facts for which there is nothing contrary on record brought by the Revenue, the issue is no longer res integra and is covered in favour of the assessee by its own case in ITA No. 1649/Mum/2019 for Assessment Year 2016-17, dated 06.02.2025. Respectfully following the same and in accordance the principle of consistency, grounds so raised by the Revenue are dismissed.

28. Ground no.14 is in regard to disallowance of amounts paid for not following the internal guidelines of the Regulator. Assessee had claimed deduction of Rs.5,40,64,008/- on account of amount paid to RBI towards penalty for not maintaining KYC of clients. According to the assessee, the said amount is an allowable deduction since it is not an expenditure incurred for purpose which is an offence or which is prohibited by law. It was paid to RBI for non-compliance of internal guidelines laid down with regard to maintenance of KYC of clients and not for violation of any law or offence. It is covered within the provisions of section 37(1) incurred wholly and exclusively for the purpose of its business. Similar issue came up before the Coordinate Bench of ITAT, Mumbai in the case of ANZ Grindlays Bank v. Dy. CIT [2004] 88 ITD 53 (Delhi)/ITA No. 3349/Mum/2019, dated 09.02.2021 wherein the deduction was allowed towards penalty imposed by RBI u/s. 47A of the Banking Regulation Act, 1949 for non-compliance of guidelines of customer service, guidelines in respect of exchange of coins and small denomination notes and mutilated notes. By following the ratio laid in the decision of ANZ Grindlays Bank v. DCIT [2004] 88 ITD 53 (Del) by the Coordinate Bench of ITAT, Delhi, the disallowance was deleted.

28.1. In the given set of facts before us, where the amount paid by the assessee is towards non-compliance of RBI guidelines for maintaining KYC of clients, the said claim is towards the business of banking in which assessee is engaged in. It is for the purpose of its business and not in the nature of an offence or prohibited under any law. The issue is covered by the decision of Coordinate Bench in the case of IDBI Bank Ltd. as stated above. Disallowance made by the ld. Assessing Officer on this account is deleted. Ground no. 14 raised by the Revenue is dismissed.

29. Coming to ground nos. 15 and 16 on the applicability of section 115JB, the same has already been adjudicated upon by us while dealing with appeal in ITA No. 4369/Mum/2025 filed by the Department. These grounds are squarely covered by our observations and findings in the said appeal and applies mutatis mutandis. Accordingly, ground nos. 15 and 16 raised by the Revenue are dismissed.

30. In the result, appeal of the Revenue is dismissed.

31. Now we take up appeal in ITA No. 5275/Mum/2025 filed by the Revenue. In this appeal by the Revenue, except for three issues which we will adjudicate in the subsequent paragraphs, all other issues raised by their respective ground numbers, details of which are already tabulated, are covered by our observations and findings given in the above paragraphs while adjudicating on grounds in ITA No. 4369/Mum/2025 which applies mutatis mutandis. Hence needs no separate adjudication.

31.1. In this appeal, we first take up the issue on disallowance of amortisation of premium on Held to Maturity (HTM) securities. Ld. Assessing Officer has disallowed Rs.420,97,00,000/- by observing that section 32 does not provide for depreciation on investment. According to the assessee, investments are to be classified, measured and valued as per RBI norms under the mandatory requirements of ICDS. Accordingly, amortisation is provided based on RBI guidelines and debited to profit and loss account which is an allowable deduction. The issue is squarely covered by the Hon’ble jurisdictional High Court of Bombay in the case of CIT-2, Mumbai v. HDFC Bank Ltd. (Bombay).

31.2. In this regard reference is made to para-3 of Part-B of ICDS-VIII which deals with securities held by scheduled bank. The same reads as under:

“Securities shall be classified, recognised and measured in accordance with the extant guidelines issued by the Reserve Bank of India in this regard and any claim for deduction in excess of the said guidelines shall not be taken into account.”

31.3. Thus, from the provisions of ICDS, it is noted that amortisation of premium on HTM securities made in accordance with the extant guidelines of RBI is to be allowed. Assessee has claimed the deduction in accordance with the provisions of the ICDS and covered by the decision of Hon’ble jurisdictional High Court of Bombay in the case of HDFC Bank Ltd. (supra) which held in favour of assessee pronounced prior to ICDS notification. Accordingly, claim of the assessee is allowed. Disallowance so made is deleted. Ground no. 13 raised by the Revenue is dismissed.

32. On the issue relating to disallowance of provision for wage revision, assessee had claimed an amount of Rs.100 crores as deduction. Ld. Assessing Officer disallowed the same by treating it as contingent liability, not spent during the year under consideration. According to the assessee, sum of Rs.100 crores towards amount of wage arears was arrived at based on the indicative increase in the wages payable by the bank which pertained to the period from November 2017 to March 2018. According to the assessee, the said liability was quantified during the year under consideration based on ongoing negotiations between the Indian Bank Association and Employees Union and the indicative percentage of wage increase, which was available at that point of time. Assessee follows accrual basis of accounting and hence, claimed the said deduction which is made on the basis of a reasonable estimate. This issue has come up before the Coordinate Bench in assessee’s own case for Assessment Year 2008-09 in BANK OF BARODA v. ADDL CIT [IT Appeal No. 4619, 4872 (Mum) of 2012, dated 04.11.2015] allowing the claim so made.

32.1. In the present case before us, there being no material change in the factual matrix, except for the quantum of deduction claimed, ld. CIT(A) by following the judicial precedent, deleted the disallowance to which we do not find any reason to interfere with. Accordingly, ground raised by the Revenue is dismissed.

33. On the third issued relating to disallowance of provision for depreciation of investments, assessee had claimed deduction of Rs.765,87,00,000/- which was disallowed by observing that section 32 does not provide for depreciation on investments. Assessee by referring to CBDT Circular No. 18/2015, dated 02.11.2015 submitted that securities held by bank constitute stock in trade which is to be valued at cost or market price whichever is less and the loss is allowable as deduction. Reference is also made to ICDS-VIII, para-3 of part-B which we have already dealt in the above paragraphs. The issue before us is also covered by the decision of Hon’ble jurisdictional High Court of Bombay in assessee’s own case in CIT v. Bank of Baroda [2003] 262 ITR 334 (Bombay). Ld. CIT(A) has taken cognizance of the factual matrix and the judicial precedents as well as provisions of ICDS and directed to allow the claim made by the assessee. In the given set of factual matrix, there being no material change, we up hold the finding of ld. CIT(A). Ground raised by the Revenue is dismissed.

34. In the result, appeal of the Revenue is dismissed.

35. In ITA nos. 5524 and 5564/Mum/2025, all the issues raised by the Revenue, details of which are already tabulated above, have been adjudicated by us in the above paragraphs while dealing with the appeal of the Revenue in ITA No. 4369 and 5275/Mum/2025 for Assessment Year 2017-18 and 2018-19, respectively. All these issues have similar factual matrix and no change in the position of law. Our observations and findings on all these issues in the above paragraphs while adjudicating on the said two appeals, applies mutatis mutandis to each of the issue in the present two appeals being dealt now. Accordingly, both the appeals of the Revenue are dismissed.

36. Now we take up appeal in ITA No. 5276/Mum/2025. The grounds raised by the Revenue are on the issues, which have already been adjudicated by us in the other captioned appeals and therefore, needs no separate adjudication. Assessee has furnished a synopsis by way of a tabulation on each of the issue by making reference to the orders of the ld. Assessing Officer and ld. CIT(A) as well as their coverage by the respective judicial precedents, forming part of the paper book. The said tabulation is extracted below for ready reference.

Gr. No.	Issues	Para & Page Ref		Covered by/ Case Laws relied on	Case Ref Number	Ref No. in sesa law
Gr. No.	Issues	AO Order	CIT(A) Order	Covered by/ Case Laws relied on	Case Ref Number	Para	Page
1-3	Disallowance u/s.14	Para -5 Page -3 to 12	(i) Para -5 Page – 3 to 11 (ii) Para -1 Page -30 Ui) Para -4 Page -33 to 34 (iv) Para -6.2 Page -37 to 39	Bank of Baroda	ITA Nos. 3409 & 3412/Mum/2023 -AY 2010-11 & 201314- Order dated 1007-2024	3 to 5	18 21

4-7	Deduction under Section 36(1)(iii)	Para -7 Page -17 to 20	(i) Para -7 Page – 14 to 16 (ii) Para -3 Page -31 Ui) Para -6 Page -35 (iv) Para -6.4 Page 43	ICICI Bank Limited	ITA No.3215/Mum/2019 -AY 2010-11 -Order dated 22-082022	10	75 76
4-7	Deduction under Section 36(1)(iii)	Para -7 Page -17 to 20		Union Bank of India	2024 (ll)TMI 1188 -ITAT MUMBAI	8 & 9	82 84

8	RBI Penalty	Para -8 Page -20 to 21	(i) Para -8 Page -17 to 18 (ii) Para -4 Page -31 (iii) Para -7 Page -35 (iv) Para -6.5 Page 43	IDBI Bank	ITA No.3394/Mum/2019 -AY 2015-16-OrderDt. 09-022021	12 & 12.1	26 28

9	Provision for Wage Revision u/s 37(1)	Para -9 Page -21 to 25	(i) Para -9 Page – 18 to 20 (ii) Para -5 Page -31 Ui) Para -8 Page -36 (iv) Para -6.6 Page 44	Bank of Baroda	ITANo.4619& 4873/M/2012-AY 2008-09 – Order dt. 04-11-2015	6& 7	34 35
9	Provision for Wage Revision u/s 37(1)	Para -9 Page -21 to 25		Bank of Baroda	2017(2) TMI1422-ITAT MUMBAI-ITA No.2480 & 3081/Mum/ 2015-order dated 17-02 201 7- Asst Year 2009-10	3 to 6	44 46

10-11	Applicability ofMATu/s 115JB	Para -11 Page -26 to 35	(i) Para -11 Page -21 to 28 (ii) Para -7 Page -31 to 32 Ui) Para-10 Page -36 (iv) Para -6.8 Page 46 to 47	Union Bank of India	2024 (9) TMI 789 -ITAT MUMBAI ITA Nos.424/Mum/2020 and 3740/Mum/2018 -Order dated 6-92024	39 to 60	2 16
12	General

37. Ld. Counsel for the assessee has invoked Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 (ITAT Rules) by making an oral submission to contend that the impugned assessment order passed is in the name of a non-existing entity and is therefore, void ab initio liable to be quashed as such. For making an oral application under Rule 27 of the ITAT Rules for its admission, he referred to the decision of Hon’ble High Court of Delhi in the case of anjay Sawhney v. Pr. CIT (Delhi)/[2020] (5) TMI 441 (Del) in ITA No. 834/2019, dated 18.05.2020. Similar issue had come up before the Hon’ble Court wherein assessee made an oral application u/r 27 of ITAT Rules and urged additional grounds against the findings of ld. CIT(A) on the issue of recording of satisfaction note and necessary condition of existence of nexus between assessment and incriminating material as these findings were in the teeth of law settled by various Courts. Hon’ble Court further noted that the Tribunal had disagreed with the assessee and had refused to consider the legal issues that were premised on Rule 27 of the ITAT Rules. After detailed deliberation in para-26, Hon’ble Court observed and gave its findings that assessee is allowed to raise additional grounds u/r. 27 of the ITAT Rules, for which the matter was remanded back to the Tribunal with a direction to hear the matter afresh. Considering the judicial precedents cited by the ld. Counsel in the case of Sanjay Sawhney (supra), we are inclined to consider the oral application made by the ld. Counsel by referring to Rule 27 of the ITAT Rules, whereby it is contested that the impugned assessment order is invalid being passed on a non-existing entity for which all the facts are already on record and it goes to the root of the matter.

37.1. For this, reference was made to the impugned assessment order wherein in the cause title, it is addressed to “Dena Bank, Branch-Revdanda, Revdanda, Raigad – 402202, Maharashtra, India. Also, Id. Assessing Officer himself in para-3.1 has taken note of the amalgamation of Dena Bank with Bank of Baroda, i.e., the assessee bank. He mentions in para-3.1 that the scheme of amalgamation was approved by Government of India vide its gazette dated 02.01.2019 with the effective date from 01.04.2019 whereby Dena Bank assessed to tax in Circle-2(3)(1), Mumbai was transferred Circle-2(1)(1), Mumbai where the assessee bank is assessed. He has made specific mention in para-3.3 about Dena Bank with its PAN, now known as Bank of Baroda with the present PAN of the assessee, is the amalgamation case which has been transferred from NFAC to the undersigned for completion of assessment.

37.2. On these factual notations of ld. Assessing Officer in the impugned assessment order, ld. Counsel for the assessee vehemently submitted that before completion of the assessment and at the time of passing of the impugned assessment order, ld. Assessing Officer was very much in the knowledge of Dena Bank with its PAN not in existence having got amalgamated into the assessee bank with its own PAN, with effective date of 01.04.2019. Contents of para-3.1 and 3.3 from the impugned assessment order are extracted below for ready reference:

“3.1 The Government of India vide it Gazette dated 02-01-2019 approved the Amalgamation of Vijaya Bank and Dena Bank (PAN : AAACD4249B) with Bank of Baroda (PAN: AAACB1534F) Scheme, 2019 with the effective date from 01-04-2019. Pursuant to the Amalgamation Scheme, Dena Bank assessed to tax in the Circle 2(3)(1), Mumbai transferred to the Circle 2(1)(1), Mumbai as the Bank of Baroda is assessed to tax in Circle 2(1)(1), Mumbai.

3.3. Since Dena Bank (PAN: AAACD4249B) now known as Bank of Baroda (PAN : AAACB1534F), is the amalgamation case, the case was now transferred from NFAC to the undersigned i.e., (Jurisdiction Assessing Officer) for completion of the assessment. Accordingly, the undersigned has assumed the jurisdiction as per section 129 of the Incometax Act, 1961 and issued statutory notices for which the assessee ‘e-filed’ the relevant details, which have been considered.”

37.3. Thus, case of the assessee is squarely covered with the decision of Hon’ble Supreme Court in the case of PCIT v. Pr. CIT, New Delhi v. Maruti Suzuki India Ltd. (SC). Reference is also made to the decision of Hon’ble jurisdictional High Court of Bombay in the case of Reliance Industries Ltd. v. P. L. Roongta 479 ITR 770 (Bombay), wherein also on the substantial question of law, “whether on the facts and circumstances of the case and in law, assessment order u/s. 143(3) of the Act passed on a non-existent entity is bad in law and ab initio”, Hon’ble Court held that assessment order passed in the name of erstwhile amalgamated company is void by taking into consideration the decision of Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. (supra) and Pr. CIT v. Mahagun Realtors (P.) Ltd. (SC). Peculiar fact was pointed out from this decision in para-26 wherein Hon’ble Court noted about the time frame of almost three decades at the stage of third appeal when this plea was taken but it held that it being a jurisdictional issue going to the root of the matter, it could not restrain from permitting and not adjudicating upon the same, merely on the ground that such a plea is taken after almost three decades. Thus, the Hon’ble Court after taking note of the amalgamation and factual position about the knowledge of the ld. Assessing Officer on the amalgamation, quashed the assessment order as bad in law.

37.4. Before us, it is evident from the impugned assessment order that ld. Assessing Officer is in the knowledge of the amalgamation of Dena Bank into assessee bank, fact of which are already recorded and extracted above from the impugned assessment order. Thus, in the given set of facts, following the judicial precedents of the Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. (supra) and that of Hon’ble Jurisdictional High Court of Bombay in the case of Reliance Industries Ltd. (supra), we hold the impugned assessment order passed in the name of Dena Bank which had already amalgamated into the assessee bank with effective date from 01.04.2019 is bad in law and therefore quashed.

38. Even on the merits of the case, all the issues raised by the Revenue have already been adjudicated upon by us, as tabulated above. Our observations and findings in this regard dealt by us in the captioned appeals apply mutatis mutandis, the result of which is that all these issues through their respective grounds are liable to be dismissed. Thus, even on merits of the case, appeal of the Revenue is dismissed.

39. In the result, appeal of the Revenue is dismissed and application by the assessee u/r. 27 of ITAT Rules, is allowed.

40. In the result, appeals/cross objection of both, Revenue and assessee are decided as per the table below:

Sr. No.	ITA No.	Assessment Year	Appeal by	Result of the appeal
1.	5712/M/2025	2009-10	Revenue	Dismissed
2.	5522/M/2025	2011-12	Revenue	Dismissed
3.	5523/M/2025	2012-13	Revenue	Dismissed
4.	4398/M/2025	2017-18	Revenue	Dismissed
5.	C. 0. 237/M/2025	2017-18	Assessee	Dismissed
6.	4369/M/2025	2017-18	Revenue	Dismissed
7.	5275/M/2025	2018-19	Revenue	Dismissed
8.	5524/M/2025	2019-20	Revenue	Dismissed
9.	5276/M/2025	2019-20	Revenue	Dismissed
10.	5564/M/2025	2020-21	Revenue	Dismissed
11.	1240/M/2025	2017-18	Assessee	Allowed
12.	4368/M/2025	2017-18	Revenue	Dismissed