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2021 (11) TMI 1168 - AT - Income TaxRevision u/s 263 - assessee s claim of Corporate Social Responsibility (CSR) expenses and claim of such expenditure u/s. 80G - HELD THAT - With regard to section 80G deduction we observed that the Coordinate Bench of ITAT Bangalore Bench decided the issue of deduction u/s. 80G relating to donations which is part of Corporate Social Responsibility in the case of M/s. FNF India Pvt. Ltd., v. ACIT 2021 (1) TMI 205 - ITAT BANGALORE As 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. 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 expenses but similar restrictions are not given in section 80G of the Act. Other expenses to invoke the provisions of section 263 of the Act on bad debts and fish purchases - Assessee has submitted various ledgers relating to fish purchases and supplier s confirmations before the Assessing Officer, all these informations clearly shows that Assessing Officer has verified these expenditures before allowing the same. From the record, we observed that AO has asked for certain informations on these expenditures and assessee has also submitted the informations with supporting documents, it can be inferred that the Assessing Officer has made certain enquiries and Ld. Pr.CIT can invoke the provisions of Explanation 2 to section 263 of the Act only when there is absolutely no verification is carried out by the Assessing Officer. This is not the case in the present impugned Assessment Order. Therefore, in our considered view the order passed by the Ld. Pr.CIT is not proper and accordingly set aside. Appeal filed by the assessee is allowed.
Issues Involved:
1. Allowability of deduction under Section 80G for Corporate Social Responsibility (CSR) expenses. 2. Examination and allowability of bad debts claimed under Section 36(1)(vii). 3. Verification of the genuineness of fish purchases. Issue-wise Detailed Analysis: 1. Allowability of Deduction under Section 80G for CSR Expenses: The Principal Commissioner of Income Tax (Pr.CIT) observed that the assessee claimed CSR expenses of Rs. 2.80 lakhs, disallowed the same in the Profit & Loss account, but claimed Rs. 1.40 lakhs under Section 80G as a deduction. The Pr.CIT argued that CSR expenses, being a statutory responsibility under the Companies Act, cannot be claimed as donations eligible for deduction under Section 80G. The Pr.CIT set aside the assessment order, directing the Assessing Officer (AO) to re-examine the allowability of the deduction under Section 80G. However, the Income Tax Appellate Tribunal (ITAT) referred to the Bangalore Bench's decision in M/s. FNF India Pvt. Ltd. v. ACIT, which allowed CSR expenses as deductions under Section 80G, provided they meet the necessary conditions. The ITAT concluded that the AO had taken a possible view by allowing the deduction, and the Pr.CIT’s invocation of Section 263 was not justified since the restriction under Section 37 does not extend to Section 80G. 2. Examination and Allowability of Bad Debts Claimed under Section 36(1)(vii): The Pr.CIT noted that the AO allowed a bad debt claim of Rs. 376.40 lakhs without proper examination. The Pr.CIT argued that the AO failed to verify the genuineness and nature of the debts written off, rendering the assessment order erroneous and prejudicial to the revenue. The assessee contended that the bad debts were written off in compliance with Section 36(1)(vii) and Section 36(2), and any subsequent recovery would be taxed under Section 41(4). The ITAT observed that the AO had requested and received details of the bad debts during the assessment, indicating some level of verification. The ITAT found that the AO’s actions were consistent with the legal requirements, and thus, the Pr.CIT’s invocation of Section 263 was not warranted. 3. Verification of the Genuineness of Fish Purchases: The Pr.CIT highlighted that the AO did not adequately verify the genuineness of fish purchases amounting to Rs. 197.94 crores, which constituted 95% of the total sales. The Pr.CIT pointed out irregular payments to suppliers and the need for thorough examination of major suppliers and movement documents. The assessee argued that all necessary details, including supplier confirmations and ledger accounts, were submitted to the AO during the assessment. The ITAT found that the AO had indeed requested and reviewed these details, suggesting that the AO had conducted a reasonable inquiry. Therefore, the ITAT concluded that the Pr.CIT’s direction to re-examine the purchases was not justified under Section 263, as the AO had already performed sufficient verification. Conclusion: The ITAT allowed the appeal filed by the assessee, setting aside the Pr.CIT’s order under Section 263. The ITAT determined that the AO had made reasonable inquiries and verifications regarding the CSR expenses, bad debts, and fish purchases, and the Pr.CIT’s intervention was not warranted. The ITAT emphasized that the AO’s actions were within the scope of permissible views, and the Pr.CIT could not substitute his opinion for that of the AO.
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