TaxTMI 
TaxTMI 
2017 (4) TMI 237
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..... Assessment was thereafter completed on 26-03- 2014, u/s. 143(3) of the Act making certain disallowances, inter alia, including a disallowance of advertisement cost of Rs. 61,60,000/-, which formed part of corporate social responsibility (CSR) expenditure for want of deduction of tax at source. Apart from the disallowance of a part of CSR expenses, there were disallowances for additional depreciation, depreciation on computer peripherals, foreign commission payment, revaluation expenses, travelling expenses and disallowance u/s. 14A of the Act. 3. Thereafter, on 16/12/2015, Principal Commissioner of Income-tax, Kochi issued a notice to the assessee requiring it to show cause why revisionary proceedings u/s. 263 of the Act should not be initiated. Two reasons were mentioned in such notice. As per Ld. PCIT, CSR expenditure of Rs. 3,25,08,521/- de bited by the assessee included a sum of Rs. 2,20,50,000/- which was a provision, a sum of Rs. 69,31,952/- for advertisement and a sum of Rs. 1,12,19,473/- which was expenditure incurred for the benefit of the assessee company and its employees. As per Ld. PCIT, in the computation statement filed by the assessee along with the return, ass....
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....icial to the interests of Revenue. He set aside the order on these two issues and directed Assessing Officer to examine the facts of the case and pass an order as per the provisions of the Act, after giving appropriate opportunity to the assessee. 6. Aggrieved, assessee is in appeal before us. Argument of Ld. Counsel for the assessee with regard to corporate social responsibility is that assessee itself had added back in its computation a sum of Rs. 1,51,18,048/- as expenditure not allowable and claimed only the balance sum of Rs. 1,73,90,473/-. As per Ld. AR, conclusion of Ld. PCIT is that such expenditure were incurred for activities not relating to the assessee's businesss, was incorrect. Contention of Ld. AR was that Assessing Officer had asked for the details of corporate social responsibility expenses during the course of original assessment proceedings and assessee had furnished such details vide its letter dated 29/01/2014. Ld. AR pointed out that in paragraph 7 of the original assessment order, examination done by the Ld. Assessing Officer on such details was clearly indicated. Further as per Ld. AR, the Assessing Officer had made a disallowance of Rs. 61,60,000/- for t....
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....just because Assessing Officer disallowed a part of such expenses for want of deduction of tax at source, would not, per se, mean that an enquiry was done by the Assessing Officer on the nature of such expenses. According to him, lack of enquiry by itself would render the order erroneous and prejudicial to the interests of Revenue. Relying on the judgment of Apex Court in the case of Toyota Motor Corporation vs. CIT (306 ITR 52), Ld. DR submitted that the Assessing Officer ought have given reasons before accepting the claim of corporate social responsibility expenses. As per Ld. DR, a cryptic order passed by the Assessing Officer would by itself be erroneous and prejudicial to the interests of Revenue. 9. In so far as the claim of interest expenditure was concerned, submission of Ld. DR was that the Assessing Officer never made any enquiries despite assessee showing no opening or closing balance of loans. Further, according to him, no prejudice would be caused to the assessee since Ld. PCIT had only directed examination of these aspects after giving proper opportunity to the assessee. 10. We have heard the rival submissions and perused the orders. Observation of the Assessing Of....
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.... only Rs. 1,73,90,473/-, out of which the Assessing Officer had disallowed Rs. 61,60,000/- for want of deduction of tax at source. Admittedly expenses incurred under corporate social responsibility included payments to various hospitals and institutions, donations to various organizations and expenses incurred for the employees of the assesseecompany. Obviously, verification by the Assessing Officer was only with regard to application of section 40(a)(ia) of the Act. Questionnaire issued by the Assessing Officer during the course of assessment proceedings which has been strongly relied on by Ld. AR is actually nothing but a notice u/s. 142(1) of the Act. What was required from the assessee in such notice dated 09/12/2013 were the following details:- "1. Details of parties from whom income from work and services'' received S. No. Name and Address Amount received during the year 2. Details of the repairs/maintenance above Rs. 10lakhs. Please mention the nature of repairs/maintenance. 3. Details of liquidated damages. 4. Details of loss on derivative contracts. 5. Details of expenditure on exchange variation. 6. ....
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....bility, was an issue which should have been looked into by the Assessing Officer before completing the assessment. What he did was only to verify advertisement expenses and make a disallowance u/s. 40(a)(ia) of the Act for want of deduction of tax at source. In our opinion, not making enquiries which was required to be done on the face of the reply given by an assessee, was as good as not making any enquiry. It is trite law that failure to make any enquiry which is required to be done under law by the Assessing Officer in an assessment proceedings, would render the assessment order erroneous and prejudicial to the interests of Revenue. 12. Coming to the judgment of Hon'ble Jurisdictional High Court in the case of Travancore Cochin Chemicals Ltd. (supra) relied on by the Ld. AR, it is true that Their Lordships held expenses incurred exclusively for the welfare of its employees and for carrying on the business more efficiently to be allowable. However, the question that is to be addressed is whether such expenses were indeed incurred for efficiently doing the business of the assessee. This could have been answered only if an enquiry was done by the Assessing Officer, which was not....