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TMI Blog2024 (6) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O has applied his mind and verified the facts and has not doubted the genuineness of expenditure If any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind and the A.O. has applied one of the possible view. We find the assessee is eligible to claim deduction u/sec. 80G of the Act under Chapter VIA and also there is no dispute on the genuineness of the contributions and the activities of the Donees i.e the institutions/trust registered u/s. 80G of the Act. Hence, the action of the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal in favour of the assessee. - Shri Pavan Kumar Gadale, Judicial Member And Shri Girish Agrawal, Accountant Member For the Assessee : Shri. Nikhil Tiwari, Shri. Milan Kapadia Shri. Arpit Thakkar. AR For the Revenue : Shri. Nimesh Yadav. CIT. DR ORDER PER PAVAN KUMAR GADALE, JM: The assessee has filed the appeal against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer (A.O) has issued notice u/sec. 143(2) and u/sec. 142(1) of the Act. In compliance to the notice, the assessee has submitted the details and information on 19.01.2021 and 08.02.2021. The AO has perused the Audited financial statements and find that the assessee has entered into an Advance Pricing Agreement (APA) on 18.07.2019 with CBDT covering the assessment year from A.Y 2012-13 to A.Y. 2019-20 and the copy of APA agreement was furnished. The AO has dealt on the facts with respect to information and details submitted. Further the assessee has filed the modified return of income for the A.Y 2018-19 on 30.10.2019 disclosing a total income of Rs. 146,58,08,180/- covering the adjustment of international transactions with its AEs as per APA signed with CBDT against the taxable income declared at Rs. 129,92,74,400/-. Whereas the AO has dealt on the claims made by the assessee u/sec. 90/91 of the Act and made disallowance of Rs. 5,44,956/-. Similarly the AO found that the assessee has earned dividend income of Rs. 2,42,98,5016/- on the investments in dividend based mutual funds. The AO has dealt and invoked the provisions of Sec. 14A r.w.r 8D of the I T Rules and worked out the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made without proper inquiries verification which should have been made. 4. You are hereby given an opportunity to represent your case as to why the proposed action u/s 263 be not pursued and necessary order be passed on the issues discussed above as well as other issues that may come to the notice of the undersigned during this proceeding. You or any duly authorized person may comply to this notice latest by 11.12.2023 at 11:00 AM. 5. You are requested to make submission online through ITBA system on or before the due date. Failure to comply will lead to the conclusion that you have nothing to offer and you are agreeable to the proposed action as deemed fit on the materials available on record or gathered during these proceedings 4. In compliance to the notice, the assessee has filed the detailed submissions vide letter dated 22.12.2023 referred at Page 2 Para 4 of the revision order as under: 4. In response the assessee submitted written submissions in respect of its claim vide its letter dated 22.12.2023. The relevant extract of the submissions is as under:- 2.30 Your honours attention is invited to Memorandum of Finance Bill, 2015 wherein it was provided that expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Was paid by the assessee to institutions/trust registered u/s. 80G of the Act, which is also evident from donation receipts enclosed as Annexure-5. Hence in view of the aforesaid submissions and precedents, it is submitted that the assessee is eligible for deduction of Rs. 48,59,170/- (i.e. 50% of Rs. 97, 18,340/-) u/s. 80G of the Act 5. Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO observing at Page 14 to 17 of the order as under: On perusal of the case records, it is observed that none of these donation receipts are on record. These donation receipts were not asked for by the AO from the assessee. These receipts have been produced during the course of 263 proceedings. The AO during the course of assessment proceedings has not enquired into the nature of the donations made and no enquiry has been made regarding the nature of the donee. It is therefore, seen that no such enquiry has been conducted by the AO during the course of assessment proceedings. This is therefore, a case of no enquiry by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT thorough an elaborate order in the case of Madhurima International (P.) Ltd. v. Pr.CIT [49 CCH 217 Mumbai] has held that where an assessment order is passed by the Assessing Order without making inquiries or verification which should have been made, then it is hit by the Explanation 2 to section 263 of the Act which deems the order to be erroneous, in so far as prejudicial to the interest of Revenue and, therefore, the Principal Commissioner of Income-tax has rightly invoked the provisions of section 263 of the Act. 8. The Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl.CIT [TS-5-HC-1947(DEL)-O] has held that an Income Tax Officer is not only an adjudicator but also an investigator. It was stated that he (ITO) cannot, therefore, remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as provoke an enquiry. The ITAT further stated that the word 'erroneous' u/s. 263 included a failure on the part of the AO to make proper enquiry as warranted and that the order becomes erroneous merely fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiries along the lines discussed above and frame the order of assessment accordingly. In the process, adequate opportunity of being heard should be afforded to the assessee to file submissions, details and to furnish their explanation. Order under section 263 of Income Tax Act, 1961 is passed accordingly 6. Finally the Pr.CIT has passed order u/sec. 263 of the Act dated 29.12.2023. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Hon ble Tribunal. 7. At the time of hearing, the Ld. AR submitted that the Pr. CIT has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the information and the notices through ITBA and the A.O. having verified and examined the facts has accepted the information. The Ld. AR submitted that the assessee has contributed to seven institutions/trusts in the F.Y. 2017-18 under the CSR Expenditure aggregating to Rs. 97,18,340/- and these institutions were granted exemption u/sec. 80G of the Act. The Assessee has not claimed the deduction of CSR expenditure in the computation of income for the A.Y. 2018-19 but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable as deductible expenses to the assessee against the income of the assessee in accordance with provisions of the Act. Consequently, the assessee is eligible to claim the deduction of such donations under section 80G of the Act while computing its total income even if such donations also qualifies as CSR payments u/s. 135(5) of the Companies Act, 2013. The assessee has made donations of Rs 97,18,340/- to the institutions/trust registered u/s. 80G of the Act and demonstrated the receipts placed at Page 211 to 217 Annexure-5 . The Assessee has not claimed the deduction of CSR expenditure in the computation of income for the A.Y. 2018-19 placed at Page 1 of the paper book but the amount debited to the Audited Profit Loss account was disallowed under the Head Income From Business and Profession and the assessee has alternatively claimed deduction @50% of contributions u/sec. 80G of the Act under Chapter VIA Act of Rs. 48,59,170/-. The Ld.AR demonstrated the claim of deduction under section 80G of the Act in Return of Income-ITR-6 at Page117 of the paper book. The Ld. AR emphasized that the AO has considered these facts in the assessment proceedings and accepted the return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he observations are read as under: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be attracted . The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question . Similar view has been expressed by Hon ble Madras High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO's order could be held to be 'erroneous' simply because in his order he did not make an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held, 13. We Considering the overall facts, circumstances, ratio of the judicial decisions and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind and the A.O. has applied one of the possible view. We find the assessee is eligible to claim deduction u/sec. 80G of the Act under Chapter VIA and also there is no dispute on the genuineness of the contributions and the activities of the Donees i.e the institutions/trust registered u/s. 80G of the Act. Hence, the action of the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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