FINEOTEX CHEMICAL LIMITED,MUMBAI vs. PCIT-4, MUMBAI

The Ld.AR filed a paper book containing pages 1 to 14, which is placed on record, and argued that the issue related to CSR expenses claiming the deduction u/s 80G is duly covered by the order of co-ordinate bench of ITAT, in the case of the WNS Global Services (P) Ltd (2025) 174 taxmann.com 1031 (Mumbai- Trib.), Motilal Oswal Securities Ltd. (ITA No. 1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019) and JMS Mining Pvt. Ltd. [130 taxmann.com 118 (Kolkata Trib.). As the issue is highly debatable, any view taken by the Ld. AO during the course of original assessment proceeding has to be considered as a plausible view and the view taken by the Ld. PCIT, howsoever plausible, is nothing but a change of opinion for which juri iction u/s 263 of the Act cannot be assumed. Further, he argued that the assessment was completed through CASS for limited scrutiny, so the Ld.AO had no juri iction for verification of other issues, except the two issues, as directed CASS system. Further, related to education cess, the Ld.AR stated that the amendment was brought in Finance Act, 2022 with retrospective effect from 01/04/2005. But the Ld. AO had no juri iction to verify the issue in limited scrutiny.

The Ld.DR argued and relied on the order of the Ld.PCIT.

We have heard the submissions of both parties and carefully perused the material available on record. It is noted that the assessee duly complied with the limited scrutiny assessment proceedings before the Ld. AO by furnishing all requisite documents in support of the return of income. The Ld. AO, after due verification, accepted the returned income of the assessee. It is observed that the issues relating to verification of CSR expenses vis-à-vis deduction under section 80G of the Act, and the disallowance of education cess under section 40(a)(ii), did not fall within the scope of the limited scrutiny framework. Upon completion of the prescribed verification, the Ld. AO did not find it necessary to convert the limited scrutiny into complete scrutiny. As per the Instruction of the CBDT, the Assessing Officer is required to restrict his inquiry to the specific parameters forming the basis of selection for limited scrutiny. Enlargement of the scope of such scrutiny into complete scrutiny is permissible only in revenue-potential cases, upon recording of reasons and obtaining prior approval of the Competent Authority, viz. PCIT/CIT/Pr. DIT. In the present case, no such approval was sought or obtained. Therefore, the issues which could legitimately fall within the scope of revision under section 263 are confined only to the parameters of selection for limited scrutiny, namely: (i) capital gains/loss; and (ii) loss from currency fluctuation. We find support in the judgment of the Hon’ble Supreme Court in Principal Commissioner of Income-tax-1 v. V-Con Integrated Solutions (P.) Ltd. [2025] 173 taxmann.com 774 (SC), wherein it was held: “2. In our opinion, the order passed by the High Court, which upheld the decision of the Tribunal, is correct on facts and in law. This case does not involve a failure by the assessing officer to conduct an investigation. Instead, according to the Revenue, it is a case where the assessing officer having made inquiries erred by not making additions. 3. The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. 4. In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of investigation and a wrong decision/conclusion. A wrong decision/conclusion can be corrected by the Commissioner of Income Tax with a decision on merits and by making an addition or disallowance. 5. There may be cases where the Assessing Officer undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax must record the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue. 6. Recording the aforesaid, the special leave petition is dismissed.” In the present case, no such failure has been established. The Ld. DR has also not placed any contrary precedent or substantive argument to controvert the submissions of the assessee. In our considered view, the Hon’ble Supreme Court in CIT v. Max India Ltd. [2008] 295 ITR 282 (SC) has reiterated the settled law that the twin conditions under section 263—(i) error in the order of the AO, and (ii) prejudice to the interests of the Revenue—must co-exist for valid exercise of revisional juri iction. In the absence of fulfilment of these conditions, the order under section 263 cannot be sustained. Accordingly, the revisional order passed under section 263 is hereby set aside and quashed. 6. In the result, the appeal of the assesse bearing ITA No.3458/Mum/2025 is allowed. Order pronounced in the open court on 04th day of September 2025. (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER Mumbai, िदनांक/Dated: 04/09/2025 Pavanan Copy of the Order forwarded to:

अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकर आयु CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, JODHPUR 5. गाड फाइल/Guard file.