Revision under Section 263 denied as AO's order under 143(3) was valid; CSR expenses can qualify for Section 80G deduction

ITAT Ahmedabad held that revision under s. 263 was unjustified as the AO's order u/s 143(3) was neither erroneous nor prejudicial to Revenue. The expected credit loss was not claimed as a deduction, negating any disallowance. Both s. 80G deduction for donation and ICDS adjustments were duly disclosed and considered by the AO without adverse findings. The Tribunal affirmed that CSR expenditure can qualify for deduction u/s 80G if conditions are met, relying on precedents. The AO's view was plausible and not liable to be substituted by PCIT merely for a differing opinion. Explanation 2 to s. 37(1) applies only to business income, not Chapter VIA deductions. Consequently, the revision order was quashed and the assessee's appeal allowed.

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ISSUES:

Whether the order passed under section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of the Revenue, justifying revision under section 263 of the Act.Whether the deduction claimed under section 80G of the Act for donation to a foundation with valid exemption approval is allowable.Whether the provision for "expected credit loss" debited in the profit and loss account and adjusted under Income Computation and Disclosure Standards (ICDS) is deductible or requires disallowance.Whether the Assessing Officer conducted proper inquiry and applied mind to the material facts before passing the assessment order.Whether invoking revisionary jurisdiction under section 263 of the Act is permissible when the Assessing Officer has adopted a plausible view supported by material on record.

RULINGS / HOLDINGS:

The order passed under section 143(3) of the Act was not "erroneous and prejudicial to the interest of the Revenue" as the Assessing Officer had made due inquiry and applied mind, thus revision under section 263 was not justified.The deduction under section 80G for donation to the foundation holding a valid exemption approval under section 80G(5)(vi) was allowable, and the Assessing Officer had called for and received all relevant information; the revisionary authority's contrary view amounted to a "mere change of opinion" which is impermissible under section 263.The amount debited as "expected credit loss" was not claimed as a deduction since corresponding ICDS adjustments were made to offer the amount for taxation, and thus no disallowance or underassessment arose on this account.The Assessing Officer's inquiry, including calling for comprehensive details and examining the tax audit report and return, constituted proper application of mind; mere calling for information does not amount to lack of inquiry.Where the Assessing Officer adopts one of the "plausible views" based on facts and materials, the Principal Commissioner of Income Tax cannot substitute that view by invoking section 263 unless the view is "unsustainable in law" or causes prejudice to the Revenue.

RATIONALE:

The court applied the statutory framework under sections 143(3), 263, and 80G of the Income Tax Act, 1961, emphasizing that revision under section 263 requires the original order to be "erroneous and prejudicial to the interest of the Revenue."Reliance was placed on established precedents that the mere existence of alternative views does not justify revision under section 263, and that "mere change of opinion" is impermissible.The court examined the interplay between Ind AS accounting, ICDS adjustments, and taxable income computation, recognizing that voluntary offer of income under ICDS negates any claim of disallowance for expected credit loss.The court reviewed recent authoritative decisions from coordinate benches clarifying that Corporate Social Responsibility (CSR) expenditures, even if mandatory, do not lose eligibility for deduction under section 80G if conditions of the section are met, distinguishing disallowance under section 37(1) from deductions under Chapter VIA.The decision reaffirmed the principle that the Assessing Officer's reasoned and plausible view, supported by material evidence, cannot be overturned by the Principal Commissioner merely on a different opinion basis.

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