LIC HOUSING FINANCE LIMITED,MUMBAI vs. ACIT 2(2)(1), MUMBAI, AAYKAR BHAVAN, MUMBAI

3.1 Subsequently, pursuant to an audit objection, the Assessing pursuant to an audit objection, the Assessing pursuant to an audit objection, the Assessing Officer (AO) issued notice under section 148A(b) on 15.02.2024 Officer (AO) issued notice under section 148A(b) on 15.02.2024 Officer (AO) issued notice under section 148A(b) on 15.02.2024 calling upon the assessee to explain the allowability of deduction of calling upon the assessee to explain the allowability of deduction of calling upon the assessee to explain the allowability of deduction of ₹4.86 crores under section 80G. The assessee submitted that 4.86 crores under section 80G. The assessee submitted that 4.86 crores under section 80G. The assessee submitted that although a sum of ₹16.84 crores was debited in the books as CSR 16.84 crores was debited in the books as CSR 16.84 crores was debited in the books as CSR expenditure and correspondingly added back in the computation, expenditure and correspondingly added back in the computation, expenditure and correspondingly added back in the computation, certain donations crores were made to institutions eligible under certain donations crores were made to institutions eligible under certain donations crores were made to institutions eligible under section 80G, and deduction was lawfully claimed thereon. ion 80G, and deduction was lawfully claimed thereon. ion 80G, and deduction was lawfully claimed thereon. Notwithstanding the assessee’s detailed response that this issue Notwithstanding the assessee’s detailed response that this issue Notwithstanding the assessee’s detailed response that this issue was duly examined in regular assessment u/s 143(3) dated was duly examined in regular assessment u/s 143(3) dated was duly examined in regular assessment u/s 143(3) dated 20.12.2019, the AO passed an order under section 148A(d) on the AO passed an order under section 148A(d) on the AO passed an order under section 148A(d) on 20.03.2024 alleging e 20.03.2024 alleging escapement of income and issued notice under scapement of income and issued notice under section 148. The reassessment culminated on 31.03.2024 with the section 148. The reassessment culminated on 31.03.2024 with the section 148. The reassessment culminated on 31.03.2024 with the disallowance of the said deduction under section 80G. disallowance of the said deduction under section 80G. disallowance of the said deduction under section 80G.

3.2 The assessee carried the matter in appeal The assessee carried the matter in appeal before the learned before the learned Commissioner Commissioner (Appeals), (Appeals), challenging chall enging the the very very initiation initiation of of reassessment proceedings as well as the disallowance on merits. reassessment proceedings as well as the disallowance on merits. reassessment proceedings as well as the disallowance on merits. The learned CIT(A), however, upheld the reopening, invoking The learned CIT(A), however, upheld the reopening, invoking The learned CIT(A), however, upheld the reopening, invoking Explanation 1 to section 148 and opining that audit objections Explanation 1 to section 148 and opining that audit objections Explanation 1 to section 148 and opining that audit objections constitute “information” so long as the constitute “information” so long as the AO forms an independent AO forms an independent belief. The learned CIT(A) further held, on merits, that donations belief. The learned CIT(A) further held, on merits, that donations belief. The learned CIT(A) further held, on merits, that donations made out of CSR allocations do not qualify for deduction under made out of CSR allocations do not qualify for deduction under made out of CSR allocations do not qualify for deduction under section 80G, as such claim allegedly defeats the legislative intent section 80G, as such claim allegedly defeats the legislative intent section 80G, as such claim allegedly defeats the legislative intent underlying Explanation 2 to secti underlying Explanation 2 to section 37(1). The Ld. CIT(A) rejected The Ld. CIT(A) rejected the challenge to reopening of the assessment proceedings observing reopening of the assessment proceedings observing reopening of the assessment proceedings observing as under:

“Ground 1: Reopening of Assessment Proceedings Ground 1: Reopening of Assessment Proceedings Ground 1: Reopening of Assessment Proceedings The appellant has challenged the order passed under section The appellant has challenged the order passed under section The appellant has challenged the order passed under section 148A(d) on the ground that the reasses 148A(d) on the ground that the reassessment proceedings were sment proceedings were improperly initiated based on a mere audit objection, without any improperly initiated based on a mere audit objection, without any improperly initiated based on a mere audit objection, without any fresh tangible material, and that its detailed reply dated fresh tangible material, and that its detailed reply dated fresh tangible material, and that its detailed reply dated 22.02.2024 was not considered judiciously by the Assessing 22.02.2024 was not considered judiciously by the Assessing 22.02.2024 was not considered judiciously by the Assessing Officer (AO). It is further alleged that the AO f Officer (AO). It is further alleged that the AO failed to exercise ailed to exercise independent judgment and simply adopted the audit objection independent judgment and simply adopted the audit objection independent judgment and simply adopted the audit objection mechanically, thereby rendering the proceedings void ab initio. mechanically, thereby rendering the proceedings void ab initio. mechanically, thereby rendering the proceedings void ab initio. Upon careful consideration, this ground is found to be without Upon careful consideration, this ground is found to be without Upon careful consideration, this ground is found to be without merit. Under the reassessment framework introduced by the merit. Under the reassessment framework introduced by the merit. Under the reassessment framework introduced by the Finance Act, 2021, Explanation 1 to section 148 clarifies that Finance Act, 2021, Explanation 1 to section 148 clarifies that Finance Act, 2021, Explanation 1 to section 148 clarifies that information suggesting escapement of income includes inputs such information suggesting escapement of income includes inputs such information suggesting escapement of income includes inputs such as audit objections, provided the AO applies his mind and arrives t objections, provided the AO applies his mind and arrives t objections, provided the AO applies his mind and arrives at a reasoned belief. In this case, the AO issued a notice under at a reasoned belief. In this case, the AO issued a notice under at a reasoned belief. In this case, the AO issued a notice under section 148A(b), considered the appellant's reply, and thereafter section 148A(b), considered the appellant's reply, and thereafter section 148A(b), considered the appellant's reply, and thereafter passed a speaking order under section 148A(d), stating why the passed a speaking order under section 148A(d), stating why the passed a speaking order under section 148A(d), stating why the claim of deduction under section 80G made from CSR funds im of deduction under section 80G made from CSR funds im of deduction under section 80G made from CSR funds requires re-examination. The AO has not mechanically acted on the examination. The AO has not mechanically acted on the examination. The AO has not mechanically acted on the audit note but has independently formed an opinion that the audit note but has independently formed an opinion that the audit note but has independently formed an opinion that the deduction, claimed to the tune of Rs.4.86 crores, may not be deduction, claimed to the tune of Rs.4.86 crores, may not be deduction, claimed to the tune of Rs.4.86 crores, may not be legally tenable legally tenable in light of CSR provisions. As held in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR As held in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR As held in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500) and reiterated in Dr. Mathew Cherian v. ACIT (450 ITR 568), 500) and reiterated in Dr. Mathew Cherian v. ACIT (450 ITR 568), 500) and reiterated in Dr. Mathew Cherian v. ACIT (450 ITR 568), reassessment can be initiated even on a legal issue if the AO reassessment can be initiated even on a legal issue if the AO reassessment can be initiated even on a legal issue if the AO possesses relevant information an possesses relevant information and applies his mind. At this d applies his mind. At this preliminary stage, a conclusive finding is not required; a prima preliminary stage, a conclusive finding is not required; a prima preliminary stage, a conclusive finding is not required; a prima facie belief that income has escaped assessment suffices. Since facie belief that income has escaped assessment suffices. Since facie belief that income has escaped assessment suffices. Since the AO's order reflects due process and independent reasoning, the AO's order reflects due process and independent reasoning, the AO's order reflects due process and independent reasoning, the invocation of reassessment proce the invocation of reassessment proceedings is in accordance with edings is in accordance with law. Regarding the argument that reopening constitutes a change of Regarding the argument that reopening constitutes a change of Regarding the argument that reopening constitutes a change of opinion because the issue was previously examined during opinion because the issue was previously examined during opinion because the issue was previously examined during original assessment, the Court in Kelvinator of India Ltd. (320 ITR original assessment, the Court in Kelvinator of India Ltd. (320 ITR original assessment, the Court in Kelvinator of India Ltd. (320 ITR 561) did hold that mere change of o 561) did hold that mere change of opinion is impermissible/ pinion is impermissible/ However, Explanation 1 to Section 148 now allows reliance on However, Explanation 1 to Section 148 now allows reliance on However, Explanation 1 to Section 148 now allows reliance on audit inputs as information, provided an independent decision is audit inputs as information, provided an independent decision is audit inputs as information, provided an independent decision is made. In this case, AO issued a specific notice, evaluated the made. In this case, AO issued a specific notice, evaluated the made. In this case, AO issued a specific notice, evaluated the reply, and concluded with reasoning under reply, and concluded with reasoning under section 148A(d). No section 148A(d). No evidence has been presented to suggest this was a mechanical evidence has been presented to suggest this was a mechanical evidence has been presented to suggest this was a mechanical exercise. On the issue of reassessment beyond 3 years under section On the issue of reassessment beyond 3 years under section On the issue of reassessment beyond 3 years under section 149(1)(b), the donation entry is clearly traceable in the books and 149(1)(b), the donation entry is clearly traceable in the books and 149(1)(b), the donation entry is clearly traceable in the books and results in a claimed deduction. As such results in a claimed deduction. As such, it falls within the category , it falls within the category of an entry in the books of account and meets the test under the of an entry in the books of account and meets the test under the of an entry in the books of account and meets the test under the amended provisions. amended provisions. Thus, all components of Ground 1 are devoid of merit and Thus, all components of Ground 1 are devoid of merit and Thus, all components of Ground 1 are devoid of merit and accordingly dismissed. accordingly dismissed.” 3.3 The Ld. CIT(A) also dismissed the claim of the assessee on The Ld. CIT(A) also dismissed the claim of the assessee on The Ld. CIT(A) also dismissed the claim of the assessee on merit.

Ground 2: Deduction Under Section 80G is Fully Allowable Ground 2: Deduction Under Section 80G is Fully Allowable Ground 2: Deduction Under Section 80G is Fully Allowable Even for CSR Donations Even for CSR Donations

The appellant has contended that the deduction under section 80G The appellant has contended that the deduction under section 80G The appellant has contended that the deduction under section 80G is legally tenable even if the donations are is legally tenable even if the donations are sourced from sourced from mandatory Corporate Social Responsibility (CSR) allocations. It is mandatory Corporate Social Responsibility (CSR) allocations. It is mandatory Corporate Social Responsibility (CSR) allocations. It is argued that while Explanation 2 to section 37(1) bars CSR argued that while Explanation 2 to section 37(1) bars CSR argued that while Explanation 2 to section 37(1) bars CSR expenditure as a business deduction, this embargo does not expenditure as a business deduction, this embargo does not expenditure as a business deduction, this embargo does not extend to deductions under Chapter VI extend to deductions under Chapter VI-A such as section 80 A such as section 80G. Reliance has been plac Reliance has been placed on several decisions of ITATs ITATs including the decision of ITAT Mumbai in Societe Generale Securities India the decision of ITAT Mumbai in Societe Generale Securities India the decision of ITAT Mumbai in Societe Generale Securities India Pvt. Ltd. v. Pr. CIT [(2023) 157 taxmann.com 533], which upheld Pvt. Ltd. v. Pr. CIT [(2023) 157 taxmann.com 533], which upheld Pvt. Ltd. v. Pr. CIT [(2023) 157 taxmann.com 533], which upheld such deductions, provided they were not made to the Swachh such deductions, provided they were not made to the Swachh such deductions, provided they were not made to the Swachh Bharat Kosh or the Clean Ganga Fund (specifically excluded under Bharat Kosh or the Clean Ganga Fund (specifically excluded under Bharat Kosh or the Clean Ganga Fund (specifically excluded under section 80G(2)(a)(iiihk) and (iiihl)). section 80G(2)(a)(iiihk) and (iiihl)). However, upon a deeper scrutiny of the legislative framework, However, upon a deeper scrutiny of the legislative framework, However, upon a deeper scrutiny of the legislative framework, intent, and facts as revealed in the assessment proceedings, this intent, and facts as revealed in the assessment proceedings, this intent, and facts as revealed in the assessment proceedings, this ground of appeal is not ground of appeal is not sustainable. It is important to begin by sustainable. It is important to begin by recognizing the legislative purpose of introducing CSR under recognizing the legislative purpose of introducing CSR under recognizing the legislative purpose of introducing CSR under section 135 of the Companies Act, 2013. The law mandates section 135 of the Companies Act, 2013. The law mandates section 135 of the Companies Act, 2013. The law mandates certain companies to allocate a portion of their profits toward certain companies to allocate a portion of their profits toward certain companies to allocate a portion of their profits toward specified social causes. This is specified social causes. This is not a voluntary act of charity but a not a voluntary act of charity but a statutory obligation. In tandem, the Finance Act, 2014 introduced statutory obligation. In tandem, the Finance Act, 2014 introduced statutory obligation. In tandem, the Finance Act, 2014 introduced Explanation 2 to section 37(1) of the Income Explanation 2 to section 37(1) of the Income-tax Act, explicitly tax Act, explicitly denying the deduction of such expenses as business expenditure. denying the deduction of such expenses as business expenditure. denying the deduction of such expenses as business expenditure. The Memorandum explainin The Memorandum explaining the amendment makes it clear that g the amendment makes it clear that allowing deduction for allowing deduction for CSR allowing deduction for CSR CSR expenditure expenditure expenditure would effectively would effectively would effectively subsidize such expenditure by the Government, defeating the subsidize such expenditure by the Government, defeating the subsidize such expenditure by the Government, defeating the principle that CSR is an obligation and not a tax principle that CSR is an obligation and not a tax principle that CSR is an obligation and not a tax-optimized expense. The Assessing Officer, in the 148A The Assessing Officer, in the 148A(d) order, has aptly noted that (d) order, has aptly noted that the assessee incurred Rs.16.84 crores as CSR expenditure, of the assessee incurred Rs.16.84 crores as CSR expenditure, of the assessee incurred Rs.16.84 crores as CSR expenditure, of which Rs.9.72 crores were disallowed in the computation of which Rs.9.72 crores were disallowed in the computation of which Rs.9.72 crores were disallowed in the computation of income. Yet, from this very pool, Rs.4.86 crores were routed income. Yet, from this very pool, Rs.4.86 crores were routed income. Yet, from this very pool, Rs.4.86 crores were routed through section 80G to claim a deduction un through section 80G to claim a deduction under Chapter VI der Chapter VI-A. In essence, the CSR expenditure disallowed under section 37 as per essence, the CSR expenditure disallowed under section 37 as per essence, the CSR expenditure disallowed under section 37 as per statute was partially re statute was partially re-characterized as deductible donations characterized as deductible donations under section 80G. This attempt circumvents the statutory denial under section 80G. This attempt circumvents the statutory denial under section 80G. This attempt circumvents the statutory denial and results in a backdoor tax Cadvantage. T and results in a backdoor tax Cadvantage. The AO rightly he AO rightly observed that CSR and 80G observed that CSR and 80G deductions operate on two deductions operate on two fundamentally distinct planes: one is a statutory obligation, and fundamentally distinct planes: one is a statutory obligation, and fundamentally distinct planes: one is a statutory obligation, and the other is a voluntary charitable contribution. The convergence of the other is a voluntary charitable contribution. The convergence of the other is a voluntary charitable contribution. The convergence of both, without clear legislative authorization, would both, without clear legislative authorization, would undermine the undermine the architecture of the tax law and CSR policy. architecture of the tax law and CSR policy. The argument that only certain clauses of section 80G (like The argument that only certain clauses of section 80G (like The argument that only certain clauses of section 80G (like Swachh Bharat Kosh) specifically bar deduction on CSR Swachh Bharat Kosh) specifically bar deduction on CSR Swachh Bharat Kosh) specifically bar deduction on CSR-funded donations cannot be stretched to imply that all other CSR donations cannot be stretched to imply that all other CSR donations cannot be stretched to imply that all other CSR-linked donations donations are ar e therefore therefore eligible. eligible. Such Such reasoning, reasoning, though though superficially persuasive, ignores the broader policy intent. Judicial superficially persuasive, ignores the broader policy intent. Judicial superficially persuasive, ignores the broader policy intent. Judicial discipline demands that provisions be interpreted not in isolation discipline demands that provisions be interpreted not in isolation discipline demands that provisions be interpreted not in isolation but in harmony with the entire statute. A mandatory expense, but in harmony with the entire statute. A mandatory expense, but in harmony with the entire statute. A mandatory expense, statutorily denied as business deduction, cannot simultaneously enied as business deduction, cannot simultaneously enied as business deduction, cannot simultaneously be repackaged as voluntary charity to gain a deduction unless the be repackaged as voluntary charity to gain a deduction unless the be repackaged as voluntary charity to gain a deduction unless the law so permits. law so permits. This view finds support in the legislative materials as well. The This view finds support in the legislative materials as well. The This view finds support in the legislative materials as well. The CBDT in Circular No. 01/2020 clarified that Explanation

2. CBDT in Circular No. 01/2020 clarified that Explanation

2. CBDT in Circular No. 01/2020 clarified that Explanation 2 to section 37(1) reflects the legislative intent to disallow CSR as a section 37(1) reflects the legislative intent to disallow CSR as a section 37(1) reflects the legislative intent to disallow CSR as a tax-saving tool. Additionally, the Hon'ble Madras High Court in CIT saving tool. Additionally, the Hon'ble Madras High Court in CIT saving tool. Additionally, the Hon'ble Madras High Court in CIT v. Infosys Ltd. [(2022) 444 ITR 401 (Mad)] emphasized that a claim v. Infosys Ltd. [(2022) 444 ITR 401 (Mad)] emphasized that a claim v. Infosys Ltd. [(2022) 444 ITR 401 (Mad)] emphasized that a claim not voluntary in nature such as CSR does not fulfi not voluntary in nature such as CSR does not fulfill the condition of ll the condition of voluntary donation required under section 80G. voluntary donation required under section 80G. Furthermore, the AO's analysis aligns with the Supreme Court's Furthermore, the AO's analysis aligns with the Supreme Court's Furthermore, the AO's analysis aligns with the Supreme Court's principle in McDowell & Co. Ltd. v. CTO [(1985) 154 ITR 148 (SC)] principle in McDowell & Co. Ltd. v. CTO [(1985) 154 ITR 148 (SC)] principle in McDowell & Co. Ltd. v. CTO [(1985) 154 ITR 148 (SC)] where the Hon'ble Court held that tax planning cannot be a where the Hon'ble Court held that tax planning cannot be a where the Hon'ble Court held that tax planning cannot be a colorable device to defeat legislative intent. In the present case, the olorable device to defeat legislative intent. In the present case, the olorable device to defeat legislative intent. In the present case, the redirection of CSR expenditure into 80G deductions, after already redirection of CSR expenditure into 80G deductions, after already redirection of CSR expenditure into 80G deductions, after already claiming a disallowance under section 37, is effectively an act of claiming a disallowance under section 37, is effectively an act of claiming a disallowance under section 37, is effectively an act of fiscal camouflage. fiscal camouflage. The CSR policy was never intended The CSR policy was never intended to create parallel channels of to create parallel channels of tax deduction but to make companies partners in nation tax deduction but to make companies partners in nation tax deduction but to make companies partners in nation- building through direct social expenditure. To allow tax deduction under through direct social expenditure. To allow tax deduction under through direct social expenditure. To allow tax deduction under 80G on mandatory CSR contributions would result in the State 80G on mandatory CSR contributions would result in the State 80G on mandatory CSR contributions would result in the State indirectly funding a third of such indirectly funding a third of such expenditure, precisely the expenditure, precisely the outcome that the Explanation to section 37(1) sought to prevent. outcome that the Explanation to section 37(1) sought to prevent. outcome that the Explanation to section 37(1) sought to prevent. Therefore, the conclusion drawn by the AO that both avenues CSR Therefore, the conclusion drawn by the AO that both avenues CSR Therefore, the conclusion drawn by the AO that both avenues CSR and 80G cannot be simultaneously availed for the same and 80G cannot be simultaneously availed for the same and 80G cannot be simultaneously availed for the same expenditure is well expenditure is well-founded. The assessment correctly identifies orrectly identifies that allowing this deduction would render Explanation 2 to section that allowing this deduction would render Explanation 2 to section that allowing this deduction would render Explanation 2 to section 37(1) redundant. The statutory distinction between business 37(1) redundant. The statutory distinction between business 37(1) redundant. The statutory distinction between business deductions and Chapter VI deductions and Chapter VI-A incentives must be respected, and A incentives must be respected, and their misuse avoided in letter and spirit. their misuse avoided in letter and spirit. Accordingly, Ground 2 is without merit and is dismissed. rdingly, Ground 2 is without merit and is dismissed. rdingly, Ground 2 is without merit and is dismissed.”

4. Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.

5. Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Book containing pages 1 to 34 Book containing pages 1 to 34 assailing validity of the reassessment assailing validity of the reassessment and grounds on merit and grounds on merit.

6. Addressing the ground challenging validity of reassessment, Addressing the ground challenging validity of reassessment, Addressing the ground challenging validity of reassessment, the Ld. counsel for the assessee submitted that issue of claim of he Ld. counsel for the assessee submitted that issue of claim of he Ld. counsel for the assessee submitted that issue of claim of deduction u/s 80G was thoroughly examined in the regular deduction u/s 80G was thoroughly examined in the regular deduction u/s 80G was thoroughly examined in the regular assessment proceedings u/s 143(3) of the Act and in the ent proceedings u/s 143(3) of the Act and in the ent proceedings u/s 143(3) of the Act and in the proceedings u/s 147 of the Act without there being any fresh proceedings u/s 147 of the Act without there being any fresh proceedings u/s 147 of the Act without there being any fresh tangible material, the ld AO has , the ld AO has re-visited the same the same material which was available for assessment u/s 143(3) for assessment u/s 143(3) and disallowed and disallowed the claim, which is based merely on the sed merely on the ‘change of the opinion change of the opinion’. He submitted that the Assessing Officer u/s 147 of the Act is allowed he Assessing Officer u/s 147 of the Act is allowed he Assessing Officer u/s 147 of the Act is allowed to reassess the income but he is is not permitted to review the already completed not permitted to review the already completed assessment without there being any new fresh tangible material in assessment without there being any new fresh tangible material in assessment without there being any new fresh tangible material in his possession. The Ld. counsel for the assessee in support thereof his possession. The Ld. counsel for the assessee in support thereof his possession. The Ld. counsel for the assessee in support thereof relied on the decision of the Hon’ble Bombay High Court in the case relied on the decision of the Hon’ble Bombay High Court in the case relied on the decision of the Hon’ble Bombay High Court in the case of Castrol India Ltd. v. Dy. CIT [2024] 161 taxmann.com 18 rol India Ltd. v. Dy. CIT [2024] 161 taxmann.com 18 rol India Ltd. v. Dy. CIT [2024] 161 taxmann.com 18 (Bombay).

“13. From the perusal of the documents, two glaring facts From the perusal of the documents, two glaring facts From the perusal of the documents, two glaring facts emerge. One is that all material/documents necessary for emerge. One is that all material/documents necessary for emerge. One is that all material/documents necessary for computing the income were disclosed and submitted by computing the income were disclosed and submitted by computing the income were disclosed and submitted by Petitioner during the course of assessment proceedings Petitioner during the course of assessment proceedings Petitioner during the course of assessment proceedings leading to an irrefutable conclusion leading to an irrefutable conclusion that there was no failure that there was no failure on the part of Petitioner to disclose fully and truly all material on the part of Petitioner to disclose fully and truly all material on the part of Petitioner to disclose fully and truly all material facts. Secondly, there is a notable absence of any fresh facts. Secondly, there is a notable absence of any fresh facts. Secondly, there is a notable absence of any fresh tangible material coming to the knowledge of the AO and the tangible material coming to the knowledge of the AO and the tangible material coming to the knowledge of the AO and the reopening of assessment is purely on a re reopening of assessment is purely on a re-examination of the ination of the very Gaikwad RD same material on the basis of which the very Gaikwad RD same material on the basis of which the very Gaikwad RD same material on the basis of which the original assessment order was passed. original assessment order was passed.

7. One must treat the concept of "change of opinion" as an in 7. One must treat the concept of "change of opinion" as an in 7. One must treat the concept of "change of opinion" as an in- built test to check abuse of power by the assessing officer. ilt test to check abuse of power by the assessing officer. ilt test to check abuse of power by the assessing officer. Hence, after 1 Hence, after 1-4-1989, the assessing officer has power to 1989, the assessing officer has power to reopen, provided there is "tangible material" to come to the reopen, provided there is "tangible material" to come to the reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from conclusion that there is escapement of income from conclusion that there is escapement of income from assessment. Reasons must ha assessment. Reasons must have a live link with the ve a live link with the formation of the belief. . . . . . . . . . ." formation of the belief. . . . . . . . . . ." 15. As held by this Court in Aroni Commercials Ltd. v. Dy. 15. As held by this Court in Aroni Commercials Ltd. v. Dy. 15. As held by this Court in Aroni Commercials Ltd. v. Dy. CIT [2014] 44 taxmann.com 304 [2014] 44 taxmann.com 304 once a query is raised once a query is raised during the assessment proceedings and during the assessment proceedings and Assessee has Assessee has replied to it, it follows that the query raised was a subject of replied to it, it follows that the query raised was a subject of replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It consideration of the AO while completing the assessment. It consideration of the AO while completing the assessment. It is also not necessary that an assessment order should is also not necessary that an assessment order should is also not necessary that an assessment order should contain contain contain reference reference reference and/or and/or and/or discussion discussion discussion to to to disclose disclose disclose its its its satisfaction in respect of the query raised. Therefore, the in respect of the query raised. Therefore, the reopening of the assessment, in our view, is merely on the reopening of the assessment, in our view, is merely on the reopening of the assessment, in our view, is merely on the basis of change of opinion of the AO from that held earlier basis of change of opinion of the AO from that held earlier basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this during the course of assessment proceedings and this during the course of assessment proceedings and this change of opinion does not constitut change of opinion does not constitute justification and/or e justification and/or reason to believe that income chargeable to tax has escaped reason to believe that income chargeable to tax has escaped reason to believe that income chargeable to tax has escaped assessment. Paragraph 14 of Aroni Commercials Ltd. (supra) assessment. Paragraph 14 of Aroni Commercials Ltd. (supra) assessment. Paragraph 14 of Aroni Commercials Ltd. (supra) reads as under: reads as under: "14. We find that during the assessment proceedings the "14. We find that during the assessment proceedings the "14. We find that during the assessment proceedings the petitioner had by a letter dated 9 July 20 petitioner had by a letter dated 9 July 2010 pointed out that 10 pointed out that they were engaged in the business of financing trading and they were engaged in the business of financing trading and they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter investment in shares and securities. Further, by a letter investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment dated 8 September 2010 during the course of assessment dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing proceedings on a specific query made by the Assessing proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its he petitioner has disclosed in detail as to why its he petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profit on sale of investments should not be taxed as business profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In profits but charged to tax under the head capital gain. In profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon support of its contention the petitioner had also relied upon support of its contention the petitioner had also relied upon CBDT Circular No.4/20 CBDT Circular No.4/2007 dated 15 June 2007. (The reasons 07 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places for reopening furnished by the Assessing Officer also places for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would reliance upon CBDT Circular dated 15 June 2007). It would reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice therefore, be noticed that the very ground on which the notice therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen th dated 28 March 2013 seeks to reopen the assessment for e assessment for assessment year 2008 assessment year 2008-09 was considered by the Assessing 09 was considered by the Assessing Officer while originally passing assessment order dated 12 Officer while originally passing assessment order dated 12 Officer while originally passing assessment order dated 12 October 2010. This by itself demonstrates the fact that notice October 2010. This by itself demonstrates the fact that notice October 2010. This by itself demonstrates the fact that notice dated 28 March 2013 under Section 148 of the Act seeking to dated 28 March 2013 under Section 148 of the Act seeking to dated 28 March 2013 under Section 148 of the Act seeking to reopen assessment for A.Y. 2008 eopen assessment for A.Y. 2008-09 is based on mere 09 is based on mere change of opinion. However, according to Mr. Chhotaray, change of opinion. However, according to Mr. Chhotaray, change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now learned Counsel for the revenue the aforesaid issue now learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not raised has not been considered earlier as the same is not raised has not been considered earlier as the same is not referred to in the assessment order referred to in the assessment order dated 12 October 2010 dated 12 October 2010 passed for A.Y. 200809. We are of the view that once a passed for A.Y. 200809. We are of the view that once a passed for A.Y. 200809. We are of the view that once a query is raised during the assessment proceedings and the query is raised during the assessment proceedings and the query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised assessee has replied to it, it follows that the query raised assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer whi was a subject of consideration of the Assessing Officer whi was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an completing the assessment. It is not necessary that an completing the assessment. It is not necessary that an assessment assessment assessment order order order should should should contain contain contain reference reference reference and/or and/or and/or discussion to disclose its satisfaction in respect of the query discussion to disclose its satisfaction in respect of the query discussion to disclose its satisfaction in respect of the query raised. raised. raised. If If If an an an Assessing Assessing Assessing Officer Officer Officer has has has to to to record record record the the the consideration bestowed by him on al consideration bestowed by him on all issues raised by him l issues raised by him during the assessment proceeding even where he is satisfied during the assessment proceeding even where he is satisfied during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to then it would be impossible for the Assessing Officer to then it would be impossible for the Assessing Officer to complete all the assessments which are required to be complete all the assessments which are required to be complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, scrutinized by him under Section 143(3) of the Act. Moreover, scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment one must not forget that the manner in which an assessment one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing order is to be drafted is the sole domain of the Assessing order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the Officer and it is not open to an assessee to insist that the Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and assessment order must record all the questions raised and assessment order must record all the questions raised and the satisfaction in the satisfaction in respect thereof of the Assessing Officer. respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to The only requirement is that the Assessing Officer ought to The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for have considered the objection now raised in the grounds for have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the issuing notice under Section 148 of the Act, during the issuing notice under Section 148 of the Act, during the original assessment proceedings. Ther original assessment proceedings. There can be no doubt in e can be no doubt in the present facts as evidenced by a letter dated 8 September the present facts as evidenced by a letter dated 8 September the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the 2012 the very issue of taxability of sale of shares under the 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from head capital gain or the head profits and gains from head capital gain or the head profits and gains from business was a subject matter of consideration by the business was a subject matter of consideration by the business was a subject matter of consideration by the Assessing sing sing Officer Officer Officer during during during the the the original original original assessment assessment assessment proceedings leading to an order dated 12 October 2010. It proceedings leading to an order dated 12 October 2010. It proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment would therefore, follow that the reopening of the assessment would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the by impugned notice dated 28 March 2013 is merely on the by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Ass basis of change of opinion of the Assessing Officer from that essing Officer from that held earlier during the course of assessment proceeding held earlier during the course of assessment proceeding held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of leading to the order dated 12 October 2010. This change of leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to opinion does not constitute justification and/or reasons to opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped believe that income chargeable to tax has escaped believe that income chargeable to tax has escaped assessment." ment."

7.1 In the present case, In the present case, the material placed before us leaves no the material placed before us leaves no manner of doubt that the assessee had fully disclosed all relevant manner of doubt that the assessee had fully disclosed all relevant manner of doubt that the assessee had fully disclosed all relevant particulars relating to its CSR expenditure, donations, and particulars relating to its CSR expenditure, do particulars relating to its CSR expenditure, do deduction under section 80G during the original assessment. The deduction under section 80G during the original assessment. The deduction under section 80G during the original assessment. The computation clearly reflected the add computation clearly reflected the add-back of CSR expenditure and back of CSR expenditure and the claim under section 80G. These matters were indeed subject of the claim under section 80G. These matters were indeed subject of the claim under section 80G. These matters were indeed subject of enquiry during section 143(3) proceedings, and enquiry during section 143(3) proceedings, and the AO had taken a the AO had taken a view while completing the assessment. view while completing the assessment.

7.2 It requires no elaborate exposition to state that audit It requires no elaborate exposition to state that audit It requires no elaborate exposition to state that audit objections, by themselves, do not constitute tangible material. Even objections, by themselves, do not constitute tangible material. Even objections, by themselves, do not constitute tangible material. Even after insertion of Explanation 1 to section 148, such audit inputs after insertion of Explanation 1 to section 148, such audit inputs after insertion of Explanation 1 to section 148, such audit inputs cannot vest in the AO a power to reopen unless he independently cannot vest in the AO a power to reopen unless he independently cannot vest in the AO a power to reopen unless he independently arrives at a belief founded on fresh information. The record before arrives at a belief founded on fresh information. The record before arrives at a belief founded on fresh information. The record before us reflects no such fresh material; instead, it exhibits a mere us reflects no such fresh material; instead, it exhibits a mere us reflects no such fresh material; instead, it exhibits a mere change of opinion dressed as reassessment. change of opinion dressed as reassessment. Before us, the ld Before us, the ld counsel for the assessee has filed a copy of the extract from the counsel for the assessee has filed a copy of the extract from the counsel for the assessee has filed a copy of the extract from the Comptroller and Auditor General ( CAG)of India report ( report no. Comptroller and Auditor General ( CAG)of India report ( report no. Comptroller and Auditor General ( CAG)of India report ( report no. 12 of 2022) wherein the CAG recommended for amendment in the 12 of 2022) wherein the CAG recommended for amendment in the 12 of 2022) wherein the CAG recommended for amendment in the Act on the issue. A copy of such extract of report placed before the Act on the issue. A copy of such extract of report placed bef Act on the issue. A copy of such extract of report placed bef Hon’ble Parliament, which is available on paper book page 29-34, Hon’ble Parliament, which is available on paper book page 29 Hon’ble Parliament, which is available on paper book page 29 relevant part of which is reproduced for ready reference as under: relevant part of which is reproduced for ready reference as under: relevant part of which is reproduced for ready reference as under:

“(iv) CBDT needs to consider bringing an amendment or issuing (iv) CBDT needs to consider bringing an amendment or issuing (iv) CBDT needs to consider bringing an amendment or issuing binding clarification as to whether donations to trust binding clarification as to whether donations to trust binding clarification as to whether donations to trusts, including in- house/corporate trusts, out of CSR expenditure by specified house/corporate trusts, out of CSR expenditure by specified house/corporate trusts, out of CSR expenditure by specified companies covered by Section 135 of the Companies Act, 2013 is companies covered by Section 135 of the Companies Act, 2013 is companies covered by Section 135 of the Companies Act, 2013 is eligible for deduction under section 80G or not. Such an amendment eligible for deduction under section 80G or not. Such an amendment eligible for deduction under section 80G or not. Such an amendment or binding clarification is necessary to ensure th or binding clarification is necessary to ensure that the provisions are at the provisions are interpreted interpreted interpreted uniformly uniformly uniformly by by by the the the Assessing Assessing Assessing Officers Officers Officers across across across all all all assessment charges and also to minimize the possibility of litigation. assessment charges and also to minimize the possibility of litigation. assessment charges and also to minimize the possibility of litigation. (Paragraph 5.1.2.3) (Paragraph 5.1.2.3) The CBDT stated that Corporate Social Responsibility contribution is The CBDT stated that Corporate Social Responsibility contribution is The CBDT stated that Corporate Social Responsibility contribution is in the nature o in the nature of application of income and hence cannot be allowed f application of income and hence cannot be allowed as expenditure. A specific amendment to this effect was brought in as expenditure. A specific amendment to this effect was brought in as expenditure. A specific amendment to this effect was brought in Section 37 of the Income Tax Act vide Finance (No.2) Act, 2014. The Section 37 of the Income Tax Act vide Finance (No.2) Act, 2014. The Section 37 of the Income Tax Act vide Finance (No.2) Act, 2014. The eligibility of entities listed in Section 80G of the Income Tax Act p eligibility of entities listed in Section 80G of the Income Tax Act p eligibility of entities listed in Section 80G of the Income Tax Act prior to this amendment was not withdrawn as it is subject to conditions to this amendment was not withdrawn as it is subject to conditions to this amendment was not withdrawn as it is subject to conditions specified in the said Section. However, for the eligibility of donation to specified in the said Section. However, for the eligibility of donation to specified in the said Section. However, for the eligibility of donation to Swachh Bharat Kosh, and Clean Ganga Fund set up by the Central Swachh Bharat Kosh, and Clean Ganga Fund set up by the Central Swachh Bharat Kosh, and Clean Ganga Fund set up by the Central Government, which was introduced in Section 80 Government, which was introduced in Section 80G subsequent to G subsequent to amendment amendment of Section 37 amendment of Section 37 of Section 37 with regard with with regard regard to to corporate to corporate corporate social social social responsibility, a condition was stipulated that only those donations to responsibility, a condition was stipulated that only those donations to responsibility, a condition was stipulated that only those donations to these two funds will qualify for deduction under Section 80G of the these two funds will qualify for deduction under Section 80G of the these two funds will qualify for deduction under Section 80G of the Income-Tax Act which is not spent by the ass Tax Act which is not spent by the assessee in pursuance of essee in pursuance of corporate social responsibility under sub corporate social responsibility under sub-Section (5) of Section 135 of Section (5) of Section 135 of the Companies the Companies Act, 2013.” 7.3 The Hon’ble Bombay High Court in The Hon’ble Bombay High Court in Castrol India Ltd. Castrol India Ltd. (supra) held in no uncertain terms that re held in no uncertain terms that re-examination of an issue examination of an issue previously scrutinised cannot provide jurisdiction to reopen under rutinised cannot provide jurisdiction to reopen under rutinised cannot provide jurisdiction to reopen under section 147. The ratio applies section 147. The ratio applies in pari materia to the present case. to the present case. We find no distinguishing feature that would permit a departure We find no distinguishing feature that would permit a departure We find no distinguishing feature that would permit a departure from the binding authority of the jurisdictional High Court. from the binding authority of the jurisdictional High Court. from the binding authority of the jurisdictional High Court.

7.4 The issue in dispute involved in the present case being ssue in dispute involved in the present case being ssue in dispute involved in the present case being identical to the issue decided in the case identical to the issue decided in the case of Castrol India Ltd. of Castrol India Ltd. (supra), therefore, respectfully following the finding of the Hon’ble herefore, respectfully following the finding of the Hon’ble herefore, respectfully following the finding of the Hon’ble Jurisdictional High Court Jurisdictional High Court, we are constrained to hold that the we are constrained to hold that the reassessment proceedings initiated under section 148A and reassessment proceedings initiated under section 148A and reassessment proceedings initiated under section 148A and concluded concluded concluded under under under section section section 147 147 147 suffer suffer suffer from from from a a a fundamental fundamental fundamental jurisdictional infirmity and cannot be sustained in law. The ground jurisdictional infirmity and cannot be sustained in law. jurisdictional infirmity and cannot be sustained in law. Nos. 1(b) and 1(c) of the appeal of the . 1(b) and 1(c) of the appeal of the assessee are assessee are accordingly allowed.