TaxTMI 
TaxTMI 
2022 (7) TMI 1519
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....e of the assessee was selected for scrutiny assessment. Notice u/s 143(2) of the Act was issued and served upon the assessee. The assessee has incurred a sum of Rs.7,50,000/- as Corporate Social Resposibility (CSR) Expenditure. According to the assessee, it suo moto disallowed the CSR expenditure but claimed it u/s 80G of the Act because the trust and institutions to which the amounts were paid, were already enjoying benefits of registration u/s Section 80G. Therefore, according to the assessee the donations made by it will qualify for claim of deduction u/s 80G of the Act. Accordingly, 50% of the expenditure was claimed as allowable expenditure with the aid of Section 80G. 4. The ld. Pr. CIT had gone through the record carefully and formed an opinion that action u/s 263 of the Act is required to be taken. Accordingly, he issued a showcause notice which is available at page 1& 2 of the paper book, which reads as under:- "GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX PCIT, Kolkata-2 To, DIAMOND BEVERAGES PRIVATE LIMITED KOLKATA 700088, West Bengal India PAN/TAN:AABCD3346C AY:2017-18 DIN & N....
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....sessment order u/s. 143(3) of the Act dated: 27.12.2019 to be erroneous insofar as it is prejudicial to the interest of revenue. 5. Having regard to the facts and circumstances of the case and law and in accordance with the provisions of Sec. 263(1) of I. T. Act, 1961 you are hereby given an opportunity of being heard and to show cause as to why the impugned assessment order passed u/s 143(3) of the Act by DCIT, Circle - 11(1), Kolkata on 27.12.2019 for A.Y. 2017,18 should not be held to be erroneous in so far as it is prejudicial to the interests of the revenue. You may accordingly furnish your written submissions u/s 263(1) of 1.T. Act, 1961 by 15.03.2022, in this regard elaborating and/or evidencing your contentions/submissions/if any. Considering the pandemic situations arising due to COVID-19, physical attendance is not considered necessary and you are requested to make written submissions with necessary details through E-mail ID: [email protected] and it will be treated as compliance to this notice u/s 263(1)." 5. In response to this showcause notice, the assessee filed a detailed reply which has been place at page 5 to 10 of the paper books, which is ....
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....f deduction u/s 80G the amounting to Rs.3,75,000/- (50% of Rs.7,50,000). However, as per section 37 of the I T Act, any amount of CSR expenses whether it is made for donation or for other purposes is not allowable expenses. Therefore, the claim of deduction on CSR expenditure amounting to Rs.3,75,000/- (50% of Rs.7,50,000) was required to be added back. But the Assessing Officer had accepted and allowed the claim u/s 80G of the I.T Act while computing the assessment u/s. 143(3) of the Act which is erroneous and resulted in the assessment order u/s. 143(3) of the Act dated: 27.12.2019 to be erroneous insofar as it is prejudicial to the interest of revenue. 5. Having regard to the facts and circumstances of the case and law and in accordance with the provisions of Sec. 263(1) of I. T. Act, 1961 you are hereby given an opportunity of being heard and to show cause as to why the impugned assessment order passed u/s 143(3) of the Act by DCIT, Circle - 11(1), Kolkata on 27.12.2019 for A.Y. 2017418 should not be held to be erroneous in so far as it is prejudicial to the interests of the revenue. You may accordingly furnish your written submissions u/s 263(1) of I.T. Act 1961 by 15.03.202....
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.... allowed the same and completed the assessment. Learned PCIT was of the opinion that claim of Rs. 67,50,000 under sec 80G on account of CSR expenditure was erroneous and it passed an order under sec 263 directing the AO to withdraw the deduction of Rs. 67,50,000 allowed under sec 80G. The assessee preferred an appeal before Hon'ble Kolkata ITAT against the said order passed under sec 263 of the Act. The Hon'ble ITAT Kolkata held that Parliament had made restriction for allowance of deduction u/s 80G of CSR expenditure on donation to Swachh Bharat Kosh and Clean Ganga Fund only, deduction on account of donation to other fund/trust or institution cannot be denied u/s 80G and quashed the order passed under sec 263 by PCIT. First American (India) Pvt. Ltd v ACIT ITA No.1762/Bang/2019 order dated 29-04- 2020 (Annexure-2): In this case also the assessee had added back the CSR expenditure u/s 37 and claimed the deduction u/s 80G. The AO disallowed the said deduction on the ground that CSR expenditure are not eligible for deduction u/s 80G also. CIT(A) confirmed the order of the AO. The assessee preferred an appeal before ITAT Bangalore wherein it has been held that don....
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....s 80G. As such it cannot be said that the above view is erroneous and there is a possible view that the expenditure which has been disallowed under sec 37 of the Act can be claimed as deductible under sec 80G of the Act. Revisionary assessment proceedings cannot be initiated unless the conjunctive conditions of section 263 of the Act are satisfied Section 263(1) of the Act states that: "The Principal Commissioner or The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." In view of the above, it is aptly clear that there are two pre-requisites for the Principal Commissioner to exercise the power of revision under section 263 of the Act: * The order passed by the AO ....
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.... income in his hands on his so offering, the order passed by the AO accepting the same as such will be erroneous and prejudicial to the interest of the Revenue.".... * CIT v. Gabriel India Ltd. (203 ITR 108) (Bom)(HC) "12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decisions is held to be erroneous. Cases may be visualized where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and lef....
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.... assessment which has been set aside is, indeed, erroneous and prejudicial to the interest of Revenue. Furthermore, the power under Section 263 being quasi-judicial such conclusion must be reached after hearsay the assessee which is mandated by the statute itself and after recording the reasons for the conclusions reached, a requirement, imposition of which, would be consistent with the well-settled principles of exercise of quasi-judicial powers." (Emphasis supplied) In the given case, the proposed revision is sought to be done merely on change of opinion disagreeing with the opinion of the AO that the expenditure is not deductible under sec 80G of the Act. Further, where there are two views possible and the AO has adopted one of the two possible views, then his order cannot be held to be erroneous/ prejudicial to the interest of the revenue and thereby proceedings under section 263 of the Act will not be sustained. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case Malabar Industrial Co. Ltd vs. CIT (supra), wherein it is held that where two views are possible on a particular issue and the AO has adopted one view, then the same....
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.... sums referred to in sub-section (1) shall be the following, namely :- (a) any sums paid39 by the assessee in the previous year as donations to- ************************************************** ************************************************** (iv) any other fund or any institution to which this section applies; or ************************************************** (iva) any corporation referred to in clause (26BB) of section 10; or ************************************************** 8. She further contended that there are various decisions of the Tribunal on this issue where action taken u/s 263 of the Act has been quashed by the Tribunal. He placed on record copies of five decisions in the paper book and index of those decisions read as under:- * Naik Seafoods Pvt. Ltd. [TS-1157-ITAT-2021 (Mum)] * DCIT vs. Peerless General Finance & Investment & Co. Ltd. [2019] 112 taxmann.com 410 (Kolkata-Trib.) * Infinera India (P) Ltd. vs. JCIT [2022] 137 taxmann.com 197 (Bangalore-Trib.) * Sling Media (P.) Ltd. vs. DCIT [2022] 135 taxmann.com 164 (Bangalore-Trib.) * Reliance Home Finance Ltd. vs. Pr. CIT-8 [ITA No. 815 & 814/Mum/2021] 9. On the s....
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....he time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed b....
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....annot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accor....
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....nditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". 14. In the case of Gee Vee Enterprise vs. Commissioner of Income Tax reported in 99 ITR page 375, the Hon'ble court has expounded the approach of ld. Assessing Officer while passing assessment order. The observation of the Hon'ble court on pages 386 of journal read as under:- "... it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very diffident ....