TaxTMI 
TaxTMI 
2025 (4) TMI 42
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....ue. 2. That on the facts & circumstances of the case and in law, assumption of jurisdiction u/s 263, by three notices on three independent issues was without merit, for vide first notice dated 17.1.2023 deduction of Rs. 66,06,500/- allowed u/s 80G was sought be withdrawn and by the second notice dated 17.3.2023, impact of GST demand of Rs. 1,59,684/- & 1,70,460/ was alleged to have not gone into and by the third notice dated 23.3.2023, jurisdiction was assumed for the reason that details of generation of scrap was not provided and was not gone into. 3. That on the facts & circumstances of the case and in law, the Pr. CIT did not appreciate that expenditure on CSR is "application of income" and not "expenditure incurred for the purpose of business", whereas, section 80G provides for "deductions to be made in computing total income". 3.1 That on the facts & circumstances of the case and in law, Pr.CIT did not appreciate that though clauses (whk) & (nihl) of section 80G(2) provided that sum paid to "Swachh Bharat Kosh" & "Clean Ganga Fund" would not include the amount spent pursuant to CSR, however in respect of donation to other funds, similar exclusion was....
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.... or fine for violation of any law 6. Deduction from total income under chapter IV-A 3. In the course of assessment proceedings, notices u/s 142(1) alongwith questionnaires was issued through e-proceedings facility and persuasion thereof the assessee submitted his explanation electronically through e-proceedings facility. In view of the above replies submitted by the assessee, assessment is completed u/s 143(3) of the Income Tax Act, 1961 at the total income of Rs. 1,91,94,51,330/-, and Computation of income and notice of demand issued. 4. The Ld. PCIT(A) issued notice u/s 263 of the Act to the assessee / appellant on dated 17.01.2023, 17/03/2023 and 23.03.2023 respectively by noticing that the assessee has disallowed CSR expenditure of Rs. 1,32,13,000/-but claimed 50% of CSR expenditure on account of donation u/s 80G of the Act and accordingly, the claim of deduction u/s 80G of Act of Rs. 66,06,500/- is not allowable deduction as per the provision of explanation 2 u/s 37(1) of the Act and no details of generation of scrap has been provided and stated that the Ld. AO has not made any enquiry regarding source of generation scrap item-wise, quanity and price etc. The Ld....
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.... allowable. Therefore, I am unable to agree with the AO or the assessee that 50% of the CSR expenses can be claimed u/s 80G of the Act." 8. The Ld. DR relied upon the impugned order of Ld. PCIT. 9. The Ld. AR further submitted that the issue of deduction u/s 80G in respect of CSR expenses was examined during assessment proceedings and even legally, the issue is settled in favour of the appellant and the Ld. PCIT has not recorded any finding why the case laws relied upon are not applicable. 10. Second issue on which the Ld. PCIT(A), set aside the order passed by the Ld.AO, regarding the issue of generation qualification of scrap, for which the Ld. CIT(A) was of opinion that it had never been verified, as the Ld. AO had not conducted the required enquiry. 11. In this regard, the Ld. AR submitted that in compliance of giving effect the impugned order, the Ld. AO vide order dated 21.03.2024, u/s 143(3) of r/w section 263 of the Act has not drawn any adverse inference on the issue in which specifically observed by the Ld. AO that on the basis of independent verification conducted u/s 13(6) of the Act, no adverse inference is drawn on this issue. 12. The Ld. AR also submit....
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.... powers under section 263 of the Act, learned CIT has referred to Explanation 2 to section 263. In this regard, we must observe, Explanation 2 in no way dilutes basic conditions of sub-section to section 163, i.e., twin conditions of 'erroneous' and 'prejudicial to the interest of Revenue' have to be satisfied cumulatively. In our view, the twin conditions are not satisfied in the present case" 16. The Ld. AR also relied upon the order of Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. M/s Cliks Finance Pvt. Ltd. [2012] (3) TMI 227 dated 01/03/2024 has held as under: "19. A bare reading of sub-Section (1) of Section 263 of the Act makes kit abundantly clear that the said provision lays down a two pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act....
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....ich 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 a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open, In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) ...... 23. A similar view was taken by thi....
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....in CII v. T. Narayana Pai (1975) 98 ITR 422 (Kant)), the 3/21/24, 6:32 PM High Court of Bombay in CIT v. Gabriel India Ltd. (1993) 203 ITR 108(Bom)) and the High Court of Gujarat in CIT v. Minalben S. Parikh ((1995) 215 ITR 81 (Guj)) treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT ((1987) 163 ITR 129 (Mad)] interpreting "prejudicial to the interests of the Revenue". The High Court held: "In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration." In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of t....