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TMI Blog2025 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, assumption of jurisdiction u/s 263, by three notices on three independent issues was without merit, for vide first notice dated 17.1.2023 deduction of Rs. 66,06,500/- allowed u/s 80G was sought be withdrawn and by the second notice dated 17.3.2023, impact of GST demand of Rs. 1,59,684/- & 1,70,460/ was alleged to have not gone into and by the third notice dated 23.3.2023, jurisdiction was assumed for the reason that details of generation of scrap was not provided and was not gone into. 3. That on the facts & circumstances of the case and in law, the Pr. CIT did not appreciate that expenditure on CSR is "application of income" and not "expenditure incurred for the purpose of business", whereas, section 80G provides for "deductions to be made in computing total income". 3.1 That on the facts & circumstances of the case and in law, Pr.CIT did not appreciate that though clauses (whk) & (nihl) of section 80G(2) provided that sum paid to "Swachh Bharat Kosh" & "Clean Ganga Fund" would not include the amount spent pursuant to CSR, however in respect of donation to other funds, similar exclusion was not provided, hence, CSR expenses of Rs. 1,32,13,000/- were eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs facility and persuasion thereof the assessee submitted his explanation electronically through e-proceedings facility. In view of the above replies submitted by the assessee, assessment is completed u/s 143(3) of the Income Tax Act, 1961 at the total income of Rs. 1,91,94,51,330/-, and Computation of income and notice of demand issued. 4. The Ld. PCIT(A) issued notice u/s 263 of the Act to the assessee / appellant on dated 17.01.2023, 17/03/2023 and 23.03.2023 respectively by noticing that the assessee has disallowed CSR expenditure of Rs. 1,32,13,000/-but claimed 50% of CSR expenditure on account of donation u/s 80G of the Act and accordingly, the claim of deduction u/s 80G of Act of Rs. 66,06,500/- is not allowable deduction as per the provision of explanation 2 u/s 37(1) of the Act and no details of generation of scrap has been provided and stated that the Ld. AO has not made any enquiry regarding source of generation scrap item-wise, quanity and price etc. The Ld. PCIT(A) vide impugned order set aside the order passed by the Ld. AO by expressing that it is erroneous and prejudicial to the interest of Revenue on above-mentioned issues. 5. Heard rival submissions and carefull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue of deduction u/s 80G in respect of CSR expenses was examined during assessment proceedings and even legally, the issue is settled in favour of the appellant and the Ld. PCIT has not recorded any finding why the case laws relied upon are not applicable. 10. Second issue on which the Ld. PCIT(A), set aside the order passed by the Ld.AO, regarding the issue of generation qualification of scrap, for which the Ld. CIT(A) was of opinion that it had never been verified, as the Ld. AO had not conducted the required enquiry. 11. In this regard, the Ld. AR submitted that in compliance of giving effect the impugned order, the Ld. AO vide order dated 21.03.2024, u/s 143(3) of r/w section 263 of the Act has not drawn any adverse inference on the issue in which specifically observed by the Ld. AO that on the basis of independent verification conducted u/s 13(6) of the Act, no adverse inference is drawn on this issue. 12. The Ld. AR also submitted on this issue that the Ld. PCIT not appreciated that the appellant is engaged in manufacturing of cables and as the business being that of manufacture, it is bound to be generation of scrap but there was nothing on record to doubt the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' and 'prejudicial to the interest of Revenue' have to be satisfied cumulatively. In our view, the twin conditions are not satisfied in the present case" 16. The Ld. AR also relied upon the order of Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. M/s Cliks Finance Pvt. Ltd. [2012] (3) TMI 227 dated 01/03/2024 has held as under: "19. A bare reading of sub-Section (1) of Section 263 of the Act makes kit abundantly clear that the said provision lays down a two pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verification which should have been made, the same would bestow a revisional power upon the Commissioner. However, the said Clause or any other condition laid down in Explanation 2 does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open, In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) ...... 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma (2010 SCC OnLine Del 838), wherein, it was held that once it is inferred from the record of assessment that AO has applied its mind, the proceedings under Section 263 of the Act would fall in the category of Commissioner having a different opinion. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT ((1987) 163 ITR 129 (Mad)] interpreting "prejudicial to the interests of the Revenue". The High Court held: "In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration." In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit." 17. Foregoing discussion and fact situation leads us to reach this conclusion that deduction u/s 80G of the Act is a debatable issue and the Ld. PCIT was not authorized to take another view in exercising revisionary jurisdiction u/s 263 of the Act, if the Ld. AO already taken possible view in issue and regarding generation of scrap, desired explanation were submitted before the Ld. AO the Ld. AO has not drawn any inference in passing order giving effect of order of Ld. PCIT u/s 263 of the Act. 17. From the bare perusal of the material available on record, the Ld. PCIT has not taken any enquiry as required by law or cite any plausible or cogent reason to reach the conclusion that the impugned assessment order was erroneously and prejudiced to the interest of revenue and instead of enquiry himself, the Ld. PCIT set aside the order with the direction to pass order after revision of assessment. In our humble opinion, that the explanation 2 to section 263 of the Act doesn't give un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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