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Facts
The assessee claimed a deduction under Section 80G of the Income Tax Act for the Assessment Year 2020-21. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, considering the deduction inadmissible because the assessee opted for Section 115BAA for tax computation.
Held
The Tribunal held that the PCIT erred in exercising revisionary jurisdiction under Section 263 as he failed to find a definitive error in the Assessing Officer's (AO) order. The PCIT himself acknowledged that Section 115BAA did not debar the 80G deduction for the relevant year.
Key Issues
Whether the PCIT's exercise of revisionary powers under Section 263 was justified when the PCIT admitted that the AO's assessment order was not erroneous or prejudicial to revenue interest.
Sections Cited
263, 143(3), 144B, 80G, 115BAA, 10AA, 32, 32AD, 33AB, 33/48/4, 35, 35AD, 35CCC, 35CCD, 80JJAA
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
(Assessment Year: 2020-21) E Infochips Pvt. Ltd., Vs. Principal Commissioner of Building 2 Aryan Corporate Park, Income Tax, Nr. Shilaj Railway Crossing, Ahmedabad-1 Thaltej, Ahmedabad-380054 [PAN No.AACCS1310E] (Appellant) .. (Respondent) Shri Bandish Soparkar, AR Appellant by : Respondent by : Shri Sher Singh, CIT-DR Date of Hearing 13.08.2025 21.08.2025 Date of Pronouncement O R D E R PER: ANNAPURNA GUPTA - AM: The present appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (hereinafter referred to as “PCIT”), Ahmedabad-1 dated 18.03.2025 under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2020-21.
2. The assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case as well in law, the Ld PCIT Ahmedabad 1 ("Ld. PCIT") has erred in law and on facts in exercising jurisdiction under section 263 of the Income Tax Act, 1961 ('the Act') in respect of the assessment order dated 27.09.2022 passed under section 143(3) r.w.s. 144B of the Act, which was neither erroneous nor prejudicial to the interests of the Revenue.
That the Ld. PCIT has failed to consider that the under the Income Tax Act applicable to the Assessment Year 2020-21, the deduction u/s 80G of the Act was deductible for computing total income of the company and thus, the assessment was neither erroneous nor prejudicial to the interests of the Revenue warranting revision under section 263.
E Infochips Pvt. Ltd. vs. PCIT Asst.Year –2020-21 - 2 - 3. That the Ld. PCIT has failed to appreciate that during the Assessment Proceedings, the Assessing Officer had duly examined the very issue and considered the provisions of section 115BAA of the Act as applicable for the Assessment Year 2020-21 and allowed deduction under section 80G after due application of mind. Thus, there was no error in the assessment order warranting revision under section 263.
4. The appellant further reserves its right to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of an appeal.”
The order of the Ld. PCIT reveals that he found the assessment order passed by the AO in the case of the assessee for the impugned order under Section 143(3) of the Act to be erroneous causing prejudice to the Revenue on account of the fact that the assessee was noted to have claimed deduction under Section 80G of the Act of Rs. 1,03,10,001/- which was not admissible since the assessee had opted for the provisions of Section 115BAA of the Act for paying taxes on its income. The order further reveals the assessee to have submitted to the Ld. PCIT that for the impugned year the provisions of Section 115BAA of the act did not debar the assessee from claiming deduction under Section 80G of the Act and categorically pointed out that the section debarred claims of deduction under Chapter-VI-A Heading C of the Act,while the claim of deduction under Section 80G of the Act fell within Heading B of Chapter-VI- A of the Act. The order of the Ld. PCIT reveals that he admitted to this position of law as pointed out by the Ld. Counsel for the assessee but still restored the matter to the AO for the limited purposes of verifying the eligibility of claim of deduction under Section 80G of the Act in terms of the relevant provisions of law existing for the impugned year. The above facts are revealed in Para 2 to 6 of the order as under:
“2. On perusal of records, it is seen that the assessee has claimed deduction of Rs.1,03,10,001/- under section 80G of the Act, the same is not admissible due to the fact that the assessee has opted for provisions of section 115BAA of the Act. The A.O. has not made disallowance of such sum in the assessment order. Therefore, the order of the A.O. was found erroneous and prejudicial to the interest of the Revenue.
E Infochips Pvt. Ltd. vs. PCIT Asst.Year –2020-21 - 3 - 3. Accordingly, a notice u/s.263 of the IT. Act dated 27/06/2024 was issued to the assessee fixing the hearing on 25/07/2024.
4. In response thereto, the assessee has submitted its reply, which is verified and placed on records. 4.1 On the issue of donation under section 80G, the assessee submitted that for the year under consideration, restriction of claiming deduction as per section 115BAA(2) is under any provisions of Chapter VI-A under the heading 'C - Deduction in respect of certain income" other than provisions of section 80JJAA. The assessee has also submitted that Finance Act, 2020 had amended the provisions of section 115BAA and the words "Chapter-VI-A other than the provisions of section 80JJAA or Section 80M" were substituted for "Chapter VI-A under the heading "C - Deduction in respect of certain income" other than the provisions of section 80JJAA" with effect from 01/04/2021, i.e. A.Y. 2021-22 and not applicable for A.Y. 2020-21. Accordingly, the assessee has submitted that its claim of deduction under section 80G is in accordance with the provisions of section 115BAA of the Act.
I have carefully and thoroughly gone through submission of the assessee. 5.2 On the issue of deduction of donation under section 80G of the Act, the A.O. is directed to verify the claim vis-a-vis provisions of section 115BAA of the Act as it stood or existed at relevant time of application to the assessment year 2020-21. The relevant paraphrase of provisions of section 115BAA of the Act is reproduced below for clarity: 2) For the purposes of sub-section (1), the total income of the company shall be computed,— (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33/48/4 or sub-clause (II) or sub-clause (iia) or sub-clause (Hi) of sub- section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes" other than the provisions of section 80JJAA; 5.3 The statute for the year under consideration is clear inasmuch as Chapter- VI-A under heading "C- Deduction in respect of certain incomes. However, provisions of section 80G falls under Chapter-VIA under heading "B.—Deductions in respect of certain payments" However, the issue is restored to the file of ACIT/DCIT Circle-2(1)(1), Ahmedabad for limited purpose of verification. The A.O. is directed to verify the claim of the assessee and decide the allowability with the relevant provisions of the Act existed in the statute book after considering the subsequent amendment with retrospective effect, if any.
Hence, in exercise of power conferred in me u/s.263 of the Act, the issues of claim of deduction under section 80G of the Act is restored to the file of ACIT/DCIT, E Infochips Pvt. Ltd. vs. PCIT Asst.Year –2020-21 - 4 - Circle-2(1)(1) of the Act for the limited purpose of verification with the direction to the AO to pass an order giving effect to this order, in accordance with law and after duly examining the facts of the case to the extent of the issues discussed supra after giving the assessee a reasonable opportunity of being heard.
7. Revised accordingly u/s. 263 of the Act.”
It is abundantly clear from the above that the Ld. PCIT had not arrived at any finding of error vis-à-vis the assessee’s claim of deduction under Section80G of the Act after having opted for paying taxes in terms of the provisions of Section 115BAA of the Act. The Ld. PCIT having categorically admitted to the position of law, as applicable to the impugned year, as not debarring the assessee from claim of deduction under Section 80G of the Act, after interpreting Section 115BAA of the Act, there surely could not have been any case for any error in the order of the AO allowing such claim to the assessee. The fact that the Ld. PCIT directed the AO to verify the claim of the assessee, whether it was as per the prevailing provisions of law, strengthens the case of there being no error in the order of the AO. The provisions of Section 263 of the Act give powers of revision of orders of authorities below only after finding errors in the said order causing prejudice to the Revenue. It is settled law that for a valid exercise of jurisdiction under Section 263 of the Act, the twin conditions of there being error of the AO and the order being prejudicial to the interest of the Revenue is to be satisfied. In the absence of any of the conditions as noted above, jurisdiction under Section 263 of the Act cannot be exercised. In a case as before us, where the Ld. PCIT himself admits that there was no error in the assessment order vis-à-vis allowance of claim of deduction u/s 80G r.w.s 115BAA of the Act, there is no finding of error in the order of the AO .Powers of revision cannot be exercised for verifying errors in orders. It is only after finding errors in the orders that revisionary jurisdiction can be exercised.
E Infochips Pvt. Ltd. vs. PCIT Asst.Year –2020-21 - 5 - 5. Besides the Ld. Counsel for the assessee fairly demonstrated before us that the issue was examined during the assessment proceedings also and the assessee had submitted identical submission to the AO explaining that its claim under Section 80G of the Act was as per law. When the Ld. PCIT himself found the claim to be in accordance with law, the view taken by the AO in allowing the claim of deduction under Section 80G to the assessee was a correct and plausible view. And therefore, also there cannot be said to be any error in the order passed by the AO.
6. In light of the above discussion we hold that there is no finding of error in the order of the Ld. PCIT and the exercise of revisionary jurisdiction therefore by the Ld. PCIT by passing the impugned order u/s 263 of the Act is not sustainable in law.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 21/08/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) (JUDICIAL MEMBER) ACCOUNTANT MEMBER Ahmedabad; Dated 21/08/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,