Tribunal remands 2018-19 Assessment Order for non-compliance, directs new order issuance.

The Tribunal set aside the Final Assessment Order for the assessment year 2018-19 due to non-compliance with the directions of the Dispute Resolution Panel (DRP). The case was remanded to the Assessing Officer (AO) to issue a new Final Assessment Order in line with the DRP's instructions. The Tribunal allowed the appeal on Ground No. 2 and deemed the other grounds irrelevant. The decision was rendered on 27.12.2022.

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Issues Involved:
1. Assessment of total income.
2. Failure to follow directions of the Dispute Resolution Panel (DRP).
3. Disallowance of deduction under Section 80G of the Income Tax Act, 1961.
4. Eligibility of CSR expenses for deduction under Section 80G.

Issue-wise Analysis:

1. Assessment of Total Income:
The Appellant contested the total income assessment for the assessment year (AY) 2018-19 at Rs. 49,31,60,128 instead of the returned income of Rs. 49,02,87,550. The discrepancy arose due to the disallowance of the deduction claimed under Section 80G of the Income Tax Act, 1961.

2. Failure to Follow Directions of the Dispute Resolution Panel (DRP):
The Appellant argued that the Assessing Officer (AO) did not follow the directions issued by the DRP under Section 144C(5) of the Act. The DRP had directed the AO to verify if the donations made by the Appellant satisfied the conditions laid down in Section 80G of the Act and, if so, to allow the Appellant's claim for deduction under Section 80G. However, the AO disregarded these directions and repeated the disallowance in the Final Assessment Order.

3. Disallowance of Deduction under Section 80G:
The AO disallowed the Appellant's claim for deduction under Section 80G amounting to Rs. 28,72,578 on the premise that these donations were grouped under CSR expenses in the Appellant's books of accounts and were not voluntarily expended. The AO's reasoning was that donations made under the mandatory CSR requirement lacked the element of charity necessary for claiming deduction under Section 80G.

4. Eligibility of CSR Expenses for Deduction under Section 80G:
The DRP had previously allowed the Appellant's objection for statistical purposes, directing the AO to verify if the donations fulfilled the conditions laid down under Section 80G. The DRP concluded that CSR expenses are not allowable under Section 37 of the Act due to Explanation 2 inserted by the Finance Act, 2014, but there is no bar for allowance under Section 80G, except for donations made to the Swach Bharat Kosh and the Clean Ganga Fund. The DRP directed the AO to allow the deduction for donations to other entities if the conditions of Section 80G were met.

Judgment:
The Tribunal held that the Final Assessment Order dated 27.07.2022 was not in conformity with the directions issued by the DRP and was therefore set aside. The Tribunal remanded the issue back to the AO with directions to pass the Final Assessment Order in conformity with the DRP's directions. The Tribunal allowed Ground No. 2 raised by the Appellant and disposed of all other grounds as infructuous. The appeal was allowed, and the order was pronounced on 27.12.2022.

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