TaxTMI 
TaxTMI 
2025 (8) TMI 1270
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....The assessee filed the return of income for the assessment year 2020-21 on 22.01.2021 showing a total income at Rs. 52,95,84,170/-. The case was selected for Scrutiny through CASS. The assessee has claimed large refund out of self assessment tax which was found unusual because self assessment tax should be paid after final assessment of income. It was further noticed that there is difference between the total expenditure of personal nature as per ITR (Schedule OI) and total expenditure of personal nature as per Form 3CD. Correctness of income and the source of income therein was required to be verified and assessee has claimed large refund claimed out of overall TDS which was also required to be verified whether the taxable income has been disclosed correctly. 3. Statutory notice u/s 143(2) was issued on 29.06.2021 and assessee submitted his reply alongwith Computation of Income, Balance Sheet and P & L Account, Tax Audit Report and Statutory Audit Report. Subsequently, a notice u/s 142(1) along with questionnaire was issued on 06.09.2022. The assessee replied to the said notice on 13.09.2022. The AO was satisfied with the reply of assessee and accordingly completed the assessme....
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....n this case, there is no query put with regards to CSR expenses eligible for deduction under section 80G of the Act and hence, there is incorrect assumption of facts as regards CSR expenses eligible for section 80G deductions. Therefore, these incorrect assumptions of fact has led to incorrect application of law. Hence, the revisionary power u/s. 263 of the Act lies with the PCIT in these facts of the case, therefore restored the case to the file of AO to pass a modified order because the expenses under CSR head is part of mandatory compliance under the provisions of Companies Act and apparently the AO had no occasion to examine the issue of CSR expenses vis-a-vis section 80G donations. Ld. PCIT observed that the assessment order suffers from infirmity being erroneous and also prejudicial to the interest of revenue for allowing ineligible claim of deduction of Rs. 36,23,500/- u/s. 80G of the Act. 7. Aggrieved with the order of Ld. PCIT, assessee preferred the present appeal before us raising the following grounds: 1. On the fact and circumstances of the case as well as in Law, the Learned Principal Commissioner of Income Tax (PCIT) has erred in initiating proceedings U/....
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.... the expenditure towards CSR are allowable deduction u/s 80G of the Act. In that regard, Ld. AR referred the decision of Mumbai Tribunal in the case of AluboundDacs (India) Pvt. Ltd. vs. DCIT, (2024) 163 taxmann.com 536 (Mum Trib.) and FDC Ltd. Vs. PCIT, 157 taxmann.com 387 (Mum. Trib.). In addition to that, Ld. AR also referred the following case laws:- i) ITA No. 1906/Mum/2019 order dated 30.07.2019 (Mumbai Tribunal) ii) ITA No. 3035/Mum/2025 order dated 27.06.2025 (Mumbai Tribunal) 10. Ld. AR further raised another argument as per his written submission that the AO has carried out limited scrutiny under CASS and there are various circulars of CBDT which provide that when there is limited scrutiny on specified issues, it is not open to the AO to travel beyond the reason for selection of the matter for limited scrutiny. It was further argued by Ld. AR that it is clear from the scrutiny assessment in this case that it was a limited scrutiny assessment on specified points, hence the CBDT Instruction No. 7/2014, 20/2015, 5/2016 and CBDT letter dated 30.11.2017 apply which mandates that the AO should not travel beyond the issues for which limited scrutiny assessme....
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.... 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,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]." "Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any ord....
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....rties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 (Cal.). In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated, it is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination 'to consider' or in other words, to form an opinion that the particular order is erroneous insofar as it is prejudicial to the interests of the revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, which has already been concluded and controversy which has been set at rest, is set again in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from the record....
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.... be held that the assessment order suffers from infirmity being erroneous and also prejudicial to the interest of revenue for allowing ineligible claim of deduction of Rs. 36,23,500/- u/s. 80G of the Act. Hence, the assessment order dated 19/09/2022 is hereby partly set aside to the file of the AO to enquire the claim of Section 80G deduction out of CSR expenses and modify the assessment order as per findings in this order." 15. It is evident from the above extracts that Ld. PCIT has not considered any of the judgments referred and relied by the assessee despite the fact that the same constitute the part of reply of the assessee which has been reproduced in the impugned order. It is noticed that Ld PCIT has justified the exercises of jurisdiction u/s 263 of the Act on the ground that the AO has done incorrect assumption of facts and also indulged in incorrect interpretation of law with respect to allowability of CSR expenditure as eligible deduction u/s 80G of the Act. Ld. PCIT has further observed that the CSR expenditure incurred by the assessee are part of mandatory compliance of the provisions of Companies Act and this certainly lacked voluntariness character. Ld. PCIT was o....
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....nd claimed out of overall TDS. It is required to be verified whether the taxable income has been disclosed correctly" 17. It is a settled law that any issue decided by ITAT or the Hon'ble High Court, is binding upon the assessing authorities and in that regard, we are supported bythe decision of the Hon'ble Allahabad High Court inK. N. Agarwal Vs. Commissioner of Income Tax, order dated 11.01.1991, [1991] 189 ITR 769B (ALL)which says, "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject-matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases." 18. In view of above findings of Hon'ble Allahabad High Court, we notice that once the issue of CSR expenditure as eligible deduction u/s 80G of the Act h....
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....s are liable to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. In the present case, the assessee has contributed Rs. 30 lacs to various educational and charitable trust for which the assessee has claimed 50% of the total donation paid as deduction u/s. 80G of the Act. Prior to the Finance (No.2) Act, 2014, the said expenditure was claimed as ‗business expenditure' u/s. 37(1) of the Act where after the insertion of Explanation 2 to section 37(1) of the Act, the CSR expenses referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. It is observed that the said expenses pertaining to CSR has been claimed as deduction u/s. 80G of the Act which claim was perennially rejected by the Revenue for the reason that only donations which are voluntary in nature will come under the purview of section 80G of the Act and donation towards CSR was merely a statutory obligation on companies as per section 135 of the Companies Act, 2013. It is pertinent to point out that the intention of the legislature was clear when the same....
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....e detail of examination claimed under section 80G. The assessee also furnished receipt of donations and per Annexure-XII of the reply. The assessee explained that they have claimed deduction of 50% of total donation. As noted above, the assessing officer has not made such references in the assessment order. Thus, assessing officer impliedly accepted the explanation offered by assessee. We find that co-ordinate bench of Mumbai Tribunal in DCIT Vs Gabriel India Ltd. (supra), Vistex Asia Pacific Private Limited (supra) and Axis Securities Limited (supra) consistently allowed deduction under section 80G @ 50% of CSR expenses. We, further, find that this combination in Dalal and Broacha Stock Broking Pvt. Ltd. in ITA No. No. 2718/Mum/2025 dated 19.06.2025 by considering other decision of Tribunal passed the following order: "6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On careful perusal of assessment order, we find that case was selected for scrutiny on the issue of large amount of donation. No doubt that the assessing officer during the assessment examined the issue and disallowed donation und....
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....39;) : The assessee made certain donation to approved institutions or funds and claimed 50% of the total donation made as deduction u/s 80G. This amount also formed part of the CSR initiative of the assessee company which amounts to INR 22,81,29,964/-. It is observed that the assessee has duly disallowed CSR expenditure of INR 22,81,29,964/-debited to the statement of profit and loss under section 37 of the Act. DRP rejected the claim of the assessee by saying that the donation is pursuant to the CSR policy of the company and lacks the test of voluntariness as required under section 80G. The AO has disallowed the claim on the ground that anything donation over and above the CSR u/s 80G will be only allowed as the CSR expense is not an allowable expense u/s 37 of the Act. Ld. Counsel of the assessee placed reliance on the following decisions :- JMS Mining (P.) Ltd. v. PCIT [2021] 130 taxmann.com 118/190 ITD 702/91 ITR(T) 80 (Kolkata - Trib.) Goldman Sachs Services (P) Ltd. v. JCIT (2020) ([2020] 117 taxmann.com 535 (Bangalore - Trib.) ) (ITAT Bangalore) (iii) First American (India) Pvt. Ltd. (ITA No. 1762/Bang/2019) Allegis Services (India) Pvt. Ltd. (ITA ....
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....ordinate Bench was of the opinion that CSR expenses cannot be allowed u/s 37(1) of the Act, therefore, no deduction is allowed u/s 80G, whereas in the case in hand, assessee has claimed deduction u/s 80G and not u/s 37(1) of the Act. Accordingly, ITA No. 1710/PUN/2023 is also dismissed. 9. In the result, appeals of the revenue are dismissed." Considering the fact that view taken by assessing officer while allowing 50% of donation under section 80G out of CSR expenses are in accordance with the decisions of various benches of Tribunal. Thus, the view taken by assessing officer cannot be said to be erroneous. Thus, the pre-requisite twin conditions for exercising jurisdiction under section 263 has not meet out in the present case hence we quash / set aside the order of Pr. CIT dated 17.03.2025. In the result, grounds of appeal raised by assessee are allowed. 7. Considering the consistent decision of Co-ordinate Bench of Tribunal, we find that in accepting the claim of donation under section 80G @ 50% of total donation in the assessment order is not erroneous as the action of assessing officer is legally sustainable view. Thus, in our considered view, the tw....