ITAT Quashes Section 263 Revision Over CSR Deduction u/s 80G

Blueberry Trading Company Private Limited Vs PCIT (ITAT, Mumbai Bench)

PCIT Cannot Turn “Enquiry Made” into “Enquiry Missing”: Revision u/s 263 Over CSR Deduction u/s 80G Quashed

Summary:

Return, Scrutiny & CSR Contribution

Blueberry Trading Company Private Limited filed its return of income for AY 2022-23 on 7 November 2022, declaring a total income of ₹2,65,65,270. The case was selected for complete scrutiny, inter alia, because of the large deduction claimed under Chapter VI-A.

The assessment was completed u/s 143(3) r.w.s. 144B on 9 March 2024, accepting the returned income.

The assessee had incurred expenditure of ₹11,29,000 towards its corporate social responsibility obligations u/s 135 of the Companies Act, 2013. Since CSR expenditure is not allowable while computing business income, the assessee had itself added back the amount in its computation.

However, as the contribution had been made to an eligible institution, the assessee separately claimed a 50% deduction u/s 80G amounting to ₹5,64,500.

PCIT’s Objection u/s 263

On examining the assessment records, the PCIT took the view that CSR expenditure was incurred pursuant to a mandatory statutory obligation u/s 135 of the Companies Act, whereas a donation contemplated u/s 80G was ordinarily voluntary.

According to the PCIT, expenditure undertaken to discharge a compulsory CSR obligation could not assume the character of a voluntary donation merely because the payment was made to an institution approved u/s 80G.

The PCIT also alleged that the AO had not conducted proper verification regarding the eligibility of the deduction. He accordingly treated the assessment order as erroneous insofar as it was prejudicial to the interests of the Revenue, set aside the assessment on this limited issue & directed the AO to conduct proper enquiry and reassess the income in accordance with law.

Assessee Shows the Enquiry Trail

The assessee contended that the AO had specifically examined the deduction during the scrutiny proceedings.

Through a notice u/s 142(1) dated 23 August 2023, the AO had called for section-wise details of deductions claimed under Chapter VI-A, details of earnings, an eligibility note, bank statements & documentary evidence supporting the claim.

In response, the assessee filed its reply dated 21 September 2023 and furnished the relevant donation receipt, detailed note supporting the deduction u/s 80G & bank extracts evidencing the payment.

Thus, it was not a case where the AO had accepted the claim without raising any query or examining any evidence. The relevant issue was specifically identified during scrutiny & the assessee’s explanation and supporting documents were placed before the AO.

The assessee argued that the PCIT had invoked u/s 263 merely because he entertained a view different from the view adopted by the AO.

Revenue Defends the Revision

The Revenue contended that the AO had failed to make an adequate enquiry into the eligibility of the CSR payment for deduction u/s 80G.

It was argued that an amount spent pursuant to the mandatory requirement u/s 135 of the Companies Act could not be regarded as a voluntary donation merely because the recipient institution possessed approval u/s 80G. The PCIT was therefore justified in directing a proper examination of the claim.

No Discussion Does Not Mean No Enquiry

The ITAT examined the assessment records & found that the AO’s notice contained a specific requirement for details and evidence relating to the Chapter VI-A deductions. The assessee had duly responded with its eligibility note, receipt, bank extracts & supporting documents.

The Tribunal held that the claim u/s 80G had been specifically enquired into during scrutiny. The mere fact that the final assessment order did not contain an elaborate discussion regarding the deduction could not lead to the conclusion that the AO had undertaken no enquiry or verification, particularly when the enquiry & response were evident from the assessment records.

The PCIT had also failed to demonstrate that the enquiry was wholly absent or that the supporting material furnished by the assessee had not been examined.

Revisionary jurisdiction cannot be exercised merely because the PCIT believes that the AO should have conducted a more elaborate enquiry or because another view on the allowability of the claim is possible. Both statutory conditions—namely, that the order must be erroneous as well as prejudicial to the interests of the Revenue—must coexist.

Identical Coordinate Bench Decisions Followed

The ITAT relied upon the coordinate bench rulings in Here Solutions India Pvt. Ltd. v. DCIT & Firemenich Aromatics Production (India) Pvt. Ltd. v. AO. On materially identical facts involving deduction u/s 80G for CSR contributions, revisionary orders u/s 263 had been quashed because the AO had raised specific queries & the assessees had furnished supporting evidence.

Following these decisions, the ITAT held that the PCIT’s assumption of jurisdiction u/s 263 was unsustainable & quashed the revisionary order.

Since the revision was quashed on the jurisdictional ground, the Tribunal left the substantive eligibility of the CSR contribution for deduction u/s 80G open and unadjudicated. The assessee’s grounds on merits became academic.

Key Takeaway

An AO is not required to write an essay on every issue examined during scrutiny. Where the assessment record establishes a specific query, a detailed reply & supporting evidence, silence in the assessment order cannot be repackaged as absence of enquiry. Section 263 empowers the PCIT to correct a genuinely erroneous order-not to demand a longer assessment order or substitute his preferred opinion for a possible view adopted by the AO.

Cases Discussed

• Here Solutions India Pvt. Ltd. v. DCIT
• Firemenich Aromatics Production (India) Pvt. Ltd. v. AO

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI

Present appeal filed by assessee arises out of the order dated 20/03/2026 passed by Learned Principal Commissioner of Income-tax – 6 [hereinafter referred to as “Ld.PCIT”] for A.Y. 2022-23, on the following ground/s of appeal:-

“1) Ground 1 a The Learned Principal Commissioner of Income Tax Mumbai 6 hereinafter referred as Principal Commissioner of Income Tax OR PCIT erred in passing Revision Order under section 263 of the Income tax Act 1961 and setting aside the Assessment Order passed under section 143(3) of the Act read with section 144B of the Act without fulfilling the twin conditions precedent to invoke the provisions of section 263 of the Act that the order passed by Assessing Officer is erroneous and the order is prejudicial to the interest of the revenue therefore the Revision Order passed under section 263 of the Act is illegal null bad in law without jurisdiction and ought to be quashed.

2) Ground 1 b The Principal Commissioner of Income Tax failed to appreciate the fact that the Assessing Officer had conducted detailed inquiries in respect of appellants claim of deduction under section 80G of the Act during the course of scrutiny proceedings therefore the Assessment Order passed under section 143(3) read with section 144B of the Act is neither erroneous nor prejudicial to the interest of the Revenue and consequentially the Revision Order passed under section 263 of the Act is bad in law void ab initio and ought to be quashed.

3) Ground 2 Without prejudice to what has been stated above the Principal Commissioner of Income Tax erred in setting aside the Assessment Order on the issue of claim of deduction under section 80G of the Act vis a vis Corporate Social Responsibility CSR expenses amounting to Rs.11,29,000/- on the ground that CSR expenditure is incurred as per mandatory requirement under section 135 of the Companies Act 2013 whereas donation is a voluntary act.

4) Ground 3 The appellant submits that the learned Assessing Officer be directed

i. to set aside and cancel the Revision Order passed by the Principal Commissioner of Income Tax under section 263 of the Act ii. without prejudice to what is stated in above

ii. to allow deduction amounting to Rs.5,64,500/- under section 80G of the Act pursuant to CSR donation;

and to modify the assessment in accordance with the provisions of the Act.

5) Ground 4 Each of the above grounds of appeal are independent and without prejudice to each other.

6) Ground 5 The appellant craves liberty to add, to alter and/OR amend the grounds of appeal as and when given.”

2. Brief facts of the case are as under:-

Assessee filed its return of income on 07/11/2022 declaring total income of Rs.2,65,65,270/-. The case was selected for complete scrutiny, inter alia, on account of large deduction claimed under Chapter VIA. The assessment was completed u/s 143(3) r.w.s. 144B of the Act vide order dated 09/03/2024, accepting the returned income.

2.1. Subsequently, the Ld.PCIT, on examination of assessment records, observed that the assessee had incurred CSR expenditure of Rs.11,29,000/-, which had been added back while computing its business income. However, the assessee claimed deduction u/s 80G of the Act at 50% thereof, amounting to Rs.5,64,500/-. According to the Ld. PCIT, CSR expenditure is obligatory in nature under section 135 of the Companies Act, 2013 and cannot be regarded as a voluntary donation eligible for deduction u/s 80G of the Act. It was further observed that the Assessing Officer had not carried out proper verification regarding such claim. The Ld. PCIT, therefore, held the assessment order to be erroneous insofar as it is prejudicial to the interests of the Revenue and set aside the assessment on this limited issue, directing the Ld. AO to make proper enquiry and re-assess the income in accordance with law.

2.2. Before the Ld. PCIT, the assessee submitted that the Ld. AO had specifically called for complete details of deductions claimed under Chapter VIA through notice issued u/s 142(1) dated 23/08/2023. In response, the assessee furnished its reply dated 21/09/2023 along with the donation receipt, a detailed note in support of deduction u/s 80G and relevant bank extracts. It was submitted that after due verification, the Ld. AO accepted the claim in the assessment framed u/s 143(3) of the Act. The assessee also relied on the decisions of the Coordinate bench in the cases of Township Real Estate Developers Private Limited v. PCIT-6, in ITA No.3303/Mum/2025, and BKC Properties Private Limited v. PCIT-6, in ITA No.3304/Mum/2025.

Aggrieved, by the order of Ld.PCIT, the assessee is in appeal before this Tribunal.

3. Before us, the Ld.AR reiterated the submissions advanced before the Ld.PCIT. He submitted that the very issue was the subject matter of a specific enquiry by the Ld.AO during assessment proceedings. He submitted that during the assessment proceedings, the Ld.AO vide notice issued under section 143(1) raised specific query relating to the allowability of exemption under section 80. He relied on page 25 of the paper book and referred to question 2 to 5 which were specific to the allowability of 80 G in the hands of the assessee. The Ld.AR also referred to the reply filed in response to the notice placed at page 28 and 32 in respect of the same and the supportive evidences to substantiate the deduction.

3.1. The Ld.AR thus submitted that the assessee had placed all supporting material on record, including donation receipt, detailed note and bank statement. He submitted that the Ld.PCIT invoked section 263 merely because he held a view different from the view adopted by the Ld.AO. Reliance was placed on following decisions of the coordinate bench involving group concerns of the assessee on identical facts:

Here Solutions India Pvt.Ltd vs. DCIT in ITA no.6658/MUM/2025 dated 30/01/2026 for assessment year 2022-23

Firemenich Aromatics Production(India) Pvt.Ltd vs.AO in ITA no.3987/Mum/2024 vide order dated 31/07/2025 for assessment year 2020-21.

3.2. The Ld.DR relied on the impugned order and submitted that the Ld. AO had failed to make adequate enquiry regarding the eligibility of CSR expenditure for deduction u/s 80G of the Act. It was submitted that a mandatory statutory expenditure under section 135 of the Companies Act, 2013 cannot assume the character of a voluntary donation merely because it is paid to an institution eligible for deduction u/s 80G of the Act.

We have perused the submissions advanced by both sides in light of the record placed before us.

4. The assessment records, as extracted in the impugned order itself, reveal that the Ld.AO issued a specific notice u/s 142(1) of the Act dated 23/08/2023 calling upon the assessee to furnish section-wise details of deduction claimed under Chapter VIA, details of earnings, eligibility note, bank statements and documentary evidences in support of the deduction. The assessee, in response thereto, filed its reply dated 21/09/2023 together with donation receipt, detailed note substantiating the claim u/s 80G of the Act and relevant bank extracts.

4.1. It is thus evident that the claim of deduction u/s 80G of the Act was specifically enquired into by the Ld. AO during the course of scrutiny assessment. The fact that the assessment order does not contain an elaborate discussion on the issue, by itself, cannot lead to the conclusion that no enquiry or verification was carried out, particularly when the relevant enquiry and response are borne out from the assessment records.

4.2. We further note that the coordinate bench, in the case of Here Solutions India Pvt.Ltd vs.DCIT (supra) and Firemenich Aromatics Production(India) Pvt.Ltd vs.AO (supra), on materially identical facts concerning deduction u/s 80G claimed in respect of CSR contribution, quashed the revisionary order passed u/s 263 of the Act. The coordinate bench noted that the Ld.AO made specific enquiry regarding deduction claimed u/s 80G and the assessee had furnished supporting documentary evidences. The revisionary order was accordingly held to be unsustainable.

4.3. The Ld. PCIT, in the present case, has not demonstrated that the enquiry conducted by the Ld.AO was wholly absent or that the material furnished by the assessee was not examined. The revisionary jurisdiction u/s.263 of the Act cannot be invoked merely because the Ld.PCIT is of the view that a more elaborate enquiry ought to have been conducted or that another view on the allowability of the claim is possible. The twin conditions, namely, that the assessment order must be both erroneous and prejudicial to the interests of the Revenue, are not fulfilled in the facts of the present case.

4.4. Respectfully following the aforesaid coordinate bench decisions and considering that the Ld. AO had made specific enquiry into the assessee’s claim u/s 80G of the Act, we hold that the assumption of jurisdiction by the Ld. PCIT u/s 263 of the Act is unsustainable. Accordingly, the impugned revisionary order is quashed.

4.5. Since we have quashed the revisionary order on the legal ground, the grounds raised by the assessee on the merits of deduction u/s 80G of the Act are rendered academic and do not require separate adjudication.

In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 31-08-2026.