TaxTMI 
TaxTMI 
2022 (7) TMI 1519
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....losing income of Rs.2,69,70,230/-. The case 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 Indi....
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....im 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. 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 ....
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....- is debited towards CSR Expenditure under the head Other Expenses. It is seen from computation of Income for A.Y: 2017-18 that he said amount of CSR had suo moto been added back as Donations and claimed benefit of 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 ....
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.... added back the sum of Rs. 1.35 crore in terms of Explanation 2 to Section 37(1) while computing "Income under the head Business". However, the assessee claimed Rs 67,50,000 being 50% of the above donation of Rs. 1,35,00,000 under sec 80G of Income tax Act,1961. The AO while making the assessment 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....
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....is Services (India) Pvt Limited v ACIT ITA No.1693/Bang/2019(Annexure- 5) Since all the judicial authorities have unanimously held that an assessee is eligible for deduction under sec 80G on account of donation of CSR expenses made to any fund, trust or institution approved under 80G. Only donation out of CSR expenses made to Swachh BharatKosh and Clean Ganga Fund are not allowable u/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 i....
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....ot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as 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 t....
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....strength" of the conclusion that must be reached by the CIT before setting aside an assessment under Section 263 as the answer to the said question would really depend on the facts that may be confronting the Commissioner in any given case. The position can be best resolved by saying that in certain situations the opinion or conclusion recorded would be the final opinion; in other situations may be less than final'. What would be necessary for our purposes is to take note of the fact that there has to be an opinion that the 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 ....
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....red under CSR by taking benefit of Section 80G of the Act. He accordingly set aside the assessment and directed the Assessing Officer to verify the submission made by the assessee. 7. The ld. Counsel for the assessee, while impugning the order of the ld. Pr. CIT, took us through Section 80G (2)(vi) &(via) of the Act, which read as under:- (1) In computing the total income of an assessee16, there shall be deducted, in accordance with and subject to the provisions of this section,- ************************************************** ************************************************** (2) The 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 ************************************************** ....
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....r after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Incometax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the 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. ....
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....t the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot 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 ....
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....ed above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. 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 d....
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....paragraph 3(c) at page 6 of the impugned order, which read as under:- "(c) Claiming deduction u/s 80G of the Act against CSR expenses: In the instant case, the assessee is claiming deduction u/s 80G of the Act against its CSR expenses. At the outset, it is crystal clear from the heading of section 80G of the Act that this section is meant for 'Deduction in respect of donations to certain funds, charitable institutions, etc.'. It is undeniable fact that this section is primarily speaks about donation, though one of its sub-section mentions the term Corporate Social Responsibility' in connection with donation to a specific fund. The assessee, while claiming deduction u/s 80G of the act, has tried to justify that CSR and Donation as similar component. But the fact is that the CSR' is completely obligatory in nature and binding upon the entities that governed by the Companies Act whereas the Donation' is completely voluntary and philanthropic in nature. It is quite clear that 'CSR' and 'Donation' is two different things in the eyes and whereas 80G of the Act speaks about 'Donation', the expenses made towards mandatory provisions....