2026 (2) TMI 684 - AT - Income Tax

Revisionary power under Section 263 requires demonstrated error and prejudice; absent that, assessment is restored.

Revisionary power under Section 263 can be exercised only where the assessment order is shown to be erroneous and prejudicial to revenue; absent specific ... Revision u/s 263 - Allowability of deduction claimed u/s 80G in respect of donations stated to be CSR expenditure and Non-disallowance of interest u/s 201(1A)/206C(7) HELD THAT:- It is evident that the issues sought to be revised by the Ld. PCIT were specifically examined by the AO during the course of assessment proceedings. AO had called for relevant details and the assessee had furnished the same, on the basis of which the assessment order u/s 143(3) of the Act was passed. The Ld. PCIT has not brought on record any specific error or demonstrated how the assessment order is erroneous and prejudicial to the interests of the Revenue. Assessee appeal allowed. Issues: (i) Whether the revisionary power under Section 263 of the Income-tax Act, 1961 was validly invoked to set aside the assessment in respect of deduction under section 80G; (ii) Whether deduction under section 80G is precluded for donations made pursuant to corporate social responsibility obligations beyond the express exclusions in section 80G(2)(a)(iiihk) & (iiihl); (iii) Whether disallowance of interest under section 201(1A)/206C(7) of the Income-tax Act, 1961 was warranted when the amount was not claimed as an expense.Issue (i): Whether the revisionary power under Section 263 of the Income-tax Act, 1961 was validly invoked to set aside the assessment.Analysis: Section 263 requires demonstration that the assessment order is erroneous and prejudicial to the interests of the revenue and ordinarily cannot be exercised where the Assessing Officer has made proper and adequate inquiry. The material shows the Assessing Officer called for and examined relevant documents and completed assessment under section 143(3). The revisional authority did not point to any specific error in the assessment or lack of inquiry that would satisfy the twin conditions for exercise of section 263.Conclusion: Revision under Section 263 was not validly invoked; the assessment order was not shown to be erroneous and prejudicial to revenue.Issue (ii): Whether deduction under section 80G is precluded for donations made pursuant to corporate social responsibility obligations beyond the express exclusions in section 80G(2)(a)(iiihk) & (iiihl).Analysis: Section 80G(2)(a)(iiihk) and 80G(2)(a)(iiihl) expressly exclude sums spent pursuant to CSR under section 135 of the Companies Act, 2013 for specified funds. No additional restriction on deductibility beyond the enumerated exceptions in section 80G can be read into the statute. The Assessing Officer's allowance on this issue falls within the statutory scheme.Conclusion: Deduction under section 80G cannot be denied except as expressly provided by the statutory exceptions; the assessment on this issue is sustainable in favour of the assessee.Issue (iii): Whether disallowance of interest under section 201(1A)/206C(7) was warranted when the amount was not claimed as an expense.Analysis: The record indicates the amount of interest was not claimed as an expense in the relevant assessment year and no contrary material was produced by Revenue to justify disallowance in that year.Conclusion: Disallowance of interest under section 201(1A)/206C(7) was not warranted; the assessment cannot be treated as erroneous or prejudicial to revenue on this ground.Final Conclusion: The revisional order setting aside the assessment under Section 263 is unsustainable on the issues decided; the assessment stands restored in so far as it was challenged and the appeal is allowed.Ratio Decidendi: Section 263 of the Income-tax Act, 1961 can be exercised only where the assessment order is shown to be erroneous and prejudicial to the revenue, and cannot be used to re-evaluate matters on which the Assessing Officer has made proper and adequate inquiry or to impose restrictions beyond those expressly provided by the statute.