ASHVIN PARSOTTAMBHAI SARDHARA,AHMEDABAD V. THE ACIT, CIRCLE-4(1)(1), AHMEDABAD

ITA 68/AHD/2025

AI Insights

The case involves Ashvin Parsottambhai Sardhara, the appellant, who contested the penalty order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre regarding the disallowance of a deduction claim for a donation made to M/s Bioved Research Society, Allahabad. The primary legal issue was the validity of the reassessment order and the subsequent disallowance of the deduction under section 35(1)(ii) of the Income Tax Act, 1961. The Tribunal examined whether the CIT(Appeals) erred in law and on facts in dismissing the grounds of appeal and not considering the submissions adequately. The Tribunal also considered the impact of the rescission of the institution's approval on the eligibility for the deduction claimed.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25808 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Other Referred Cases: Rashmiben Sharadbhai Patel Vs. DCIT, The Principal Commissioner of Income Tax-3 Vs. M/s. Thakkar Govindbhai Ganpatlal HUF, M/s. Vora Financial Services Pvt. Ltd. Vs. ACIT, MRC Transolutions Pvt. Ltd. Vs. ACIT, Inspiron Engineering P Ltd v/s DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADJOURNMENT APPLICATION FILED
• Assessee Lawyers: D K PARIKH
• Keywords: Set aside; Reopening of assessment; Principle of natural justice; Accommodation entries
• Section: 147

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.TA. No.68/Ahd/2025 (Assessment Year: 2013-14) Ashvin Parsottambhai Sardhara, B-27, Sudarshan Tower, Opp. Sun-N-Step Club, Sal Hospital Road, Thaltej, Ahmedabad-380054. Vs. The Assistant Commissioner of Income Tax, Circle-4(1)(1), Ahmedabad. [PAN No.BDJPS2083Q] (Appellant) .. (Respondent) Appellant by : Shri D K Parikh, AR Respondent by: Adjournment Application filed Date of Hearing 11.03.2025 Date of Pronouncement 18.03.2025 O R D E R PER: DR. BRR KUMAR, VICE PRESIDENT: This appeal has been filed by the Assessee against the penalty order passed by the Ld. Commissioner of Income Tax (Appeals)/National Appeal Centre vide order dated 21.11.2022 passed for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal: ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 2– 1. The learned CIT(Appeals) / NATIONAL FACELESS APPEAL CENTRE [NFAC] has grievously erred both in law and on facts in dismissing Ground No: 1 & 2 of the appeal challenging the validity of reassessment order. On the facts and in view of the submissions made, the order passed being untenable in law ought to be quashed. It be quashed now. 2. Without prejudice to the above ground, the Id CIT (Appeals)/NFAC further erred in law and on facts in not properly considering the grounds No: 3 to 8 and elaborate submissions thereon and dismissing the same by a cryptic order. It be so held now and grounds on merits of disallowance be allowed in favour of appellant now. 3. The Id CIT(Appeals )/NFAC further grievously erred both in law and on facts in not following the decisions on identical facts of the higher forum including the judgment by Jurisdictional High Court and Co ordinate benches furnished to him and not even commenting on the legal position emerging there from. It be so held now and in view of settled legal position, the deduction of Rs. 17,50,000/- claimed be directed to be allowed now. 4. The Id CIT(Appeals) / NFAC grievously erred in law and ofacts in holding that the disallowance u/s 35(1)(ii) made on the basis of retrospective withdrawal of approval when the appellant had satisfied all conditions of genuine donation at the time of making donation and evidences thereof were filed with submissions. It be so held now and order passed by authorities below be set aside and deduction be directed to be allowed as claimed. 5. The Id CIT(Appeals)/ NFAC patently went wrong in not properly considering submissions, following the decisions cited and copies furnished to him fully and in passing the order in violation of principles of natural justice and audi alterem partem deserves to be set aside. It be set aside now. 6. The Id CIT(Appeals)/ NFAC ought to have allowed the appeal in toto. 7. The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing. ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 3– 3. The only effective issued raised by the assessee is that the learned CIT(A)/NFAC erred in confirming the disallowance of the weighted deduction under section 35(1)(ii) of the Act for Rs.17,50,000/- 4. The brief facts of the case are that the assessee had claimed deduction u/s 35(1)(ii) of the Act for having given donation to M/s Bioved Research Society. Allahabad of Rs 17,50,000/- (175% of actual donation). According to the AO, the CBDT vide Circular No F.No 203/31/2018-ITA(II) dated 28.02.2019, it was clarified that the Central Government had withdrawn the Notification No 5 of 2008 dated 01.02.2008 issued to M/s Bioved Research Society, Allahabad which was approved u/s 35(1)(ii) of the Act after it was found that the said institution misused the benevolent provision of the Act. The said notification issued earlier was rescinded w.e.f. 01.04.2011 vide Notification No 3 of 2019 dated 02.01.2019. The circular also stated that M/s Bioved Research Society. Allahabad had grossly misused the provision of Section 35(1)(ii) of the Act by allegedly providing accommodation entries to the donors in the name of research activities and which enabled the donors to claim a false weighted deduction under the Act. As the said notification was rescinded w.e.f. 01.04.2011, the AO held that the appellant was not eligible for claiming of deduction of Rs.17,50,000/- for the impugned A.Y. As the assessee did not respond to the show cause notice issued by the AO, the AO disallowed the said deduction claimed. ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 4– 5. Aggrieved assessee preferred an appeal before the Ld.CIT(A), who dismissed the appeal of the assessee. 6. The Ld. Counsel for the assessee placed reliance on various judicial precedents which are as follows: i. Co-ordinate Bench of ITAT in the case of Rashmiben Sharadbhai Patel Vs. DCIT in ITA No. 266/Ahd/2021 dated 16.10.2023. ii. Jurisdictional High Court of Gujarat in the case of The Principal Commissioner of Income Tax-3 Vs. M/s. Thakkar Govindbhai Ganpatlal HUF in Tax Appeal No.881 of 2019. iii. Co-ordinate Bench of ITAT Mumbai, in the case of M/s. Vora Financial Services Pvt. Ltd. Vs. ACIT dated 29.06.2018. iv. Co-ordinate Bench of ITAT Pune, in the case of MRC Transolutions Pvt. LTd. om ITA No.528/PUN/2017 dated 29.01.2021 7. On this issue, we have examined the order of the Ld.CIT(A). For the sake of completeness and ready reference, the relevant part of the adjudication of the Ld.CIT(A) is reproduced as under: “…Ground No 1 is relating to reopening of assessment u/s 147 of the Act. As it is claimed by the appellant that there is no valid reasons to believe as envisaged in section 147 of the Act. The AO has observed in the assessment order that the CBDT vide Circular No F.No 203/31/2018-ITA(II) dated 28.02.2019, it was clarified that the Central Government had withdrawn the Notification No 5 of 2008 dated 01.02.2008 issued to M/s Bioved Research Society, Allahabad which was approved u/s 35(1)(ii) of ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 5– the Act after it was found that the said institution misused the benevolent provision of the Act. The said notification issued earlier was rescinded w.e.f. 01.04.2011 vide Notification No 3 of 2019 dated 02.01.2019. The circular also stated that M/s Bioved Research Society, Allahabad had grossly misused the provision of Section 35(1)(ii) of the Act by allegedly providing accommodation entries to the donors in the name of research activities and which enabled the donors to claim a false weighted deduction under the Act. As the said notification was rescinded w.e.f. 01.04.2011, the AO held that the appellant was not eligible for claiming of deduction of Rs 17,50,000/- for the impugned AY. The Central Government had rescinded the approval given to the donee institution w.e.f 01.04.2011. The appellant has claimed to have given the donation to the said institution in the FY 2012-13. In the said FY, the institution in question was not approved u/s 35(1) of the Act. Thus, the information in possession of the AO was sufficient to harbour the belief that the income in the shape of alleged claim of donation to the unapproved institution was the income escaping assessment. Further, the action of the Central Government to rescind the approval was after due investigation of gross misuse of the donations by returning the money in cash after deducting a particular amount of commission. The findings showed that the amount of donation was never utilized for carrying out the research activities. Thus, it is found that the AO had sufficient material before him for forming an opinion that the income of the appellant had escaped assessment. Thus, there is no merit in the ground of appeal. Ground No 1 is dismissed. 7. Ground No 2 to 8 are relating to the disallowance of the claim of the deduction made by the appellant u/s 35(1)(ii) of the Act. As all these grounds are related to the same issue, they are being adjudicated together. The brief facts of the case are that the appellant had claimed deduction u/s 35(1)(ii) of the Act for having given donation to M/s Bioved Research Society, Allahabad of Rs 17,50,000/- (175 of actual donation). According to the AO, the CBDT vide Circular No F.N 203/31/2018-ITA(II) dated 28.02.2019, it was clarified that the Central Governme had withdrawn the Notification No 5 of 2008 dated 01.02.2008 issued to M/s Bioved Research Society, Allahabad which was approved u/s 35(1)(ii) of the Act after it was found that the said institution misused the benevolent provision of the Act. The said notification issued earlier was rescinded w.e.f. 01.04.2011 vide Notification No 3 of 2019 dated 02.01.2019. The circular also stated that Mis Bioved Research Society. Allahabad had grossly ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 6– misused the provision of Section 35(1)(ii) of the Act by allegedly providing accommodation entries to the donors in the name of research activities and which enabled the donors to claim a false weighted deduction under the Act. As the said notification was rescinded w.e.f. 01.04.2011, the AO held that the appellant was not eligible for claiming of deduction of Rs 17.50,000/- for the impugned AY. As the appellant did not respond to the show cause notice issued by the AO, the AO disallowed the said deduction claimed. 7.1 The appellant has placed reliance on the decision of Hon'ble ITAT. Ahmedabad in the case of Inspiron Engineering P Ltd v/s DCIT (ITA No 968/Ahd/2018 dated 19.03.2020). In the said case, the AO had disallowed the donation given by the assessee u/s 35(1)(ii) of the Act on the basis of the investigation report of DIT (Inv) Kolkata. The contention of the appellant in that case was that he was not given any opportunity of cross-examination of the persons who had given statements before the Income Tax Department that they were providing accommodation entries for claiming deduction u/s 35 of the Act. In the facts of the said case, the Hon'ble ITAT held that unless the persons on whose statements the additions were made were not made available for cross-examination by the appellant, the statements of such persons cannot be read against the appellant. But in the instant case, the disallowance has not been made on the basis of the report of the Investigation Wing or on the basis of statements of any persons. The disallowance has been made on the basis of notification issued by the Central Government that the approval given to the institution in question has been rescinded w.e.f. 01.04.2011. As a result of the said notification, there was no deduction available to the appellant during the impugned AY. Accordingly, the disallowance made by the AO of Rs 17,50,000/- is sustained. Ground No 1 to 8 are dismissed…” 8. On going through the order of the Ld.CIT(A), we find that the case of the assessee has been rightly re-opened based on the tangible information of the donee providing accommodation entries and also keeping in view the fact that the approval given by the Central Government stands rescinded, the issue of cross- ITA No. 68/Ahd/2025 Asst.Year –2013-14 - 7– examination does not arise. Hence, we declined to interfere with the reasoned order of the Ld.CIT(A) on this issue. 9. In the result, the appeal filed by the assessee is dismissed. This Order pronounced in Open Court on 18.03.2025 Sd/- Sd/- (SUCHITRA KAMBLE) (DR. BRR KUMAR) JUDICIAL MEMBER VICE PRESIDENT True Copy) Ahmedabad; Dated 18.03.2025 Manish, Sr. PS TRUE COPY आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT 4. आयकर आयुᲦ(अपील) / The CIT(A)- 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडᭅ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "