Naik Seafoods Pvt. Ltd. Vs PCIT (ITAT Mumbai)
The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act for Assessment Year 2016–17. The Pr.CIT had set aside the assessment completed under Section 143(3), holding that the assessment order was erroneous and prejudicial to the interests of the revenue on three issues: (i) deduction under Section 80G claimed on Corporate Social Responsibility (CSR) expenditure, (ii) allowance of bad debts, and (iii) genuineness of fish purchases.
Regarding CSR expenditure, the assessee had disallowed ₹2.80 lakh in computation but claimed deduction of ₹1.40 lakh under Section 80G. The Pr.CIT held that CSR expenses could not be claimed as donations under Section 80G, as this would defeat the purpose of CSR provisions, and the Assessing Officer had failed to examine this issue.
On bad debts of ₹376.40 lakh, the Pr.CIT observed that no such claims were made in earlier years and that the Assessing Officer had not examined the genuineness or nature of the debts through independent inquiry. It was concluded that lack of verification rendered the assessment order erroneous.
With respect to fish purchases amounting to ₹197.94 crore, constituting about 95% of sales, the Pr.CIT held that the Assessing Officer had failed to verify the genuineness of purchases, particularly as transactions were through intermediaries and payments were irregular. The Pr.CIT directed fresh examination of these issues by the Assessing Officer.
