TMI Blog2021 (12) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... R 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in the first revised return filed on 1.11.2017 and in the second revised filed on 29.3.2018 the said claim was withdrawn by the assesse suo-motto as is evident from amount of income returned in both the income tax returns.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 Thus, the claim of loss of ₹ 14,36,669/- was withdrawn by the assessee.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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,90,040/-. The case of the assesse for selected for scrutiny and original assessment was framed by the AO u/s.143(3) of the Act vide his order dated 26.12.2018. Thereafter the PCIT upon going through the assessment records observed that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and accordingly issued show-cause notice u/s.263 of the Act dated 12.3.2021 giving show cause to the assessee as to why the assessment framed under section 143(3) should not be revised and set aside for the reason that the AO has failed to carry out relevant and meaningful inquiries on certain points. The contents of the notice are reproduced as under: 2. On perusal of the assessment records it was seen that, the assessee debited an amount of ₹ 1,39,00,000 towards Corporate Social Responsibility (CSR) which was added back in the computation of income statement. However, assessee claimed and was allowed deduction under 80G of ₹ 66,50,000 which was part of the CSR expenses which was already written back resulting in disallowance under the provisions of one section and allowance under the provisions other section of the Act. This has resulted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paragraphs ae above, provision of Section 263 of the Income Tax Act, 1961 are clearly attracted to the facts of this case. 2. In view of the above, it is proposed to suitably revise the assessment order passed by the AO u/s 263 of the I.T. Act, 1961. Accordingly you are hereby requested to make your submission if any by l9/03/2021 and to explain why the said order u/s 143(3) dated 26/12/2018 should not be revised u/s 263 of the I.T. Act, 1961. If nothing is heard from you by the said date, the necessary order will be passed ex-parte on the basis of material available on record without giving further opportunity to you, which may please be noted. 4. The ld. PCIT after taking into account the submissions and reply of the assesse set aside the assessment order passed u/s 143(3) of the Act by observing that the AO while completing the assessment u/s.143(3) of the Act failed to carry out adequate inquiry or specific inquiry or recording reasons for accepting assessee s submission. On the issue of deduction u/s.80G, the PCIT while deciding the issue on revision u/s.263 of the Act noted that the AO had raised general query in his notice u/s.142(1) dated 4.10.2018 in which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel further contended that the assessee further submitted detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018. 6. In view of the above facts, the learned Counsel for the assessee further argued that the AO has examined everything on the issue of allowability of CSR expense as donation. 7. As regards the loss arising on demerger of business of IDMPL, the ld. AR for the assessee pointed out that detailed questionnaire was issued by the AO alongwith notice u/s.142(1) of the Act dated 4.10.2018 which included the query on reduction of income in the revised return and claim of huge refund. The assessee replied to the above query vide letter dated 20.11.2018 in which it was explained that reduction in income and large refund claimed was on account of demerger of business of IDMPL. 8. The ld AR argued that it was explained that the company had revised financials for the year ended 31.3.2016 to incorporate the demerger of entire credit business of IDMPL and obtained revised Tax Audit Report which were filed with AO vide letter dated 11.9.2018. 9. The assessee further submitted following additional documents as required by the AO in cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above facts, the order of ld PCIT is wrong and may be quashed as he has no valid jurisdiction to invoke section 263 of the Act to revise the assessment. 12. The ld. DR, on the other hand, vehemently argued that there was lack of full and proper inquiry on both the aspects and therefore the revisionary jurisdiction was validly exercised to revise the assessment which was erroneous as well as prejudicial to the interest of the revenue. The ld. DR referred to various case laws in defense of his arguments and to defend the order of ld. PCIT namely Deniel Merchants Pvt. Ltd. vs. ITO 2017-TIOL-455-SC-IT, PCIT vs. Shri Braham Dev Gupta 2018- TIOL-1547-HC-DEL-IT, CIT vs. Ballarpur Industries Ltd. (2017) 85 taxmann.com 10 (Bombay), Vedanta Ltd. vs. CIT (2021) 124 taxmann.com 435 (Bombay), Rampyari Devi Saraogi(1968) (67 ITR 84) SC, Malabar Industrial Co. Ltd. Vs CIT (243 ITR 83) (SC), Shoreline Hotels (P) Ltd. (98 taxmann.com 234)(Bom) and Jeevan Investment and Finance (P) Ltd. (88 taxmann.com 552)(Bom). The learned DR relied upon the order of PCIT and submitted that the assessment order is prejudicial to the interest of the revenue and erroneous in law and therefore the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has been accepted by AO. We note that the AO issued notice u/s.142(1) of the Act dated 4.10.2018 wherein the query was raised for large deduction under Chapter VIA which was replied vide letters dated 11.10.2018 and 20.11.2018 and submitted copy of the donation receipt before the AO. The said reply of the assesse is reproduced hereunder for sake of ready reference:- The company replied to the above query in the notice dated 20.11.2018 as under:- We have claimed deduction under section 80G of the Income Tax Act, 1961 amounting to ₹ 66,50,000 on account of ₹ 1,33,00,000 to M/s. Mandke Foundation. A copy of the receipt, evidencing payment has been provided vide our submission dated 11.10.2018. Another submission was made vide letter dated 11.10.2018 as under:- Also, during the year under consideration, we have claimed deduction u/chap VI-A of INR 66,50,0000/- on account of donation of INR 1,33,00,0000 to M/s. Mandke Foundation. A copy of the receipt evidencing the same is enclosed as Exhibit 2A. 15. We also note that the assessee also filed detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led under CSR? No specific tax exemptions have been extended to CSR expenditure per se. Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemption has been extended to expenditure incurred on CSR, spending on several activities like contributions to Prime Minister s Relief Fund, scientific research, rural development projects, skill development projects, agricultural extension projects, etc., which find place in Schedule VII, already enjoy exemptions under different sections of the Income Tax Act, 1961. (underline is ours) Thus, based on the above legal position as well as the guidance provided by Government of India, the CSR expenditure are allowable under as deduction u/s 80G subject to conditions mentioned therein. 16. Considering these facts, we are of the considered view that the ld PCIT has formed an incorrect opinion that the AO has not examined the issue of allowability of CSR expense as donation. So far as the loss arising on demerger of business of IDMPL is concerned, we note that again a detailed questionnaire was issued by the AO along with notice u/s.142(1) of the Act dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant details with regard to scheme of demerger with IDMPL, enclosed as Exhibit 10 Valuation Report of IDMPL confirming the swap ratio used in the demerger scheme is enclosed as Exhibit 11 Copy of certificates for issuance of Non-cumulative Preference Shares towards purchase consideration, as Exhibit 12 Statement of brought forward losses of IDMPL along with copies of Order Giving Effect / Assessment Order is enclosed as Exhibit 13 . Copy of the above documents are enclosed. The assessee further submitted following additional documents as required by the AO in course of the assessment proceedings vide letter dated 18.12.2018:- c. Financial Statements of IDMPL for the AY 2015-16, 2016-17 2017-18 is enclosed as Exhibit 1 . d. CA Certificate of the details of tax losses of the demerged undertaking i.e. credit business of IDMPL as Exhibit 2 . 18. Lastly As regards the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2017. Subsequently the ld. PCIT issued show-cause notice u/s.263 for revising the assessment order passed u/s.143(3) of the Act dated 19.3.2021 for the reason that the AO failed to carry out relevant and meaningful inquiries on the following:- The assessee filed original return on 27.11.15 declaring income of ₹ 95,73,73,330/- and revised return of income on 31/03/2017 declaring total income at ₹ 4,59,65,95,240/-. The assessment was completed in a scrutiny manner on 22.12.2017 accepting the revised returned filed by the assessee. On perusal of the assessment records it was observed that, comparison of original and revised computation and also the submission of the assessee revealed that the downward revision in income was on account of claim of ₹ 49,00,000 as deduction u/s 80G of the Act (i.e. 50 % of the donation of ₹ 98,00,000). Further scrutiny of the donation receipt and the P L revealed that the ₹ 98,00,000 was actually CSR expenses which was first debited in the P L a/c but subsequently added back in the computation of income. Thus, the same expenditure which was originally disallowed as CSR expenses was again claimed (50%) throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Reason Description Issue TA05.01 Taxable Income shown in revised return is less than the taxable income shown in the Original return (Part B- TTI of return) Whether reduction of income in revised return is correct. The assessee replied to the above vide letter dated 4.12.2017. The said reply is reproduced hereunder:- Point 4 (page 2) With respect to query on taxable income in revised return being less than taxable income in original return, our client submits that the difference is on account of deduction claimed under Chapter VI-A in the revised return. Our client has made donation u/s 80G amounting to ₹ 98,00,000/- which is eligible for 50% deduction. Hence the taxable total income is less in revised return by ₹ 49,00,000/-. It may be noted that the donation receipt was submitted vide our letter dated 17.11.2017. Copy of donation receipt submitted as above is enclosed. 25. The assessee had also earlier replied to the questionnaire alongwith notice u/s.142(2) dated 18.9.2017 vide letter dated 17.11.2017 on the issue of large deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment order u/s 143(3) 323,745,685 Refund 58,809,445 4 Above refund issued as under (As per intimation u/s 143(1) dated 04.03.2015) (Interest u/s 244A ₹ 52,72,308) 43,935,816 5 Refund issued as per Assessment Order u/s 143(3) (Interest u/s 244A of ₹ 18,66,033) 14,873,537 Total Refund 58,809,353 Note: Total interest u/s 244A ₹ 71,38,341 (52,72,308+8,66,033) 30. It was submitted that initially the refund of ₹ 4,39,35,816/- was granted in the intimation u/s.143(1) including interest u/s.244A of ₹ 52,72,308/-. Subsequently, the regular assessment u/s.143(3) was completed and further refund of ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to the assessee on the issues not raised in the notice u/s.263 which has not been done. It was therefore submitted that the revision order on this issue is not justified. 34. We have heard the rival contentions and gone through the facts and circumstances of the case. The facts qua the first issue of are similar to one as decided by us supra in ITA No. 815/Mum/2021 A.Y. 2015-16, therefore our decision would apply to this issue in this appeal as well and we accordingly hold that the revision of assessment u/s 263 of the Act by PCIT is bad in law. So far as the second item for revising the assessment is concerned, we find from 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. 35. The appeal of the assessee is allowed. 36. In the result, both the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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