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Facts
The assessee claimed a deduction of Rs. 56,20,100/- under Section 80G for donations to the PM National Relief Fund. The PCIT initiated proceedings under Section 263, citing that the deduction was not allowable as the assessee had opted for a reduced tax rate and the AO had not made the disallowance.
Held
The Tribunal held that the deduction under Section 80G was rightly claimed by the assessee. It noted that the AO had made specific inquiries and examined the details before allowing the deduction, and therefore, the assessment order was not erroneous or prejudicial to the revenue.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise an assessment order where the AO had examined and allowed a deduction under Section 80G after due inquiry.
Sections Cited
263, 143(3), 80G, 115BA, 139(1), 142(1), 37(1)
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Before: SHRI PAWAN SINGH & SMT. RENU JAUHRI&
PER RENU JAUHRI [A.M.]:- This appeal is filed by the assessee against the order of the Principal Commissioner of Income Tax, Mumbai-8 [hereinafter referred to as “PCIT”] dated 24.03.2025 passed u/s. 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2020-21.
The assessee has raised the following grounds in this appeal:
“1. In the facts and circumstances of the case and in law, the Ld. Pr. Commissioner of income Tax erred in: (a) Passing the impugned order u/s. 263 in the case of the appellant which is illegal and bad-in-law and hence, requires to be quashed for the reasons as mentioned hereunder:-
(i) The assessment order was passed by the Ld. AD u/s. 143(3) of the Act after obtaining all the relevant information and explanation from the appellant in respect of the impugned items of disallowance/addition. (ii) The Ld. AO had applied his mind and considered the submissions made by the appellant including in respect of the items which are subject matter of proceedings u/s. 263 of the Act and passed the assessment order thereafter. (iii) Explanation 2 to section 263 of the Act is not applicable in the instant case as assessment order passed u/s. 143(3) of the Act dated 26th September 2022 was passed after proper enquiries and verification. (iv) In various judicial pronouncements the Hon'ble Courts and Hon. Tribunals have held that the subject matters in respect of which the AO after verifying and detailed enquiries allowed the expenditure, the same cannot be considered as erroneous requiring revision u/s. 263 of the Act. (V) In the assessment order the Ld. AO has specifically mentioned about the claim for deduction u/s. 80G and therefore he has examined the claims of the same and thereafter has allowed in computing the taxable income. (vi) Even otherwise, In various judicial pronouncements the Hon'ble Courts and Hon. Tribunals have held that once the query is raised and replied and just because the same is not mentioned separately or dealt with in the assessment order does not mean that the AO has not applied his mind. (vii) In various judicial pronouncements the Hon'ble Courts and Hon. Tribunals have held that Explanation 2 to section 263 does not give unfettered powers to assume jurisdiction u/s. 263 of the Act to the Commissioner of Income Tax to revise the order of the AO in response to the issues examined during the course of the assessment proceedings.
2. Without prejudice to each of the earlier grounds that the order passed by the Ld. Pr. Commissioner of Income Tax is illegal and bad-in-law and hence requires to be quashed, alternatively on merits, it is submitted that the Ld. PCIT erred in not considering the detailed submissions made vide letter dated 06 March 2025 and 13th March 2025 wherein the points raised during the hearing were answered and explained fully on the subject of that claim for deduction under section 80G of the Act in respect of CSR expenses of Rs. 56,20,100/-. 3 The above grounds of appeal
are distinct and separate and without prejudice to each other.
4. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted.
5. The appellant craves leave to amend or alter any ground or add new ground which may be necessary.”
Brief facts of the case are that the assessee company filed its return declaring income of Rs. 14,34,35,570/- for A.Y. 2020-21 on 29.01.2021. The case was selected for scrutiny and assessment was finalized u/s. 143(3) r.w.s. 144B at total income of Rs. 14,34,35,570/- vide order dated 26.09.2022. Subsequently, ld. PCIT issued a notice u/s. 263 on 27.02.2025 for treating the assessment as erroneous in so far as it is prejudicial to the revenue as deduction u/s. 80G was not allowable in respect of donation made to the PM National Relief Fund amounting to Rs. 56,20,100 for the following reasons: a. The assessee company has opted for reduced tax rate u/s. 115BA of the Act. b. The return was not filed u/s. 139(1) within the due date. c. Disallowance of Rs. 56,20,100/- was not made in computation of income by the AO. 3.2 The assessee responded to the notice and explained that it had not opted for lower tax regime u/s. 115BA of the Act. In support of this claim, relevant extract of ITR was filed from which it was clear that the assessee had not opted for the lower tax regime u/s. 115BA. It was further clarified that the assessee company availed the concessional rate of 25% on account of being a company having turnover less than Rs. 400 cr for A.Y. 2020-21, which was applicable Ay 2020-21 WNS Global Services Pvt Ltd in view of the CBDT notification dated 31.12.2020, a copy of which has been placed on record. The assessee also furnished the requisite documentary evidence in support of donation made to the PM National Relief Fund. 3.3 However, ld. PCIT passed an order u/s. 263 on 24.02.2025 holding that the assessment order passed by the AO was erroneous and prejudicial to the revenue and set aside the same on the issue of claim of deduction u/s. 80G of the Act with directions to make an enquiry in this matter and reassess the income.
Aggrieved with the order of ld. PCIT, the assessee has preferred an appeal before the Tribunal. 4. Before us, ld. AR has submitted that details of donation made u/s. 80G were duly submitted and also examined by the ld. AO and allowed as claimed below:
Sr. Amount paid to PM case Date of Receipt No. fund 1 25,00,000 05.04.2020 2 24,92,000 16.03.2020 3 6,28,100 31.07.2020 Total 56,20,100 4.2 With regard to the claim that this amount was eligible for deduction @100%, the assessee has explained as under in the written submission filed in response to the notice u/s. 263: “6. Deduction u/s 80G of the Act of Rs. 56,20,100/-:
6.1 The assessee company has claimed a deduction of Rs. 56,20,100/-u/s. 80G of the Act for the assessment year under reference. We had submitted the details of deduction claimed u/s. 80G of the Act in respect of donations made vide letter dated 09 December 2021, a copy whereof is enclosed herewith marked as "Annexure D". 6.2 In this regard, we enclose herewith the Press release by PIB Delhi posted on 24th June 2020 marked as "Annexure E". On perusal of the same, it shall be observed that on account of prevailing COVID-19 during FY 20-21, various dues dates were extended. At Point no. IV it is mentioned that the date of making payment for claiming deduction u/s. 80G of the Act for financial year 2019- 20has been extended to 31 July, 2020. 6.3 On perusal of the details of donation paid and claimed as deduction u/s 80G of the Act it shall be observed that amount of Rs. 31,28,100/- is paid after 31 March 2020 and paid before 31 July 2020 is claimed as deduction in view of the above press release. Since the said amount is not debited to the statement of profit and loss of the current financial year the same is not subject to disallowance for the year under reference. Balance Rs. 24,92,000/-is already disallowed in the computation. 6.4 As per the Press Release mentioned above, since Rs. 56,20,100/-had been duly paid before 31 July 2020, the assessee company has rightly claimed deduction of the same u/s. 80G of the Act.
7. Considering all of the above, factual submissions it is submitted that the Learned AO has correctly granted deduction u/s 80G of the Act and also computed the tax under normal provision of the Act as applicable. In view of the above it is submitted that the order passed u/s 143(3) r.w.s 144B of the Act on 26.09.2022 is not prejudicial to the interests of the revenue and is consequently not required to be quashed or set aside for fresh adjudication. Thus, no revisionary proceedings u/s 263 are required in the case of the assessee company.
Without prejudice to above, we also enclose herewith assessment order passed u/s 143(3) of the Act alongwith computation sheet annexed thereto marked as "Annexure F". On perusal of the same it shall be observed that Ld. AO has acknowledged that the assessee company has submitted the details regarding deduction u/s 80G vide letter dated 9th December 2021. The Ld. AO has further mentioned that he has pursued the material on record and explanation of the assessee company and accordingly has determined the income without any variation. 9.It is therefore submitted that having issued a specific notice calling for details/information/explanations in respect of the issues, the Ld. AO has examined the issue and formed the opinion i.e. granted deduction. Accordingly, the said order is not erroneous so far it is prejudicial to the interest of the revenue. 10.Since the AO had made specific inquiry in connection with the above mentioned issues and after due application of mind and on consideration of submissions made by the assessee, accepted the claim of the assessee / granted the requisite deductions, the same does not amount to inadequate enquiry/ lack of enquiry, and hence the order passed by AO cannot be considered as erroneous
or prejudicial to interest of revenue and hence the provisions of Section 263 of the Act are not applicable.”
4.3 Ld. AR has relied on various decisions of the Hon’ble jurisdictional
High Court in support of the issue regarding revision u/s. 263 of the Act. Some of the decisions cited by ld. AR wherein the issue stands decided in favour of the assessee are as under:
“a) PCIT v. Cartier Leafin (P.) Ltd. v. [2019] 112 taxmann.com 63 (Bom) SLP dismissed 146 taxmann.com 281 (SC) b) CIT Vs. Gabriel India Ltd (1993) (203 ITR 108) (Bom) c) CIT Vs. Kiran Hirji Shah (2015) (231 Taxman 670) (Bom) d) Aditi Developers Vs. ACIT (2012) (49 SOT 664) (Mumbai ITAT) e) MOIL Ltd. v. CIT [2017] 396 ITR 244 (Bom) (Para 5) f) PCIT v. Ramchandra Naidu [2017] 85 taxmann.com 127 (Bom) (Para 8)”
4.4 Reliance has also been placed on various decisions in support of its claim that deduction u/s. 80G is allowable in case of CSR expenditure which is disallowed u/s. 37(1), if other conditions are fulfilled. Some of the decisions of the Mumbai Benches of the Tribunal cited by the ld. AR are as under:
“a) Synergia Lifesciences Pvt. Ltd. vs DCIT (ITA no.938/Mum./2023) b) ACIT vs Rustomjee Realty Private Limited (ITA no.1585/Mum./2023) c) Societe Generale Securities India Pvt. Ltd. vs PCIT (ITA No. 1921/Mum/2023) d) Naik Seafoods Pvt. Ltd. vs PCIT (ITA NO. 490/MUM/2021)” e)DCIT V. Mahyco Monsanto Biotech(India) Private Limited [TS-885-ITAT- 2024(Mum)] Specifically, in the case of Mahyco Monsanto (supra), the issue has been examined at length and it has been held as under:
“13.1 So, it can be clearly seen that this Explanation 2 to section 37(1) which denies deduction for CSR expenses by way of business expenditure is applicable only to the extent of computing 'business income' under Chapter IV-D. The said Explanation cannot be extended or imported to CSR contributions which are otherwise eligible for deduction under any other provision or Chapter, so as to say donations made by charitable trust registered under section 80G. Parliament has expressed its intention clearly by bringing in restriction in respect of expenditure classified by an assessee company while claiming deduction under section 80G i.e. CSR expenditure related to Swachh Bharat Kosh and Clean Ganga Fund. And if the Parliament desired, it could have been made such kind of restriction or any restriction like in the case of donation to Swachh Bharat Kosh & Clean Ganga Fund. So the assertion of the Assessing Officer is erroneous and therefore cannot be accepted. It can be safely inferred that when the Legislature in particular has provided for only the above referred two specific exceptions in section 80G, then it is the implied intent of the Legislature to permit deduction under section 80G in respect of CSR contributions made to funds/organizations referred to in all other sub- clauses of section 80G [other than (iiihk) and (iiihl)] of the Act. 13.2 It may be stated here that in the case Allegis Services (India) (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1693 (Bang.) of 2019] exactly similar issue has been adjudicated by the Co-ordinate Bench of ITAT, Bangalore. Since the facts and circumstances in the present case is similar to that of the Co-ordinate Bench in the case of Allegis Services (India) Ltd. (supra), taking a consistent view, we remit the issue back to the file of the Assessing Officer with similar direction as contained in the aforesaid order of the Tribunal and for decision afresh in accordance with law on due verification of the claim of deduction u/s 80G of the Act.”
On the other hand, ld. DR strongly relied on the order of Ld. PCIT. It was pointed out by him that in the assessment order, there is no discussion with regard to the claim u/s. 80G and, therefore, it was apparent that the same had not been examined by the ld. AO. Accordingly, Explanation 2 of section 263 was applicable in this case, wherein it has been provided that an order passed without making enquiries or verification which should have been made, is deemed to be erroneous in so far as it is prejudicial to the interest of Revenue. Since no such enquiry or verification was discernible from the assessment order, the PCIT was justified in invoking his revisionary powers u/s. 263 of the Act.
We have heard the rival submissions and perused the material placed on record. The assessee has filed a paper book containing, interalia, the following documents in support of its contention that the claim of i. Notice u/s. 142(1) dated 16.11.2021 seeking details of deduction under chapter VI A ii. Copy of assessee’s reply dated 09.12.2021 alongwith copies of donation receipts evidencing payment to the PM National Relief Fund. Thus, we note that the claim of deduction u/s. 80G has been examined by the ld. AO although this fact is not mentioned in the body of the assessment order. Hence, we are of the view that it is not a case where Explanation 2 of section 263 would be applicable. Further, as submitted by the ld. AR, the issue regarding allowability of deduction u/s. 80G in respect of CSR expenditure has been allowed in favour of the assessee in a number of decisions of the co-ordinate benches, some of which are noted in para 4 hereinbefore. Accordingly, we are of the considered view that under the facts and circumstances discussed above, it is not a fit case for invoking the provisions of section 263 of the Act by the PCIT. Accordingly, the order dated 24.03.2025 passed by the ld. PCIT u/s. 263 of the Act is hereby quashed.
In the result, appeal of the assessee is allowed. Order Pronounced in Open Court on 14.10.2025