2017 (5) TMI 258 - HC - Income Tax

Revision u/s 263 - Whether CIT was justified in invoking the jurisdiction under Section 263 to remand the matter to the Assessing Officer in respect of allowance of Corporate Social Responsibility claim of assessee? - Held that - In the instant case, we find that the Assessing Officer has applied his mind to the claims made by the assessee and wherever the claims were disallowable they have been discussed in that assessment order and there is no discussion or reference in respect of the claims that were allowed. Judgments in the case of Fine Jewellery (India) Ltd. (2015 (2) TMI 732 - BOMBAY HIGH COURT) and Nirav Modi (2016 (6) TMI 1004 - BOMBAY HIGH COURT) it would be necessary to hold that in the circumstances of the case, it cannot be said that merely because the Assessing Officer had not specifically mentioned about the claim in respect of the Corporate Social Responsibility, the Assessing Officer had passed the assessment order without making any enquiry in respect of the allowability of the claim of Corporate Social Responsibility The provisions of Section 263 of the Act could not have been invoked by the Commissioner of Income Tax in the circumstances of this case. The Tribunal was not justified in holding that the query under Section 142 (1) of the Act was very general in nature and the reply of the assessee was also very general in nature. In our considered view, the query pertaining to Corporate Social Responsibility was exhaustively answered and the appellant assessee had provided the data pertaining to the expenditure under each head of the claim in respect of Corporate Social Responsibility, in detail. The Tribunal was not justified in holding that the reply/explanation of the assessee was not elaborate enough to decide whether the expenditure claim was admissible under the provisions of the Income Tax Act. The Assessing Officer is not expected to raise more queries, if the Assessing Officer is satisfied about the admissibility of claim on the basis of the material and the details supplied. In the facts and circumstances of the case, we answer the question of law in the negative and against the Revenue.

Summary

Issues:
1. Jurisdiction under Section 263 of the Income Tax Act regarding Corporate Social Responsibility claim.

Analysis:
The High Court of Bombay addressed the issue of whether the Commissioner of Income Tax was justified in invoking the jurisdiction under Section 263 of the Income Tax Act to remand the matter to the Assessing Officer in respect of the allowance of a Corporate Social Responsibility claim by the appellant-assessee. The appellant, a public sector undertaking wholly owned by the Government of India, was involved in various business activities. The Assessing Officer had asked for details regarding the Corporate Social Responsibility expenditure, and the appellant had provided a detailed response. The Commissioner of Income Tax found the assessment order erroneous and prejudicial to the Revenue's interest, leading to the remand of the matter to the Assessing Officer. The Income Tax Appellate Tribunal upheld this decision, prompting the appellant to file an appeal challenging both the Tribunal's and Commissioner's orders.

The appellant argued that the Assessing Officer had considered and allowed the Corporate Social Responsibility claim after being satisfied with the explanation provided. Similar claims in previous years had been accepted without issue. The appellant contended that the Commissioner's jurisdiction under Section 263 was wrongly invoked as the Assessing Officer had applied his mind to the claim. The High Court examined the assessment order and noted that while certain deduction claims were discussed, the Corporate Social Responsibility claim was not specifically mentioned. However, the appellant had responded exhaustively to the query regarding this claim, providing detailed expenditure breakdowns under different heads.

The High Court referred to previous judgments to establish that if an assessee responds to queries during assessment proceedings, the mere absence of specific mention in the assessment order does not imply a lack of consideration by the Assessing Officer. The Court found that the Assessing Officer had indeed applied his mind to the appellant's claims, disallowing those deemed inappropriate while not explicitly mentioning allowable claims. In light of this, the Court concluded that the Commissioner's invocation of Section 263 was unwarranted. The Tribunal's view that the appellant's response was insufficient was deemed incorrect, as the appellant had provided detailed data on the Corporate Social Responsibility expenditure. Ultimately, the Court ruled in favor of the appellant, allowing the Income Tax Appeal and quashing the orders of the Commissioner and the Tribunal.

In summary, the judgment delved into the application of Section 263 of the Income Tax Act concerning the Corporate Social Responsibility claim of the appellant-assessee. It analyzed the Assessing Officer's consideration of the claim, the Commissioner's jurisdictional invocation, and the Tribunal's decision. The Court emphasized the sufficiency of the appellant's response to the query, the Assessing Officer's discretion in raising further queries, and the legal precedents supporting the appellant's position. The final decision favored the appellant, overturning the previous orders and highlighting the importance of thorough consideration in tax assessments.