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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH
Per Rajesh Kumar, Accountant Member:
The above titled appeals have been preferred by the assessee against the orders dated 30.03.2021 & 22.03.2021 of the Pr. Commissioner of Income Tax) [hereinafter referred to as the PCIT] relevant to assessment years 2015-16 & 2016-17 respectively. Since the issues involve are largely common and therefore being decided by this consolidated order. First we are taking up A.Y. 2016-17 for adjudication.
2. Assessee has raised following two grounds on jurisdictional issue:-
“1. On the facts and circumstances of the case and in law, the Learned Principal Commissioner of Income-Tax - 08, Mumbai (“the PCIT”) erred in invoking the provisions of section 263 of the Act and directing setting aside of the assessment order passed under section 143(3) of the Act by the Deputy Commissioner of Income Tax, Circle -8(1)(1), Mumbai (“the Assessing Officer”) dated 26.12.2018 on the alleged ground that the said assessment order was erroneous and prejudicial to the interest of the revenue.
2. The learned PCIT erred in invoking the provisions of section 263 of the Act without specifying as to how the prejudice is caused to the Revenue in as much as it is not pointed out as to how the order of the Assessing Officer is erroneous in law and therefore how the interest of the Revenue is affected adversely. The Appellant prays that it be held that the action of the Learned PCIT in invoking provisions of section 263 of the Act and directing the Assessing Officer to pass a fresh assessment order be held to be ab-initio and/or otherwise void and bad in law.”
The facts in brief are that the assessee is engaged in the business of providing long term finance for housing and non- housing purposes. The return of income was filed on 15.10.2016 declaring loss of Rs.123,64,90,040/-. The case of the assesse for selected for scrutiny and original assessment was framed by the AO u/s.143(3) of the Act vide his order dated 26.12.2018. Thereafter the PCIT upon going through the assessment records observed that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and accordingly issued show-cause notice u/s.263 of the Act dated 12.3.2021 giving show cause to the assessee as to why the assessment framed under section 143(3) should not be revised and set aside for the reason that the AO has failed to carry out 3 & 814/M/2021 M/s. Reliance Home Finance Ltd. relevant and meaningful inquiries on certain points. The contents of the notice are reproduced as under: “2. On perusal of the assessment records it was seen that, the assessee debited an amount of Rs.1,39,00,000 towards Corporate Social Responsibility (CSR) which was added back in the computation of income statement. However, assessee claimed and was allowed deduction under 80G of Rs.66,50,000 which was part of the CSR expenses which was already written back resulting in disallowance under the provisions of one section and allowance under the provisions other section of the Act. This has resulted in excess allowance of deduction by AO. It is also seen that during the year, ‘India Debt Management Private Ltd (IDMPL]’ got merged into assessee company. The total business loss claimed by the assessee was Rs.302,62,68,251 which pertained to India Debt Management Pvt Ltd. It was seen that in AY 2016-17, IDMPL had also set off business loss of Rs.14,36,669. The set off of loss of same business loss by two different accesses in the same AY needed to be verified. Further as per the provisions of section 72A, the loss should be apportioned between the demerged company and the resulting company in the same proportion in which the assets of the undertakings have been retained by the demerged company and transferred to the resulting company and be allowed to be carried forward and set-off in the hands of the demerged company or the resulting company. In this case ae per notes to accounts 37{i) of AY 2016- l7, the total assets taken over by the assessee was Rs.4,70,000 which represented only 0.0 1°f» of the total assets of IDMPL. Further as per Note 22 of IDMPL pertaining to segment information, there is only one business segment and no geographical segment and as such no separate reportable segment. Thus it can be seen there is no separate discernable loss which can be attributed to one particular type of business and the basic of loss to be taken over can only be apportioned on the basis of assets taken over which was very negligible in this case. Therefore the loss Rs. 105,36,30,422 which was set off cannot be attributed to the loss on account of the scheme of arrangement between IDMPL and the assessee and needed to be disallowed. AO has failed to verify this aspect and allowed the lose claimed by the aseessee.
The aforesaid aspects, which, prima facie warranted inquiry on the facts and circumstances of the case, have not been inquired into while completing the assessment. On the facts and circumstances of the case, it is clear that in respect of the aforesaid aspects, the order of the A.O. suffers from error within the meaning of Section 263 of the I.T. Act, 1961. This error has resulted in prejudice to the revenue within the meaning of Section 263 in as much as the claim of the assessee i.e. allowed in excess and /or income of the assessee has been under assessed. Accordingly, in respect of the aforesaid aspects, enumerated in foregoing paragraphs ae above, provision of Section 263 of the Income Tax Act, 1961 are clearly attracted to the facts of this case.
In view of the above, it is proposed to suitably revise the assessment order passed by the AO u/s 263 of the I.T. Act, 1961. Accordingly you are hereby requested to make your submission if any by l9/03/2021 and to explain why 4 & 814/M/2021 M/s. Reliance Home Finance Ltd. the said order u/s 143(3) dated 26/12/2018 should not be revised u/s 263 of the I.T. Act, 1961. If nothing is heard from you by the said date, the necessary order will be passed ex-parte on the basis of material available on record without giving further opportunity to you, which may please be noted.”
The ld. PCIT after taking into account the submissions and reply of the assesse set aside the assessment order passed u/s 143(3) of the Act by observing that the AO while completing the assessment u/s.143(3) of the Act failed to carry out adequate inquiry or specific inquiry or recording reasons for accepting assessee’s submission. On the issue of deduction u/s.80G, the PCIT while deciding the issue on revision u/s.263 of the Act noted that the AO had raised general query in his notice u/s.142(1) dated 4.10.2018 in which he asked the assessee to submit the details of 80G deductions. The ld. AR submitted that ld. PCIT noted that the assessee in fact had submitted the note on allowability of CSR vide its submissions dated 14.12.2018 but AO failed to verify the aspect whether the deduction claimed u/s.80G and CSR expenditure were overlapping. According to ld. PCIT the assessee debited an amount of Rs.1,39,00,000/- towards the Corporate Social Responsibility (CSR) which was added back in the statement of computation of income and the assessee claimed deduction u/s.80G of Rs.66,50,000/- and allowed accordingly which was part of the CSR expenses. So as per ld. PCIT this needed further verification and explanation. With respect to loss arising on demerger of business of IDMPL, ld. PCIT observed that AO has raised the query regarding reduction of taxable income in revised return vide its notice u/s.142(1) dated 4.10.2018, however, as per ld. PCIT no proper inquiries were made by the AO during the scrutiny assessment regarding demerger of business of IDMPL. As per ld. PCIT, AO
5 & 814/M/2021 M/s. Reliance Home Finance Ltd. has failed to verify whether the assessee has complied with the requirement of section 2(19AA) and section 72A of the Act. The ld. PCIT has also observed that AO has not verified whether business loss of Rs.14,36,669/- which was set off by IDMPL in original return of income was set off in revised return of income or not. In view of these facts the PCIT has held the assessment order is not only erroneous but also prejudicial to the interest of the revenue. The PCIT directed the AO to verify whether donation already claimed by the assessee u/s.80G can be allowed as CSR. The ld. PCIT further directed the AO to verify the valuation of assets taken over by the assessee and assess the correct valuation of the assets which would be assigned to the assets as per law and further directed to verify whether the provisions of section 72A(4)(a) or section 72A(4)(b) would apply.
The ld Counsel of the assesse submitted that the order passed by the ld PCIT is without jurisdiction. The ld AR referred to the notice issued u/s.142(1) of the Act dated 4.10.2018 wherein the query was raised for large deduction under Chapter VIA. The ld AR submitted that the assessee replied to the above query vide letters dated 11.10.2018 and 20.11.2018 and submitted copy of the donation receipt before the AO. The learned Counsel further contended that the assessee further submitted detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018.
In view of the above facts, the learned Counsel for the assessee further argued that the AO has examined everything on the issue of allowability of CSR expense as donation.
6 & 814/M/2021 M/s. Reliance Home Finance Ltd.
As regards the loss arising on demerger of business of IDMPL, the ld. AR for the assessee pointed out that detailed questionnaire was issued by the AO alongwith notice u/s.142(1) of the Act dated 4.10.2018 which included the query on reduction of income in the revised return and claim of huge refund. The assessee replied to the above query vide letter dated 20.11.2018 in which it was explained that reduction in income and large refund claimed was on account of demerger of business of IDMPL.
The ld AR argued that it was explained that the company had revised financials for the year ended 31.3.2016 to incorporate the demerger of entire credit business of IDMPL and obtained revised Tax Audit Report which were filed with AO vide letter dated 11.9.2018.
The assessee further submitted following additional documents as required by the AO in course of the assessment proceedings vide letter dated 18.12.2018 as under:-
a. Financial Statements of IDMPL for the AY 2015-16, 2016-17 & 2017-18 is enclosed as Exhibit 1. b. CA Certificate of the details of tax losses of the demerged undertaking i.e. credit business of IDMPL as Exhibit 2.
As regards the claim of business loss of Rs.14,36,669/- being set off both by the assessee and by IDMPL, the ld. AR of the assessee submitted that the assessee had claimed the loss of Rs.14,36,669/- in the first revised return filed on 1.11.2017 and in the second revised filed on 29.3.2018 the said claim was withdrawn by the assessee. The ld AR submitted that it was further pointed out that this is evident from the facts that the 7 & 814/M/2021 M/s. Reliance Home Finance Ltd. income returned in the first revised return at Rs.18,14,22,950/- was increased to Rs.18,28,59,260/- in the second revised return filed on 29.3.2018 and the difference between two returned income is Rs.14,36,669/-. Thus, the claim of loss of Rs.14,36,669/- was withdrawn by the assessee. It was further pointed out that whether it was claimed by IDMPL or not is not within the knowledge of the assessee.
In view of the above facts, the ld. AR further argued that the AO has examined everything in respect of the above two issues. The Counsel further vehemently argued that directions of the ld. PCIT on the issue of donation are not correct in as much as ld. PCIT has directed the AO to verify whether donation claimed by the assessee can be allowed as CSR. It was argued that the above directions are contrary to the issue raised in the notice u/s.263 which was whether CSR expenses can be considered for deduction u/s.80G. It was further submitted that the claim for the loss on demerger of business of IDMPL was accepted by the AO after due consideration of the law on the subject and after proper verification and merely because the assessment order was silent does not mean that the AO has not applied his mind. It was further pointed out that the directions of the ld. PCIT in the order that the AO should verify whether business loss of Rs.14,36,669/- which was set off by IDMPL in original return of income was set off in the revised return of income or not. It was submitted that the above directions have no relevance to the computation of income of the assessee. The ld AR finally prayed that in view of the above facts, the order of ld PCIT is wrong and may be quashed as he has no valid
The ld. DR, on the other hand, vehemently argued that there was lack of full and proper inquiry on both the aspects and therefore the revisionary jurisdiction was validly exercised to revise the assessment which was erroneous as well as prejudicial to the interest of the revenue. The ld. DR referred to various case laws in defense of his arguments and to defend the order of ld. PCIT namely Deniel Merchants Pvt. Ltd. vs. ITO 2017-TIOL-455-SC-IT, PCIT vs. Shri Braham Dev Gupta 2018- TIOL-1547-HC-DEL-IT, CIT vs. Ballarpur Industries Ltd. (2017) 85 taxmann.com 10 (Bombay), Vedanta Ltd. vs. CIT (2021) 124 taxmann.com 435 (Bombay), Rampyari Devi Saraogi(1968) (67 ITR 84) SC, Malabar Industrial Co. Ltd. Vs CIT (243 ITR 83) (SC), Shoreline Hotels (P) Ltd. (98 taxmann.com 234)(Bom) and Jeevan Investment and Finance (P) Ltd. (88 taxmann.com 552)(Bom). The learned DR relied upon the order of PCIT and submitted that the assessment order is prejudicial to the interest of the revenue and erroneous in law and therefore the appeal of the assessee may kindly be dismissed.
The learned Counsel of the assessee in the rejoinder submitted that on the issue of allowability of CSR expenses as deduction u/s.80G is directly covered by the recent decision of Hon’ble Kolkata Tribunal in JMS Mining (P.) Ltd. 130 Taxmann.com 118. The Hon’ble Kolkata High Court has not only held that assessee is entitled to claim of deduction u/s.80G but has also quashed 263 order passed qua this issue holding that the AO has taken a plausible view. In fact, the Hon’ble
9 & 814/M/2021 M/s. Reliance Home Finance Ltd. Kolkata Tribunal has referred to and followed two decisions of the Hon’ble Bangalore Tribunal in the case of Goldman Sachs Services Pvt. Ltd. v JCIT 117 taxmann.com 535 and Allegies Services India Pvt. Ltd. v ACIT [IT Appeal No.1693 (Bang) of 2019 dated 29.4.2020] to support the view that deduction u/s.80G is available even for CSR contributions. On the issue of loss on demerger, the learned Counsel pointed out that full and proper inquiry were carried out. It was further submitted that the ld. PCIT has referred to Note 22 of the financials of IDMPL relating to segment information which stated that there is only one business segment. The ld. AR submitted that ld. PCIT has incorrectly observed that there is no loss which can be attributed to one particular type of business. It was therefore submitted that these observations of PCIT is totally contrary to Note 22 of the financials of IDMPL and provisions of section 27A(4)(a) were applicable and correctly applied and accepted.
We have heard the rival contentions and perused the materials on records including the case cited by both the sides. From the records before us and arguments of rival parties we note that undisputedly on all issues the assessee has filed complete details before the AO in reply to queries from the AO as discussed above. It is also not in dispute that the assessee has filed detailed note on allowability of CSR expenses as donation u/s.80G and therefore the issue was considered by the AO during the assessment proceedings. Besides we note that the assessee has filed the Scheme of Arrangement of demerger alongwith all documents including financials of IDMPL, assessment orders of IDMPL determining losses, book entries
10 & 814/M/2021 M/s. Reliance Home Finance Ltd. incorporating the demerger in the books of the assessee. All conditions of section 2(19AA) were complied with and therefore there was a proper demerger and the same has been accepted by AO. We note that the AO issued notice u/s.142(1) of the Act dated 4.10.2018 wherein the query was raised for large deduction under Chapter VIA which was replied vide letters dated 11.10.2018 and 20.11.2018 and submitted copy of the donation receipt before the AO. The said reply of the assesse is reproduced hereunder for sake of ready reference:-
The company replied to the above query in the notice dated 20.11.2018 as under:- We have claimed deduction under section 80G of the Income Tax Act, 1961 amounting to Rs.66,50,000 on account of Rs.1,33,00,000 to M/s. Mandke Foundation. A copy of the receipt, evidencing payment has been provided vide our submission dated 11.10.2018. Another submission was made vide letter dated 11.10.2018 as under:- “Also, during the year under consideration, we have claimed deduction u/chap VI-A of INR 66,50,0000/- on account of donation of INR 1,33,00,0000 to M/s. Mandke Foundation. A copy of the receipt evidencing the same is enclosed as Exhibit 2A.
We also note that the assessee also filed detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018. The relevant reply is reproduced as under for the sake of ready reference:-
“Note on allowability of Corporate Social Responsibility (CSR) under Section 80G Expenditure incurred by a company for CSR activities will not be allowed as a deduction under section 37(1) of the Act in the hands of the company while computing its income from business and profession, however there may be cases where a company incurs expenditure towards CSR activities by contributing to an entity which undertakes the notified activities under section 80G of the Act.
11 & 814/M/2021 M/s. Reliance Home Finance Ltd. Attention is invited to the Rule 4(2) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 where in it is provided as under:- “(2) The Board of a company may decide to undertake its CSR activities approved by the CSR committee, through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise: Provided that- (i) if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects; (ii) the company has specified the project or progams to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.” Therefore, the aforesaid rule enables a company to carry out CSR activity through registered trust or registered society or a company after complying certain conditions specified therein. At the same time, the company can also get deduction for the amount of contribution made to such trust in accordance with the provisions of section 80G of the Act subject to and to the extent of limitation of that section. There is no disabling clause in Section 80G similar to Section 37(1) of the Act. In absence of such debar in Section 80G of the Act and CSR being donation to charitable institution holding Section 80G certificate, the deduction under section 80G was rightfully claimed by us. The above position is also supported by FAQ’s on CSR Cell released by the Government of India, enclosed as Exhibit 14, and displayed on the website of Ministry of Corporate Affairs wherein it stated as under: “8. What tax benefits can be availed under CSR? No specific tax exemptions have been extended to CSR expenditure per se. Finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemption has been extended to expenditure incurred on CSR, spending on several activities like contributions to Prime Minister’s Relief Fund, scientific research, rural development projects, skill development projects, agricultural extension projects, etc., which find place in Schedule VII, already enjoy exemptions under different sections of the Income Tax Act, 1961.”
12 & 814/M/2021 M/s. Reliance Home Finance Ltd. (underline is ours) Thus, based on the above legal position as well as the guidance provided by Government of India, the CSR expenditure are allowable under as deduction u/s 80G subject to conditions mentioned therein.”
Considering these facts, we are of the considered view that the ld PCIT has formed an incorrect opinion that the AO has not examined the issue of allowability of CSR expense as donation. So far as the loss arising on demerger of business of IDMPL is concerned, we note that again a detailed questionnaire was issued by the AO along with notice u/s.142(1) of the Act dated 4.10.2018 which included a specific query on reduction of income in the revised return and large refund claim which was replied by the assessee vide letter dated 20.11.2018 in which it was explained that reduction in the income and large refund claimed was on account of demerger of business of IDMPL. Relevant portion of the reply is reproduced hereunder:-
29. Sr. No. 2 (page 5) With respect to query on taxable income in revised return being less than taxable income in original return and refund claim, we submit that the difference is on account following: • We have filed revised return of income pursuant to the Scheme of Arrangement under section 391 to 394 of the Companies Act 1956 with India Debt Management Private Limited, which was sanctioned by National Company Law Tribunal (‘NCLT’) Mumbai Bench vide Order dated 05.04.2017 to acquire the “entire credit business of IDMPL. The aforesaid Scheme became effective on April 21, 2017 on filing with the Registrar of Companies, Maharashtra at Mumbai with effect from March 31, 2016 i.e. Appointed Date. A copy of order passed pursuant to the said scheme are enclosed as Exhibit 19. • Revising the TDS claim as per updated Form 26AS ………”
It was explained before us that the company had revised financials for the year ended 31.3.2016 to incorporate the 13 & 814/M/2021 M/s. Reliance Home Finance Ltd. demerger of entire credit business of IDMPL and obtained revised Tax Audit Report which were filed with AO vide letter dated 11.9.2018. The assessee further vide letter dated 14.12.2018 submitted various documents relating to demerger which are specified hereunder:-
Note on scheme of demerger with India Debt Management Private Limited (IDMPL) The scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 between IDMPL (‘the demerged company’) and us has been sanction by the National Company Law Tribunal, Mumbai Bench vide order dated April 5, 2017 to acquire the ‘entire credit business’ of the Demerged Company. The scheme became effective on April 21, 2017 on filing with the Registrar of Companies, Maharashtra at Mumbai with effect from March 31, 2016 i.e. Appointed Date. In this regard, we submit the following: • Scheme of arrangement along with copy of the order of National Company Law Tribunal, Mumbai Bench approving the scheme is enclosed as Exhibit 9 • Statement showing journal entry & relevant details with regard to scheme of demerger with IDMPL, enclosed as Exhibit 10 • Valuation Report of IDMPL confirming the swap ratio used in the demerger scheme is enclosed as Exhibit 11 • Copy of certificates for issuance of Non-cumulative Preference Shares towards purchase consideration, as Exhibit 12 • Statement of brought forward losses of IDMPL along with copies of Order Giving Effect / Assessment Order is enclosed as Exhibit 13. Copy of the above documents are enclosed.
The assessee further submitted following additional documents as required by the AO in course of the assessment proceedings vide letter dated 18.12.2018:- c. Financial Statements of IDMPL for the AY 2015-16, 2016-17 & 2017-18 is enclosed as Exhibit 1. d. CA Certificate of the details of tax losses of the demerged undertaking i.e. credit business of IDMPL as Exhibit 2.
Lastly As regards the claim of business loss of Rs.14,36,669/- being set off both by the assessee and by IDMPL,
14 & 814/M/2021 M/s. Reliance Home Finance Ltd. we note that the assessee had claimed the loss of Rs.14,36,669/- in the first revised return filed on 1.11.2017 and in the second revised filed on 29.3.2018 the said claim was withdrawn by the assesse suo-motto as is evident from amount of income returned in both the income tax returns. We note that the income returned in the first revised return at Rs.18,14,22,950/- was increased to Rs.18,28,59,260/- in the second revised return filed on 29.3.2018 and the difference between two returned income is Rs.14,36,669/-. Thus, the claim of loss of Rs.14,36,669/- was withdrawn by the assessee.
Considering the above facts and circumstances, we are inclined to hold that the revisionary proceedings were not valid and so is the revisionary order passed u/s 263 of the Act by ld. PCIT. Therefore, we are inclined to quash the revisionary proceedings u/s 263 of the Act as well as consequent order passed by ld PCIT.
The appeal of the assesse is allowed.
Assessee has raised following two grounds on jurisdictional issue:-
“1. On the facts and circumstances of the case and in law, the Learned Principal Commissioner of Income-Tax - 08, Mumbai (“the PCIT”) erred in invoking the provisions of section 263 of the Act and directing setting aside of the assessment order passed under section 143(3) of the Act by the Deputy Commissioner of Income Tax, Circle -8(1)(1), Mumbai (“the Assessing Officer”) dated 22.12.2017 on the alleged ground that the said assessment order was erroneous and prejudicial to the interest of the revenue.
2. The learned PCIT erred in invoking the provisions of section 263 of the Act without specifying as to how the prejudice is caused to the Revenue in as much as it 15 & 814/M/2021 M/s. Reliance Home Finance Ltd. is not pointed out as to how the order of the Assessing Officer is erroneous in law and therefore how the interest of the Revenue is affected adversely. The Appellant prays that it be held that the action of the Learned PCIT in invoking provisions of section 263 of the Act and directing the Assessing Officer to pass a fresh assessment order be held to be ab-initio and/or otherwise void and bad in law.”
The facts in brief are that the assesse filed the return of income on 27.11.2015 declaring total income of Rs.95,73,330/- which was later revised by filing a revised return on 31.3.2017 declaring total income of Rs.4,59,65,95,240/-. The case of the assesse was selected for scrutiny and assessment u/s.143(3) of the Act was framed vide his order dated 22.12.2017. Subsequently the ld. PCIT issued show-cause notice u/s.263 for revising the assessment order passed u/s.143(3) of the Act dated 19.3.2021 for the reason that the AO failed to carry out relevant and meaningful inquiries on the following:-
“The assessee filed original return on 27.11.15 declaring income of Rs.95,73,73,330/- and revised return of income on 31/03/2017 declaring total income at Rs. 4,59,65,95,240/-. The assessment was completed in a scrutiny manner on 22.12.2017 accepting the revised returned filed by the assessee. On perusal of the assessment records it was observed that, comparison of original and revised computation and also the submission of the assessee revealed that the downward revision in income was on account of claim of Rs.49,00,000 as deduction u/s 80G of the Act (i.e. 50 % of the donation of Rs.98,00,000). Further scrutiny of the donation receipt and the P&L revealed that the Rs.98,00,000 was actually CSR expenses which was first debited in the P&L a/c but subsequently added back in the computation of income. Thus, the same expenditure which was originally disallowed as CSR expenses was again claimed (50%) through the route of 80G deduction. Since both CSR expense and 80G donations are two different mode of ensuring fund for public welfare, hence treating the same expense under two different heads would defeat the very purpose of it and hence the same was required to be disallowed in the assessment. The aforesaid aspects, which, prima facie warranted inquiry on the facts and 16 & 814/M/2021 M/s. Reliance Home Finance Ltd. circumstances of the case, have not been inquired into while completing the assessment. On the facts and circumstances of the case, it is clear that in respect of the aforesaid aspects, the order of the A.O. suffers from error within the meaning of Section 263 of the I.T. Act, 1961. This error has resulted in prejudice to the revenue within the meaning of Section 263 in as much as the claim of the assessee is allowed in excess and /or income of the assessee has been under assessed. Accordingly, in respect of the aforesaid aspects, enumerated in foregoing paragraphs as above, provision of Section 263 of the Income Tax Act, 1961 are clearly attracted to the facts of this case. In view of the above, it is proposed to suitably revise the assessment order passed by the A.O. u/s 263 of the I.T. Act, 1961. Accordingly you are hereby requested to make your submission if any by 26/03/2021 and to explain why the said order u/s 143(3) dated 22/12/2017 should not be revised u/s 263 of the I.T. Act, 1961. If nothing is heard from you by the said date, the necessary order will be passed ex-parte on the basis of material available on record without giving further opportunity to you, which may please be noted.”
Thus the ld. PCIT passed revisionary order u/s.263 of the Act dated 22.3.2021 on the issue of deduction u/s.80G relating to CSR expenses and also direction about grant of interest u/s.244A of the Act.
So far as the first reason for revising the assessment order by ld. PCIT is concerned the facts are narrated are as follow. Now, we have to examine the details and evidences produced by the assessee before AO during the course of the assessment proceedings. First of all, the ld. Counsel for the assessee Shri Yogesh Thar referred to the CASS Selection Reason and Issue which included reason for taxable income shown in the revised return being less than the taxable income shown in the original return. The relevant portion is reproduced hereunder:-
Reason Code Reason Description Issue TA05.01 Taxable Income shown in revised Whether reduction of return is less than the taxable income income in revised return shown in the Original return (Part B-
The assessee replied to the above vide letter dated 4.12.2017. The said reply is reproduced hereunder:-
Point 4 (page 2) With respect to query on taxable income in revised return being less than taxable income in original return, our client submits that the difference is on account of deduction claimed under Chapter VI-A in the revised return. Our client has made donation u/s 80G amounting to Rs. 98,00,000/- which is eligible for 50% deduction. Hence the taxable total income is less in revised return by Rs. 49,00,000/-. It may be noted that the donation receipt was submitted vide our letter dated 17.11.2017. Copy of donation receipt submitted as above is enclosed.
The assessee had also earlier replied to the questionnaire alongwith notice u/s.142(2) dated 18.9.2017 vide letter dated 17.11.2017 on the issue of large deduction under Chapter VI-A and also filed copy of donation receipt. The said reply is reproduced hereunder:-
“In the original return of income filed on 27.11.2015, our client has inadvertently not claimed deduction under section 80G of the Income Tax Act, 1961 (‘the Act’) amounting to Rs. 49,00,000/-. Further, a copy of the receipt, evidencing payment of Rs. 98,00,000/- is enclosed as Exhibit 1. 26. In view of the above facts, the learned Counsel for the assessee further argued that the AO has examined everything on the issue of allowability of CSR expense as donation.
We find that the issue is similar to one as decided by us in A.Y. 2016-17 (supra) and therefore our decision in ITA No. 814/Mum/2021 A.Y. 2016-17 (supra) would apply to this appeal as well. Accordingly we hold that the first
As regards interest u/s.244A, the ld. AR submitted that the issue was not raised in the notice u/s.263 of the Act and that no opportunity was provided in course of revision proceedings. The ld. PCIT in the revisionary order has stated that the tax computation sheet revealed that the assessee was allowed interest of Rs.71,38,341/- u/s.244A which was erroneous as the excess payment of Rs.1,48,73,533/- of interest was made as the net tax determined was less than 10% of the tax determined on regular assessment u/s.143(1) of the Act. Ld. PCIT therefore held that the AO has erred in computing interest u/s.244A of the Act.
As regards interest u/s.244A, the learned Counsel provided the details of taxes paid, tax assessed and how excess tax paid has been refunded. The assessee submitted the chart in the paper book which is reproduced hereunder:-
Sr no. Particulars Amount (In Rs.)
1 TDS 169,673,494 (Claimed in Revised return Rs. 16,96,81,351) 2 Advance Tax paid 212,881,636 ----------------- Total 382,555,130
3 Tax payable as per Assessment order u/s 143(3) 323,745,685
Refund 58,809,445
4 Above refund issued as under (As per intimation u/s 143(1) dated 04.03.2015) 43,935,816 (Interest u/s 244A Rs. 52,72,308)
Total Refund 58,809,353
Note: Total interest u/s 244A Rs. 71,38,341 (52,72,308+8,66,033)
It was submitted that initially the refund of Rs.4,39,35,816/- was granted in the intimation u/s.143(1) including interest u/s.244A of Rs.52,72,308/-. Subsequently, the regular assessment u/s.143(3) was completed and further refund of Rs.1,48,73,537/- was granted alongwith interest of Rs.18,66,033/-. Thus total interest u/s.244A was granted at Rs.71,38,341/-. Contention of PCIT as recorded in the order u/s.263 was that the refund of Rs.1,48,73,537/- was less than 10% of the tax determined on regular assessment u/s.143(3) of the Act. The learned Counsel explained that interest u/s.244A is allowable on the excess amount of tax paid over the tax determined under section 143(1) or on regular assessment. Proviso to section 244A(1) provides that if refund determined is less than 10% of the tax determined u/s.143(1) or regular assessment, interest shall not be payable. It was submitted that in the intimation u/s.143(1) tax determined was Rs.32,54,11,195/-. In the regular assessment the tax determined is Rs.32,37,45,685/-. It was submitted that the total refund granted under intimation as well as regular assessment should be considered as on finalization of regular assessment intimation u/s.143(1) gets merged with the regular assessment. It was submitted that refund granted under regular assessment cannot be considered in isolation without considering the refund granted under intimation u/s.143(1).
20 & 814/M/2021 M/s. Reliance Home Finance Ltd. 31. The learned Counsel further submitted the directions of PCIT to set-aside the order on this issue is beyond the show cause notice and that no opportunity was provided in course of revision proceedings and therefore, the order of the PCIT is not sustainable both on merits as well as on legal grounds.
The learned DR vehemently argued that there is a lack of full and proper inquiry on both the aspects. The learned DR relied upon various decisions. The learned DR relied upon the order of PCIT and submitted that the assessment order is erroneous and prejudicial to the interest of the revenue. The learned DR also pointed out that the receipt of Mandke Foundation does not specify the same as donation and therefore the same cannot be considered. On the issue of interest u/s.244A, the learned DR submitted that it is not necessary that the revision should be confined to the issues raised in the notice u/s.263 as held by Supreme Court in the case of CIT vs. Amitabh Bachhan 384 ITR 200 (SC).
On the issue of interest u/s.244A, the learned Counsel submitted that Supreme Court in the case of Amitabh Bachhan (384 ITR 200) (SC) does require the Commissioner to provide opportunity to the assessee on the issues not raised in the notice u/s.263 which has not been done. It was therefore submitted that the revision order on this issue is not justified.
We have heard the rival contentions and gone through the facts and circumstances of the case. The facts qua the first issue of are similar to one as decided by us supra in , therefore our decision would
21 & 814/M/2021 M/s. Reliance Home Finance Ltd. apply to this issue in this appeal as well and we accordingly hold that the revision of assessment u/s 263 of the Act by PCIT is bad in law. So far as the second item for revising the assessment is concerned, we find from the facts before us that the ld PCIT has not given any opportunity to the assesse during the revisionary proceedings and it was also not in the show cause notice issued. So on this basis, the revisions can not be sustained. Beside we note that the interest has been correctly allowed and there is no mistake which his prejudicial to the interest of the revenue. In view of these facts we are to quash the revisionary proceedings as well as order u/s 263 as bad in law.
The appeal of the assessee is allowed.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 24.11.2021.