JUDGMENT M. Katju, J.
1. This is an appeal under Section 260A of the Income-tax Act, 1961, by which the judgment of the Income-tax Appellate Tribunal, Delhi Bench, New Delhi, dated November 14, 2002, has been challenged.
2. Heard learned counsel for the parties.
3. The assessee is a company registered under the Indian Companies Act and the relevant assessment year is 1993-94. The assessment order was passed by the assessing authority on March 31, 1995. Against that order a revision was filed under Section 263 of the Income-tax Act which was allowed by the Commissioner of Income-tax on December 18, 1996. Against that order the assessee filed an appeal before the Tribunal which has been dismissed.
4. Learned counsel for the appellant submitted that the Commissioner of Income-tax was not justified in invoking the provisions of Section 263 of the Income-tax Act as the order of the Assessing Officer was not prejudicial to the interests of the Revenue nor was it erroneous.
5. A perusal of the order of the Commissioner of Income-tax shows that he was of the opinion that the profits under Section 80I have to be computed after deducting the profits under Section 80HH, which the Assessing Officer did not do. Hence, according to the Commissioner of Income-tax, the order was prejudicial to the interests of the Revenue and was erroneous. Another, reason for invoking the jurisdiction under Section 263 by the Commissioner of Income-tax was that the Assessing Officer had failed to disallow and add back the amount of Rs. 11,98,000 being provision for bad debts.
6. It appears that before the Tribunal the assessee only urged that the Commissioner of Income-tax erred by observing that the appellant had not written off bad debts of Rs. 11,98,000 by debiting the profit and loss account and further that the assessee had not satisfied the conditions laid down under Section 36(1)(vii).
7. Section 36(1)(vii) of the Income-tax Act states :
"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."
8. To this provision an Explanation was inserted by the Finance Act, 2001, with effect from April 1, 1989, which reads as follows :
"Explanation.--For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provisions for bad and doubtful debts made in the accounts of the assessee."
9. In our opinion since the Explanation to Section 36(1)(vii) was added with effect from April 1, 1989, it obviously applies to the present case in which the assessment year is 1993-94. The assessee had written off bad debts by debiting the profit and loss account but no credit in the debtor's account was correspondingly made. Since this had to be done simultaneously, but was not, in our opinion, the provisions of Section 36 as amended were not complied with. In the present case, the assessee had written off the bad debts in the profit and loss account but instead of making a corresponding credit entry in the account of the debtor, he had made an entry under the head "Provisions for doubtful debts", and this was approved by the Assessing Officer. The Commissioner of Income-tax hence rightly issued a notice under Section 263 as according to him the assessee while debiting the profit and loss account has not given the necessary credit in the account of the party.
10. As observed by the Supreme Court in Union of India v. S. Muthyam Reddy [1999] 240 ITR 341 (at page 342) :
"By the Finance Act, 1989, Explanation to Section 2(1A) is inserted with effect from April 1, 1970, to supersede the view expressed in the order under appeal and several decisions setting out similar ratio. This declaratory amendment having retrospective operation though coming into force during the pendency of this appeal must be given effect to. The said Explanation clearly declares that the revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in Section 2(14)(iii)(a) or (b). The upshot of the same is that income derived from sale of such agricultural lands cannot be treated as 'agricultural income'. Thus, the whole basis of the decision has been lost and, therefore, the order under appeal cannot be sustained and deserves to be set aside."
11. In view of the above we are of the opinion that the assessee did not comply with the provision of Section 36(1)(vii) which had been amended with retrospective effect from April 1, 1989. Thus there is no force in this appeal and it is dismissed.
12. Before parting with this case we may mention that under Section 263 of the Income-tax Act, the Commissioner of Income-tax can correct both errors of fact and errors of law. His jurisdiction is not limited to correcting errors of law alone as there is no such express restriction in the language of Section 263. The only requirement is that the impugned order should be prejudicial to the Revenue.