2021 (12) TMI 748 - AT - Income Tax

Revision u/s 263 by CIT - allowability of CSR expenses as donation u/s.80G - argument of no adequate inquiry or specific inquiry or recording reasons for accepting assessee s submission - case of the assessee for selected for scrutiny and original assessment was framed by the AO u/s.143(3) - HELD THAT - Assessee has filed detailed note on allowability of CSR expenses as donation u/s.80G and therefore the issue was considered by the AO during the assessment proceedings. Besides we note that the assessee has filed the Scheme of Arrangement of demerger alongwith all documents including financials of IDMPL, assessment orders of IDMPL determining losses, book entries incorporating the demerger in the books of the assessee. All conditions of section 2(19AA) were complied with and therefore there was a proper demerger and the same has been accepted by AO. Assessee also filed detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018.PCIT has formed an incorrect opinion that the AO has not examined the issue of allowability of CSR expense as donation. Claim of business loss of ₹ 14,36,669/- being set off both by the assessee and by IDMPL, we note that the assessee had claimed the loss of ₹ 14,36,669/- in the first revised return filed on 1.11.2017 and in the second revised filed on 29.3.2018 the said claim was withdrawn by the assesse suo-motto as is evident from amount of income returned in both the income tax returns. We note that the income returned in the first revised return at ₹ 18,14,22,950/- was increased to ₹ 18,28,59,260/- in the second revised return filed on 29.3.2018 and the difference between two returned income is ₹ 14,36,669/-. Thus, the claim of loss of ₹ 14,36,669/- was withdrawn by the assessee. Thus we are inclined to hold that the revisionary proceedings were not valid and so is the revisionary order passed u/s 263 of the Act by ld. PCIT. Issue of interest u/s.244A - The facts before us that the ld PCIT has not given any opportunity to the assesse during the revisionary proceedings and it was also not in the show cause notice issued. So on this basis, the revisions can not be sustained. Beside we note that the interest has been correctly allowed and there is no mistake which his prejudicial to the interest of the revenue. In view of these facts we are to quash the revisionary proceedings as well as order u/s 263 as bad in law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Invocation of Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT).
2. Allowability of Corporate Social Responsibility (CSR) expenses as a deduction under Section 80G.
3. Verification of business losses claimed due to the demerger of India Debt Management Private Ltd (IDMPL).
4. Grant of interest under Section 244A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Invocation of Section 263 of the Income Tax Act by the PCIT:

The PCIT invoked Section 263, arguing that the assessment orders for the years 2015-16 and 2016-17 were erroneous and prejudicial to the interest of the revenue. The PCIT issued show-cause notices to the assessee, highlighting that the Assessing Officer (AO) failed to conduct adequate inquiries on specific points, including the allowability of CSR expenses under Section 80G and the verification of business losses due to the demerger of IDMPL. The PCIT directed the AO to pass fresh assessment orders after conducting the necessary inquiries.

2. Allowability of CSR expenses as a deduction under Section 80G:

The assessee claimed deductions under Section 80G for donations made, which were part of the CSR expenses. The PCIT argued that the AO did not verify whether the CSR expenses could be allowed as a deduction under Section 80G. The assessee contended that detailed notes and supporting documents were submitted to the AO, who considered the issue during the assessment proceedings. The Tribunal noted that the AO had indeed examined the issue and accepted the assessee’s claim after due consideration. The Tribunal referenced the decision of the Kolkata Tribunal in JMS Mining (P.) Ltd., which supported the view that CSR contributions could be allowed under Section 80G.

3. Verification of business losses claimed due to the demerger of IDMPL:

The PCIT observed that the AO did not properly verify the business losses claimed by the assessee due to the demerger of IDMPL. The assessee argued that detailed submissions, including financial statements, tax audit reports, and other relevant documents, were provided to the AO, who accepted the claim after thorough examination. The Tribunal found that the AO had conducted proper inquiries and that the PCIT’s observations were incorrect. The Tribunal emphasized that the AO’s acceptance of the assessee’s claim was based on a plausible view after considering all relevant facts and documents.

4. Grant of interest under Section 244A of the Income Tax Act:

The PCIT raised an issue regarding the grant of interest under Section 244A, arguing that the AO erred in computing the interest. The assessee contended that the interest was correctly allowed based on the excess tax paid over the tax determined on regular assessment. The Tribunal noted that the PCIT did not provide an opportunity to the assessee to address this issue during the revisionary proceedings, which was a procedural lapse. The Tribunal also found that the interest was correctly computed and allowed by the AO, and there was no error prejudicial to the interest of the revenue.

Conclusion:

The Tribunal quashed the revisionary proceedings under Section 263 initiated by the PCIT for both assessment years, holding that the AO had conducted proper inquiries and accepted the assessee’s claims based on a plausible view. The appeals of the assessee were allowed, and the orders of the PCIT were set aside.