KARAJ SINGH,HARYANA vs. PCIT (CENTRAL) GURGAON, GURGAON

ITA 642/CHANDI/2026Status: DisposedITAT Chandigarh01 October 2026AY 2022-2311 pages
AI SummaryAllowed

What were the facts?

The assessee, Shri Karaj Singh, is challenging an order passed by the Principal Commissioner of Income Tax (Pr. CIT) invoking revisionary jurisdiction under Section 263 of the Income Tax Act for the Assessment Year (AY) 2022-23. The Pr. CIT proposed to revise an assessment order dated March 31, 2024, passed by the Assessing Officer (AO) under Section 143(3). The AO had disallowed consultancy charges of Rs. 35 Lacs. The assessee had filed a return declaring agricultural income of Rs. 4.82 Lacs. The case was selected for scrutiny to examine high liabilities versus low income and low income from TCS receipts related to mining and quarrying. The AO issued notices under Section 142(1), which the assessee responded to. The Pr. CIT, based on an internal audit, flagged three issues: CSR expenditure of Rs. 16.85 Lacs, Rs. 38.29 Lacs payable under 'Rehabilitation and Restoration fund' requiring disallowance under Section 43B, and inadequate verification of mining and quarrying activity. The assessee refuted these allegations, explaining the nature of the expenses and deposits.

What did the Tribunal hold?

The Tribunal held that the Pr. CIT was not justified in invoking revisional jurisdiction under Section 263. On the issue of CSR expenditure, the Tribunal noted that the assessee is an individual and not covered by CSR regulations applicable to corporate entities. The expenditure was incurred wholly for business and allowable under Section 37(1), making the invocation of Explanation 2 to Section 37(1) by the Pr. CIT unwarranted. Regarding the 'Rehabilitation and Restoration fund', the Tribunal found that it was a refundable deposit and not claimed as an expenditure, thus Section 43B was not applicable, and revision on this ground was incorrect. Concerning mining and quarrying activity, the Tribunal observed that the AO had conducted detailed inquiries, issued notices under Section 142(1), and received extensive replies with supporting documents, including financial statements, GST summaries, and royalty payment proofs. The AO, after considering these, had substantially accepted the assessee's claims. The Tribunal relied on precedents like Malabar Industrial Co. Ltd. v. CIT and CIT v. Max India Ltd., stating that an order cannot be branded as erroneous merely because the Commissioner disagrees with a plausible view taken by the AO after due application of mind. The Tribunal emphasized the distinction between lack of enquiry and inadequate enquiry, citing CIT v. Sunbeam Auto Ltd., and concluded that the AO had conducted an enquiry, and the assessment order was neither erroneous nor prejudicial to the revenue. Therefore, the impugned order under Section 263 was set aside, and the assessment order passed by the AO was restored.

What were the issues?

1. Whether the Pr. CIT was justified in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, on the issue of CSR expenditure of Rs. 16.85 Lacs, considering the assessee is an individual and the expenditure was for business purposes, not voluntary CSR under the Companies Act? 2. Whether the Pr. CIT was justified in invoking revisionary jurisdiction under Section 263 on the issue of Rs. 38.29 Lacs shown as payable under 'Rehabilitation and Restoration fund', when it was a refundable security and not claimed as an expenditure, thus not attracting Section 43B? 3. Whether the Pr. CIT was justified in invoking revisionary jurisdiction under Section 263 on the grounds of inadequate verification of mining and quarrying activity, when the AO had conducted inquiries and accepted the assessee's submissions and documents? Assessee's Contentions: The assessee argued that there was no error in the assessment order prejudicial to the revenue. The CSR expenditure was incurred wholly for business. The rehabilitation and restoration fund amount was a refundable security, not an expenditure, so Section 43B was not applicable. The assessee had provided ledgers, mining contracts, royalty payment proofs, and reconciled sales with GST returns during the assessment. The AO had made due inquiries and accepted the assessee's explanations. Revenue's Contentions: The revenue, through the Pr. CIT, contended that the applicability of Explanation 2 to Section 37(1) was not examined for CSR expenditure. No documentary evidence was furnished for the rehabilitation and restoration fund, and the AO failed to verify it. The assessment record lacked discussion on mining activities, and the AO failed to independently verify extraction, royalty payment, and reconciliation with GST/TCS returns and sales. Accordingly, the assessment was erroneous and prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 142(1),Section 43B,Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

MANOJ KUMAR AGGARWAL (Accountant Member)

1.

By way of this appeal, the assessee assails invocation of revisionary juri iction u/s 263 by Ld. Pr. Commissioner of Income Tax (Central), Gurgaon (Pr. CIT) for the Assessment Year (AY) 2022-23 vide impugned order dated 09-03-2026 proposing revision of an assessment as framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 31-03-2024 wherein Ld. AO disallowed consultancy charges for Rs.35 Lacs

The order continues below.

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