2017 (3) TMI 1233 - AT - Income Tax

Revision u/s 263 - expenditure incurred on community development and tribal welfare under corporate social responsibility and expenditure incurred in connection with diversion of high tension lines of Maharashtra State Electrical Transmission Co. Ltd. at open cast mines of W.C.L. not condidered by A0 - Held that - Upon examining the records and the paper book submitted by the assessee we find that the AO has duly issued the questionnaire on both the subjects and the assessee has duly replied. In the notice u/s 142(1) dated 04-10-2012 details of both the items has been sought by the AO in point No. 13 and 20 respectively. Submissions by the assessee placed in the paper book clearly demonstrate that assessee has given due details of explanation. Hence there is no question of learned CIT assuming jurisdiction u/s 263 and holding that the concerned expenditure were allowed without examination by the AO. Lack of appreciation of mind by the concerned authority exercising revisionary power is evident here. Secondly we find that the issue of community development and tribal welfare expenditure has already been decided by the ITAT in favour of the assessee in several decisions of earlier years. Further more we also note that on the issue of diversion of high tension lines the AO has disallowed some expenditure u/s 154 by an order which is dated prior to the date of learned CIT s order. Hence this makes it also clear that the AO has duly examined this issue. Further more the issue of diversion of high tension lines of open cast mines of WCL is wholly and exclusively connected with facilitating the business of the assessee which is mining. Hence it also cannot be said that the expenditure is not allowable or there can be two opinion in this regard. In these circumstances, in our considered opinion, the order of learned CIT is not at all sustainable and is liable to be quashed. - Decided in favour of assessee

Summary

Issues:

1. Validity of the order passed under section 263 of the Income Tax Act, 1961.
2. Examination of expenditure on corporate social responsibility and transmission line expenses by the Assessing Officer (AO).

Issue 1: Validity of the order under section 263:

The Appellate Tribunal, ITAT Nagpur, dealt with an appeal against an order passed by the Principal Commissioner of Income Tax-2, Nagpur, for the assessment year 2010-11. The order under section 263 of the Income Tax Act was challenged by the appellant on the grounds of being illegal, invalid, and bad in law. The CIT-2 was criticized for holding the AO's order under section 143(3) as erroneous and prejudicial to the revenue's interest. The CIT-2 set aside the assessment, citing lack of examination of certain expenses related to corporate social responsibility and transmission line expenses by the AO. The Tribunal analyzed the grounds of appeal and submissions made by both parties to determine the validity of the CIT-2's order under section 263.

Issue 2: Examination of expenditure by the Assessing Officer:

The core issue revolved around the examination of expenses incurred on corporate social responsibility and transmission line expenses by the AO. The CIT-2 found that the AO had not adequately examined these expenses during the assessment. However, the appellant contended that the AO had indeed scrutinized the expenses, as evidenced by disallowances made on certain amounts. The Tribunal reviewed the records and submissions to ascertain whether the AO had appropriately examined the disputed expenses. It was noted that the AO had issued questionnaires and the appellant had responded with detailed explanations, indicating examination of the expenses. Moreover, previous decisions by the ITAT in favor of the appellant on similar issues were cited to support the contention that the expenses had been adequately examined. The Tribunal concluded that the CIT-2's assumption of jurisdiction under section 263 was unwarranted, as the AO had properly considered and addressed the disputed expenses. The Tribunal referred to relevant case laws and precedents to support its decision to quash the CIT-2's order under section 263.

In conclusion, the Appellate Tribunal, ITAT Nagpur, allowed the appeal filed by the assessee, finding the order passed under section 263 of the Income Tax Act to be unsustainable. The Tribunal held that the AO had appropriately examined the disputed expenses related to corporate social responsibility and transmission line expenses, rendering the CIT-2's order invalid. The decision was based on a thorough analysis of the facts, submissions, and legal precedents, ultimately leading to the quashing of the CIT-2's order.