SIDDHARTH COLORCHEM PRIVATE LIMITED,NARIMAN POINT, MUMBAI, MAHARASHTRA V. DCIT 3(3)(1), MUMBAI, AAYAKAR BHAWAN,MUMBAI

ITA 2903/MUM/2025

AI Insights

The case involves Siddharth Colorchem Pvt. Ltd., which appealed against the revision order passed by the Principal Commissioner of Income Tax, Mumbai. The revision order set aside the original assessment order, claiming it was erroneous and prejudicial to the interests of the Revenue because the Assessing Officer had allowed a deduction under Section 80G for Corporate Social Responsibility (CSR) expenses, which the Principal Commissioner believed should not have been allowed. The Tribunal examined whether the Assessing Officer had adequately inquired into the matter and whether the revision under Section 263 was justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652659 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Other Referred Cases: Blue Cross Laboratories Pvt. Ltd., Worley Services Industries Pvt. Ltd., JMS Mining (P.) Ltd. v. PCIT, Agilent Technologies (International) (P.) Ltd. v. ACIT, CIT v. Max India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: PRATEEK JAIN
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Assessment record
• Section: 143(3); 142(1); 263; 37(1); 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 2903/MUM/2025 Assessment Year: 2020-21 Siddharth Colorchem Pvt. Ltd., 121 Atanta, Nariman Point, Mumbai-400021. Vs. DCIT 3(3)(1), Aayakar Bhavan, Mumbai-400020. PAN NO. AABCS 7709 L Appellant Respondent Assessee by : Mr. Prateek Jain Revenue by : Mr. R.A. Dhyani, CIT-DR Date of Hearing : 05/06/2025 Date of pronouncement : 17/06/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against revision order dated 13.03.2025 passed by the Ld. Principal Commissioner of Income-tax, Mumbai – 3 [in short ‗the Ld. PCIT‘] for assessment year 2020-21, wherein he has set aside the assessment order dated 26.09.2022 holding the same as erroneous in so far as prejudicial to the interest of the Revenue. Siddharth Colorchem Pvt. Ltd. 2 ITA No. 2903/MUM/2025 2. The grounds raised by the assessee are reproduced as under: 1. On the facts and circumstances of the case and in law the Pr. Commissioner of Income Tax erred in passing the impugned order u/s. 263 of the Income Tax Act, 1961 ('the Act) without providing an adequate opportunity of being heard to the appellant as per the ground stated in the order or otherwise. 2. The Appellant submits that the order u/s. 263 of the Act made by the Pr. Commissioner of Income Tax is bad in law, erroneous, invalid, void, in excess of and / or in want of jurisdiction and otherwise illegal. 3. On the facts and circumstances of the case and in law. the Pr. Commissioner of Income Tax erred in holding that the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s 144B of the Act was erroneous and / or prejudicial to the interests of the revenue within the meaning of the provisions of section 263 to the extent of AO's action of not disallowing an amount of Rs. 15,00,000/- being claim of deduction u/s 80G in respect of Corporate Social Responsibility expense incurred, as per the ground/s contained in the order or otherwise. 4. On the facts and circumstances of the case and in law the Pr. Commissioner of Income Tax failed to consider that the assessment as framed u/s 143(3) r.w.s 144B by the Assessing Officer was after due application of mind and after considering the detailed replies on various dates as filed before him during the course of reassessment proceedings and hence, the Pr. Commissioner of Income Tax erred in passing order u/s. 263 as the order passed by the AO is not erroneous and prejudicial to the interests of the revenue. 5. On the facts and circumstances of the case and in law the Pr. Commissioner of Income Tax failed to appreciate that every loss of revenue as a consequence of an order of the A0 cannot be treated as prejudicial to the interests of the Revenue, when an AO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree unless the view taken by the AO is unsustainable in law. Consequently, the Pr. Commissioner of Income Rax erred in passing order u/s. 263 as the order passed by the AO is not erroneous and prejudicial to the interests of the revenue as the AO's action of allowing an amount of Rs. 15,00,000/- being claim Siddharth Colorchem Pvt. Ltd. 3 ITA No. 2903/MUM/2025 of deduction u/s 80G in respect of Corporate Social Responsibility expense incurred is sustainable in law. 3. Briefly stated, facts of the case are that the assessee, a company engaged in the business of manufacturing and export of dyestuffs and intermediates, filed its return of income for the relevant assessment year on 29.01.2021, declaring a total income of ₹35,20,91,580/-. The assessment was completed under Section 143(3) read with Section 144B of the Income-tax Act, 1961 (hereinafter referred to as ―the Act‖) on 26.09.2022, determining the total income at ₹35,86,01,929/-. Subsequently, the Learned Principal Commissioner of Income Tax (hereinafter ―Ld. PCIT‖), in exercise of the powers vested under the Act, called for the assessment records. Upon examination thereof, the Ld. PCIT observed that certain material aspects had not been verified by the Faceless Assessing Officer (hereinafter ―FAO‖) while passing the assessment order. It was specifically noted by the Ld. PCIT that the assessee had debited an amount of ₹30,00,000/- towards expenditure incurred under the head ―Corporate Social Responsibility‖ (CSR), which had been rightly disallowed by the assessee itself in the computation of income, in view of the specific bar under Explanation 2 to Section 37(1) of the Act. However, the assessee simultaneously claimed a deduction of ₹15,00,000/-, being 50% of the said CSR expenditure, under Section 80G of the Act, which was erroneously allowed by the FAO. The Ld. PCIT was of the considered view that CSR expenditure, being a statutory Siddharth Colorchem Pvt. Ltd. 4 ITA No. 2903/MUM/2025 obligation under Section 135 of the Companies Act, 2013, is not incurred voluntarily, and hence, does not qualify for deduction under the r specific provisions of the section 37(1) of the Act. It was further observed by the ld PCIT that the FAO did not examine the issue of allowability of claim of deduction under Section 80G in respect of the said amount. In the absence of such examination, the Ld. PCIT concluded that the FAO had failed to apply his mind to the issue, thereby rendering the assessment order erroneous, in so far as it was prejudicial to the interest of the Revenue. Accordingly, invoking the provisions of Section 263 of the Act, the Ld. PCIT set aside the assessment order dated 26.09.2022, with a direction to the Assessing Officer to frame a fresh assessment after making necessary verification and disallowing the deduction claimed under Section 80G in respect of the said CSR expenditure, after affording due opportunity of being heard to the assessee. 4. The Ld. PCIT in para 6.9 of the impugned order has noted that the Co-ordinate Bench of the Tribunal in following two cases has decided the issue in favour of assessee but the Department had preferred further appeal before the Hon‘ble High Court: Sr. No. Name of the Case PAN ITAT Order No. High Court Lodging No. 1. Blue Cross Laboratories Pvt. Ltd. AAACB1549G 1806/Mum/2023 TXAL/30782/2024 2. Worley Services Industries Pvt. Ltd. AAACH0456J 554/M um/2024 ITXAL/4392/2025 Siddharth Colorchem Pvt. Ltd. 5 ITA No. 2903/MUM/2025 5. Before us, the learned counsel appearing on behalf of the assessee submitted that the Assessing Officer had duly examined and verified the assessee‘s claim for deduction under Section 80G of the Act. In support of such submission, he invited our attention to the query raised by the Assessing Officer vide notice issued under Section 142(1) of the Act dated 07.12.2021, which is placed at pages 19–20 of the Paper Book. In the said notice, the Assessing Officer specifically called upon the assessee to furnish the source of payment and the exemption certificate pertaining to the donation made. In response thereto, the assessee, by way of its letter dated 17.01.2022, a copy of which is found at pages 23–28 of the Paper Book, submitted that a donation of ₹30,00,000/- had been made to the ‗B. L. Singhania Foundation‘. Along with this, the assessee furnished a copy of the relevant bank statement evidencing the payment, as well as a valid certificate under Section 80G issued in favour of the assessee. The bank statement evidencing the said transaction is available at page 29 and the 80G certificate at page 30 of the Paper Book. Based on the aforesaid, it was contended that the Assessing Officer had duly applied his mind to the issue and conducted inquiries before accepting the claim. It was, therefore, not a case of lack of inquiry or non-application of mind, which alone could justify the exercise of revisionary jurisdiction under Section 263 of the Act. In further support, the learned counsel placed reliance on the decision of the Co-ordinate Bench of the Kolkata Tribunal in the case of JMS Mining (P.) Ltd. v. PCIT [2021] 130 Siddharth Colorchem Pvt. Ltd. 6 ITA No. 2903/MUM/2025 taxmann.com 118 (Kolkata-Trib.). It was submitted that in the said case also, the assessee had claimed deduction under Section 80G in respect of donations forming part of CSR expenditure. The Tribunal, after examining the statutory framework, particularly the proviso to Section 80G(2), noted that while donations to funds such as the Swachh Bharat Kosh and the Clean Ganga Fund are expressly excluded for CSR deductibility under Section 80G, no such restriction applies to other qualifying donations and section 263 invoked was accordingly setaside. The learned counsel further submitted that the Ld. PCIT himself had acknowledged the existence of a view taken by Co-ordinate Benches of the Tribunal favouring the allowability of such deduction, and that the Department‘s challenge to the same is presently pending before the jurisdictional High Court. Thus, it was argued that the view adopted by the Assessing Officer was a plausible and sustainable one in law, and merely because the Ld. PCIT held a different legal opinion, he could not invoke Section 263 to supplant the original view with his own interpretation. 5.1 In rebuttal, the learned Departmental Representative placed reliance on the decision of the Delhi Tribunal in Agilent Technologies (International) (P.) Ltd. v. ACIT [(2024) 160 taxmann.com 238 (Delhi-Trib.)], wherein it was held that CSR expenditure, being specifically disallowed under Section 37(1) of the Act, cannot be simultaneously claimed under Section 80G. Siddharth Colorchem Pvt. Ltd. 7 ITA No. 2903/MUM/2025 According to the Revenue, such a statutory bar operates uniformly and, therefore, any allowance of deduction under Section 80G in respect of CSR expenditure would be contrary to law. 6. We have heard the rival submissions advanced by the parties and carefully perused the material placed on record. The Ld. PCIT has exercised revisionary jurisdiction under Section 263 of the Act and held that the assessment order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interest of the Revenue. The basis of such finding was that the Assessing Officer had allegedly failed to conduct any inquiry before allowing the assessee‘s claim of deduction under Section 80G of the Act, in respect of the amount forming part of Corporate Social Responsibility (CSR) expenditure, which had otherwise been disallowed under Section 37(1) of the Act. Before us, the learned counsel for the assessee has drawn attention to the inquiries conducted by the Assessing Officer through the issuance of notice under Section 142(1) of the Act and to the specific replies furnished by the assessee substantiating its claim. It is evident from the record that the assessee had furnished details regarding the donation, including the name of the recipient trust, the source of payment, the bank statement evidencing the said payment, and a valid certificate of eligibility under Section 80G of the Act. Upon a cumulative appraisal of the record, we are of the considered view that the Assessing Officer had duly examined the requisite Siddharth Colorchem Pvt. Ltd. 8 ITA No. 2903/MUM/2025 conditions under Section 80G of the Act before allowing the deduction. This is, therefore, not a case where no inquiry was conducted or where the inquiry was perfunctory. Rather, the material placed before the Assessing Officer was considered, and a conscious view was taken on the issue. 6.1 Further, it is not in dispute that divergent judicial views existed at the relevant time. The Ld. PCIT himself has taken note of decisions of Co-ordinate Benches of the Tribunal wherein deduction under Section 80G was allowed in respect of donations forming part of CSR expenditure. The assessee has also placed reliance on the judgment of the Kolkata Bench of the Tribunal in JMS Mining (P.) Ltd., while the Revenue has referred to the contrary view adopted in Agilent Technologies (International) (P.) Ltd. by the Delhi Bench. 6.2 In view of the existence of two plausible legal views on the issue, it is trite law that where the Assessing Officer has adopted one of the possible views—one which is neither perverse nor contrary to law—the exercise of revisionary jurisdiction under Section 263 of the Act is not warranted. The view adopted by the Assessing Officer cannot be regarded as unsustainable in law merely because another authority holds a different opinion. Further, in CIT v. Max India Ltd. [(2007) 295 ITR 282 (SC)], it is held that where two views are possible and the Assessing Officer has adopted one of them, the revisional jurisdiction cannot be exercised merely because the Commissioner prefers the other view. Siddharth Colorchem Pvt. Ltd. 9 ITA No. 2903/MUM/2025 6.3 Accordingly, we are of the view that the assessment order in question cannot be held to be erroneous and prejudicial to the interest of the Revenue so as to justify interference under Section 263 of the Act. The impugned order passed by the Ld. PCIT is, therefore, not sustainable in law and is hereby set aside. 6.4 The grounds raised by the assessee are allowed. 7. The appeal of the assessee is accordingly allowed. Order pronounced in the open Court on 17/06/2025. Sd/- Sd/- (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 17/06/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai "