TaxTMI 
TaxTMI 
2021 (11) TMI 1168
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....d by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue and requires revision. Accordingly, a show because notice was issued and served on the assessee with the following observations: - "(i) On examination of records it is seen that assessee has claimed CSR expenses of Rs 2.80 lakhs and the same is added in computation but assessee has claimed u/s 80-G deduction of Rs 1.40 lakhs on the same. CSR expenses is assessee's responsibility as per the companies Act and if it is spent through other trusts then also it is spent on behalf of assessee as per Rule 4(2) of CSR Rules. Therefore, assessee cannot give donation of CSR expenses even if it is given to Trust eligible for 80- G deduction. Hence the same is not allowable. Failure of the assessing officer to consider the CSR expense as disallowable expense has rendered the assessment order dated 24.12.2018 as erroneous in so far as it is prejudicial to the interests of the revenue. ii) Assessee has claimed bad debts of Rs 376.40 lakhs during the year and on examination of records it is seen that no such claim has been made by the assessee company in earlier years. Since asse....
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....our honour have observed that lower net profit of 1.5 % raises suspicion that purchases might have been inflated. Thus, your honour has not come to any conclusion that purchases were inflated. This amounts to nothing but rowing inquiry and not covered by revision U/s. 263. 4. During the course of scrutiny assessment, the assessing officer had called for numerous details and same were duly tendered by us vide our letters dated 12.12.2018 / 14.12.2018 / 18.12.2018 (copies enclosed). 5. And as can be seen, all the details asked for were tendered including details of purchases of fish. The balance sheets of major fish suppliers were tendered (letter dated 18.12.2018) Details of creditors of more than Rs.2 Lakhs were tendered (Letter dated 14.12.2018). Also ledger of fish purchases with confirmations from fish suppliers were tendered (letter dated 12.12.2018). 6. And after going through all the above details, the assessing officer passed the order dated 24.12.2018. As such, it cannot be said that the assessing officer did not apply his mind or did not verify the authenticity of purchases. And hence, the observation made by your honour that the assessing office....
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....t heads would defeat the very purpose of it. As mentioned above in the budget memorandum as well, the legislative intention was to ensure that companies with certain strong financials make the expenditure towards this purpose and by allowing deduction, the Government would be subsidizing one third of it by way of revenue foregone thereon and hence the same was required to be disallowed in the assessment. Omission to do so by the assessing officer resulted into underassessment to the same extent with consequential short levy of tax and interest. Failure of the assessing officer to examine the CSR expense as disallowable expense and to examine disallowance of deduction u/s.80G for CSR spending in light of the above stated legal position has rendered the assessment order dated 24.12.2018 as erroneous in so far as it is prejudicial to the interests of the revenue. Therefore the assessment order passed u/s.143(3) of the I.T. Act., 1961 dated 24.12.2018 without verification of this aspect is erroneous. Since the enquiries with regard to correctness of claim have not been made, the order passed u/s.143(3) of the I.T. Act., 1961 dated 24.12.2018 is prejudicial to the interest of revenue. T....
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....s not raised any specific query regarding genuineness of fish purchases even though purchase is ultimately from unorganized sector and assessee has done purchases mainly through intermediaries. Since fish purchases of Rs 197.94 crores constitute 95% of the sale of fish, the assessing officer should have made proper examination of purchases and genuineness of purchases by examining major suppliers, Further, payments to most suppliers are irregular and on lump sum basis, which required examination of some major suppliers to ascertain the genuineness of the intermediaries. Also to know the correct price of fish purchased, verification of documents relating to movement of fish should have been made to establish the genuineness of purchases from these intermediaries. It is seen from the record that the assessing Officer has failed to examine these aspects. From the submissions made by the assessee during the course of current proceedings u/s 263, it is crystal clear that fish purchases were not properly enquired into by the assessing officer during the assessment proceedings. Failure to examine the same has rendered the assessment order dated 24.12.2018 as erroneous in so far as it is p....
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....e with I. T. Act, 1961 in that the said section does not require the assessee to prove the genuineness of the bad debts and what is required is writing it off in the books of accounts and nothing more. And the said view was duly supported by the Supreme Court judgments and Pr. CIT was of different view as mentioned in para 6.2 of his order dated 31.3.2021. Thus, imposing his own views on the assessing officer. vii. giving directions to the AO to examine the fish purchases of Rs. 197.95 Crores to see the genuineness of the purchases by examining the major suppliers and verification of documents on the ground that the AO had failed to do so. viii. giving directions as mentioned in para (vii) above when all the details called for by the AO were duly tendered by the assessee vide its letters dated 12.12.2018/14.12.2018/18.12.2018 and they included the details of purchase of fish, balance sheet of major fish suppliers, details of creditors of Rs. 2 Lakhs as also ledger of fish purchases with confirmations of fish suppliers & the deduction was granted by the AO after going thru all the details and all these correspondence was duly placed on the record of the PR Commissi....
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....d by way of deduction in terms of S.80G. As such, the deduction under S.80G was rightly allowed by the Assessing Officer and the view held by the Ld. Pr.CIT is patently baseless. In support of his contentions Ld. AR relied on the following case laws: - (i). M/s. FNF India Pvt. Ltd., v. ACIT in ITA.No. 1565/Bang/2019 dated 05.01.2021. (ii). M/s. Goldman Sachs Services Pvt. Ltd., v. JCIT in IT(TP)A No. 2355/Bang/2019. 10. With regard to grounds of appeal no. (v) & (vi) with respect to the bad debts of Rs..3,76.40,000/- claimed by the assessee during the year, Pr.CIT has dealt with the same in para 6.2 of his order dated 31.3.2021 by observing that no such claim was made by the Assessee in earlier years and that claim of bad debts should have been examined by the assessing officer by making independent inquiry and no specific query was raised by the assessing officer in this regard. In the assessee's submission, the claim of the bad debts was rightly allowed by the Assessing Officer in terms of S.36(1)(vii) of the Act, which does not require the assessee to prove anything. The only condition is that the said debt should have been written off as irrecoverable in th....
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....ears or so and it is not that they were the new suppliers. Going by the conclusion drawn by the PR.CIT, it would be saying that the Assessee had been inflating its purchases for last 10 years or so and had never presented its true picture and hence requested that the order dated 31.3.2021 passed by the Ld. Pr.CIT U/s. .263 of I. T. Act, 1961 deserves to be set aside in Toto. 12. On the other hand, Ld. DR submitted that assessee in order to claim CSR benefit assessee resorted to route these transactions as donation. It is important to note that section 37(1) is amended and assessee cannot claim expenses relating CSR. Assessee cannot resort indirectly to claim benefit u/s. 80G of the Act and he supported the findings of the Ld. Pr.CIT. With regard to reliance of ITAT order by the Ld. AR he submitted that department is not in agreement with the findings of the Hon'ble ITAT. With regard to bad debts he submitted that assessee itself recovered substantial amount in the subsequent assessment year for which assessee has claimed bad debt during this assessment year. Therefore, this clearly shows that the claim of bad debts itself is not proper. He supported the findings of the Ld. P....
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...., 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head 'Income form Business and Profession'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify th....
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....h deduction is available. a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i) b) Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", where as monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed und....
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....tances in the present case is similar to that of the Coordinate Bench in the case of Allegis Services (India) Ltd. (supra), taking a consistent view, we remit the issue back to the file of the Assessing Officer with similar directions as contained in the aforesaid order of the Tribunal and for decision afresh in accordance with law." 16. Respectfully following the said decision, the Bangalore Bench has remitted the issue to the Assessing Officer to verify the additions necessary to claim the deduction u/s. 80G of the Act with a clear direction to the Assessing Officer. In the given case the Assessing Officer himself allowed the deduction u/s. 80G of the Act as claimed by the assessee and the issue itself is a debatable issue and Assessing Officer has taken one of the possible view. Therefore, Ld.Pr.CIT cannot invoke provisions of section 263 of the Act in order to bring on record his possible view. 17. We observe from the record that on merit assessee has a valid point to claim the deduction u/s. 80G of the Act and we observe that nowhere assessee has claimed deduction u/s. 37 of the Act. It is clear that the restriction given in section 37 of the Act is restricted to CSR exp....