PATEL INFRASTRUCTURE LIMITED,AHMEDABAD vs. THE PCIT (CENTRAL), SURAT, VADODARA

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

This appeal has been filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax (Central), (in short “Ld.
PCIT”), Surat at Vadod vide order dated 31.03.2025 passed for A.Y. 2020-
21. 2. The assessee has raised the following grounds of appeal:

“1. On the facts and circumstances of the case as well as law on the subject, the learned Principal Commissioner of Income Tax, Surat has erred in passing order u/s 263 of the Act for assessment year 2020-21. 2. On the facts and circumstances of the case as well as law on the subject, the learned Principal Commissioner of Income Tax, Surat has erred in passing order u/s 263 of the Act when order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of revenue.

any inquiry on the matter of expected credit loss and failed to examine the computation of the adjustment under ICDS and neither did he scrutinize the relevant audit details. This lack of inquiry amounted to non-application of mind, thereby rendering the order erroneous and prejudicial to the interest of the Revenue. Similarly, in relation to the section 80G deduction, the PCIT noted that the assessing officer did not verify whether the donation of ₹84,00,000/- (50% of which was claimed as a deduction) was made towards
CSR activities, and which are not eligible for deduction under section 80G of the Act. The assessee failed to provide a satisfactory explanation regarding the nature of the donation, and the omission to examine this issue led to underassessment and short levy of tax. Principal CIT placed reliance on rulings by the Supreme Court and various High Courts and held that revision under section 263 of the Act is justified when an assessment order is passed without due inquiry or consideration of material facts. Principal CIT was of the view that the mere act of calling for information does not constitute proper inquiry unless the assessing officer applies his mind to the material and arrives at a reasoned conclusion. In this case, the assessment order showed no indication of such examination, by the Assessing Officer.
Accordingly, the PCIT held that the assessment order was passed without necessary inquiry into material issues, making it erroneous and prejudicial to the interest of the Revenue.

assessment on two primary issues: (i) the allowability of deduction under section 80G of the Act for donation of ₹84,00,000/- to 'VG Patel Foundation', and (ii) the tax treatment of the amount of ₹1,94,67,203/- debited in the profit and loss account as “Expected Credit Loss”. It is the case of the assessee that the PCIT has wrongly invoked the revisionary juri iction under section 263
of the Act, despite there being no error in the assessment order. With respect to the first issue concerning the deduction under section 80G, the Counsel for the assessee submitted that the donation of ₹84,00,000/- was made to ‘Late
Vithalbhai Gobarbhai Patel Foundation’ which held a valid exemption approval under section 80G(5)(vi) of the Act vide order dated 22.10.2019
issued by the competent authority. A copy of the said approval certificate was submitted as part of the response during revision proceedings, and there is no dispute about the validity of the donee institution’s approval. Furthermore, during the assessment proceedings, the Assessing Officer had called for comprehensive details regarding all deductions, exemptions, and rebates claimed by the assessee for the relevant year vide notice dated 03.03.2022. The assessee had duly responded to the said notice and furnished all the supporting documents, including those relating to the donation to VG Patel
Foundation. Accordingly, the allegation that the Assessing Officer failed to verify the genuineness or eligibility of the section 80G claim is not coming from the facts and amounts to a mere change of opinion by the PCIT, which is impermissible in law under section 263 of the Act. With regards to the second issue regarding the expected credit loss of ₹1,94,67,203/-, the Counsel for the assessee submitted that while the said amount was debited to the profit and loss account as per Ind AS-compliant financial statements, the entire amount was voluntarily offered for taxation by making corresponding adjustments under the Income Computation and Disclosure Standards
(ICDS), specifically under ICDS I (Accounting Policies). This adjustment was duly disclosed in the Tax Audit Report and in the ITR under “Part A -
Asst.Year –2020-21
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OI - Other Information” and resulted in a net increase in taxable income by ₹1,07,53,745/- after combining other ICDS-related adjustments. The Counsel for the assessee has placed on record the relevant sections of the Tax
Audit Report, Return of Income (ITR-6), and the computation worksheet showing these disclosures and adjustments. On going through the facts of the case, we observe that the expected credit loss was not claimed as a deduction in computing income under the Act, and thus there is no question of disallowance or underassessment on this account. The revisionary juri iction under section 263 of the Act, in our view, cannot be exercised on mere presumptions or hypothetical loss to Revenue, especially when the assessee has offered the said provision for taxation voluntarily and disclosed all the necessary details in the Return of Income and the Tax Audit Report.
We further note that both issues-80G deduction and ICDS adjustments-were part of the material filed before the Assessing Officer during the assessment proceedings, and no adverse comment or finding was made in the assessment order. The PCIT’s observation that there was no inquiry or lack of application of mind is not sustainable when the record shows that requisite information was called for and duly furnished before the Assessing Officer, and no discrepancy was found. It is a settled law that if the Assessing Officer adopts one of the plausible views based on the facts and materials before him, the same cannot be substituted by the PCIT merely because he holds a different view, unless the view of the Assessing Officer is unsustainable in law or results in prejudice to the Revenue.

the other conditions of that section are met. The Tribunal relied on several rulings by co-ordinate benches across India, holding that the mandatory nature of CSR expenses does not disqualify them from deduction under Section 80G if they fulfill the section’s conditions. The ITAT Delhi in Interglobe Technology Quotient Ltd (2024) 163 taxmann. com 542 (Del) held that while CSR expenditure is disallowed as a business expense under Section 37(1) due to Explanation 2 introduced by the Finance (No. 2) Act,
2014, it remains part of the assessee’s total income and thus eligible for deduction under Chapter VIA, which includes Section 80G. The Tribunal clarified that CSR contributions, although mandatory, still retain the voluntary and philanthropic nature required under Section 80G, as they are made without any reciprocal benefit from the donee. ITAT observed that there is no linkage between disallowance under Section 37(1) and eligibility for deduction under Section 80G, and the Revenue had not alleged any failure on part of the assessee to meet other Section 80G conditions. The Mumbai
536 (Mum) held that CSR expenses, although statutorily required under Section 135 of the Companies Act, 2013, do not lose their character as donations eligible for deduction under Section 80G, except where specific exclusions (like donations to the Swachh Bharat Kosh or Clean Ganga Fund under Section 80G(2)(a)(iiihk)/(iiihl)) apply. The Tribunal ruled that as long as the conditions of Section 80G are satisfied, such donations remain allowable, even after CSR-related restrictions under Section 37(1). The Kolkata Bench in JMS Mining (P.) Ltd. vs. PCIT (2021) 130
Asst.Year –2020-21
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Officer’s view allowing the deduction was found plausible, the Tribunal held that invoking revisionary powers under Section 263 was unjustified.
Similarly, the Mumbai Bench in Societe General Securities India P Ltd -
(2023) 157 taxmann.com 533 (Mum) held that revision proceedings initiated to disallow Section 80G claims on CSR contributions were improper.

TANMAY, Sr. PSआदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to :
1. अपीलाथŎ / The Appellant
2. ŮȑथŎ / The Respondent.
3. संबंिधत आयकर आयुƅ / Concerned CIT
4. आयकर आयुƅ(अपील) / The CIT(A)-
5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाडŊ फाईल / Guard file.

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.