TMI Blog2024 (3) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Schedule 7 specifies the donee s details showing the 50% deductible amount of the qualifying amount. Petitioner has, thus, submitted detailed explanation along with supporting documents. The documents on record also indicate that the Audit Wing of the Department raised certain objections to the original assessment order including the issue of deduction under Section 80G of the Act. It is seen that the AO justified the original assessment order to the audit party without accepting any adjustment to the same. The notice providing the reasons to believe itself is based on verification of the profit and loss account and computation of income showing the amount of CSR expenses debited under the head other expenses and the said amount being added back and claimed as deduction under Chapter VA as donation. The notice further goes on to say that during the course of original assessment proceedings, neither the AO has asked for any details and information on this issue from Assessee nor has Assessee volunteered any details. From the perusal of the documents, two glaring facts emerge. One is that all material/documents necessary for computing the income were disclosed and submitted by Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of manufacture and distribution of lubricating oils, greases, brake fluids and specialty products. 4. During the Assessment Year 2016-17, Petitioner incurred expenses of Rs. 10,54,06,706/- towards Corporate Social Responsibility ( CSR ) under Section 135 of the Companies Act, 2013. The return of income of Petitioner for the relevant assessment year, as revised from time to time, declared total income of Rs. 1051,29,97,660/-. A dis-allowance was made for the amount of CSR in the return of income in consonance with the Explanation 2 to Section 37 of the Act. Petitioner also claimed deduction of Rs. 1,79,41,595/- (being 50% of the aggregate donation) under Section 80G of the Act as permissible in law. 5. Petitioner s return of income was selected for scrutiny. Pursuant to initiation of assessment proceedings, a notice dated 14th September 2019 was issued under Section 142(1) of the Act seeking details along with supporting evidence in respect of the claim of deduction. Petitioner replied by letter dated 30th November 2019 inviting another notice dated 14th November 2019 under Section 142(1) of the Act requesting proof of donation justifying claim for deduction, which was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the part of the assessment order. (v) The satisfaction of the Sanctioning Authority has not been provided to Petitioner which indicates that there is no such approval. Mr. Pardiwalla thus, contends that the impugned notice and order is unreasonable and discloses an arbitrary exercise of power. He, thus, urges the Court to set aside and quash the same. 7. Mr. Suresh Kumar, learned counsel appears for the Revenue and justifies the impugned order by contending that since the deduction of CSR expenses are specifically disallowed under Section 37(1) read with Explanation 2 of the Act, the same cannot be allowed under Section 80G of the Act. While candidly admitting the audit objection, he however, asserts that the same itself is a source of information and constitutes fresh tangible material . Mr. Suresh Kumar further points out that although an amount of Rs. 10,54,06,706/- appears in the profit and loss account showing debit on account of CSR expenses under the head other expenses , this includes donation expenses of Rs. 3,58,83,189/-. This amount has not been separately debited in the profit and loss account which was never disclosed by Petitioner directly or indirectly. Mr. Suresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the AO has asked for any details and information on this issue from Assessee nor has Assessee volunteered any details. The relevant portion of the notice providing the reasons to believe escapement of income reads thus: 2. On verification of profit and loss account and computation of income, it is seen that an amount of Rs. 10,54,06,706/- was debited on account of CSR expense in Other expenses head. Further, the aforesaid amount was added back by the assessee in its computation of income as CSR Expenses and again claimed as deduction as donation of Rs. 1,79,41,595/- under chapter VA as donation. In this connection, it is submitted that as per the amendment made vide Finance Act, 2014, CSR expenses is not allowable as business expenditure. Hence, the same is required to be disallowed and added to the total income of the assessee. 3. From the above, it is clear that the assessee has claimed expenses, which is not allowable as business expenditure and has escaped assessment by reasons of failure on the part of the assessee to disclose fully and truly all material facts and accordingly the same was required to be added to the total income shown by the assessee. It is also seen tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. Paragraph 14 of Aroni Commercials Limited (supra) reads as under: 14. We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No. 4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 16. We have also noted the contents of the impugned order rejecting the objections of Petitioner. An identical and common place assertion is seen in various such orders rejecting the objections of Assessees. The Department routinely relies upon an observation of the Supreme Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2008) 14 SCC 208., which reads as follows: At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. 17. However, Assessing Officers without appreciating the true import of the aforesaid decision of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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