Joshi Technologies International Inc., Ahmedabad V. The CIT (IT & TP), Ahmedabad

ITA 106/AHD/2021

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9645 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-09-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 20-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Bonafide belief; Set aside; Ineligible deduction; Bogus
• Section: 263; 2; 143(3)

Judgement Text

आयकरअपील यअ धकरण, अहमदाबाद यायपीठ‘डी’ अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFOREMRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 106/Ahd/2021 नधा रणवष /Assessment Year: 2015-16 Joshi Technologies International Inc. 701, Parshwanath E Square Near Titanium Building Prahadnagar Garden, Satellite Ahmedabad – 380 015 PAN : AAACJ 9592P Vs. Commissioner of Income-tax (IT & TP), Ahmedabad अपीलाथ / (Appellant) यथ / (Respondent) Assessee by : Shri S.N. Soparkar, Sr. Advocate & Shri Parin Shah, Ars Revenue by : Dr. Darsi Suman Ratnam, CIT-DR स ु नवाई क तार ख/Date of Hearing : 12/09/2023 घोषणा क तार ख /Date of Pronouncement: 07/12/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the Learned Commissioner of Income-Tax (IT & TP), Ahmedabad [hereinafter referred to as “Ld.CIT” for short] dated 30/03/2021in exercise of his revisionary jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as "the Act" for short] for Assessment Year (AY) 2015-16. 2. The assessee has raised the following ground:- “The Appellant aggrieved by the order passed by the Commissioner of Income Tax (IT & TP), Ahmedabad, (CIT) under section 263 of the Act prefers this appeal against the same on following amongst other grounds which are without prejudice to each other: 2 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 1. The order passed by the CIT is erroneous on facts and contrary to the provisions of the law and therefore needs to be quashed. It is submitted it be so held now. 1.1 The CIT erred on facts and in law in holding that the order passed by the Assessing officer (AO) under section 143(3) of the Income Tax Act (Act) was erroneous and prejudicial to the interest of the revenue and thereby setting aside the order with direction for fresh assessment keeping the issue of weighted deduction u/s 35(1)(II) of the Act in mind. It is submitted it be so held now. 1.2 The CIT erred in facts and in law in Invoking Explanation 2 to sub section (1) of section 263 of the Act while holding that the assessment order was passed without proper enquiry and verification of facts when in fact inquiry had been made and details were submitted in the course of regular proceedings. It is submitted it be so held now. 1.3 The CIT ought to have appreciated that absence of reasons given in order, for allowing a deduction does not tantamount to enquiry not made in that assessment proceedings and thereby making the order erroneous and prejudicial to the interest of revenue. It is submitted it be so held now. 2. The learned CIT has erred in law and in facts in not appreciating that the donation was given by the appellant based on the notarized approval of registration u/s 35(1)(ii) of the Act given by the trust and appellant had no reason to disbelieve the operation of approval and notification of the trust. 2.1 The learned CIT has erred in not appreciating that in the facts and circumstances of the case, appellant was eligible to claim the deduction u/s 35(1)(11) It be so held now. 2.2 Even otherwise, the learned CIT has erred in not appreciating that the fact of approval having expired was not available when the donation was made and when the assessment order was passed, hence view adopted by the AO while framing assessment order was plausible view and cannot trigger revision under section 263 of the Act. It is submitted that it be so held now.” 3. As transpires from the order of the Ld.CIT, the error noted by him in the assessment order passed in the case of the assessee u/s 143(3) of the Act, from the records before him ,was the incorrect allowance of weighted deduction @ 175% on donations made to a Scientific Research Institute, i.e. M/s.Shri Arvindo Institute of Applied Scientific Research Trust u/s 35(1)(ii) of the Act, since as per the records with the Ld.CIT the approval granted to the Institute for receiving donations under the said section had 3 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 expired long back and was not in existence for the impugned year. The amount of donation given by the assessee to the said trust was noted to be to the tune of Rs.70 lakhs and the assessee had claimed weighted deduction thereon @ 175% amounting to Rs.1,22,50,000/-. 4. Show-cause notice was issued to the assessee u/s 263 of the Act in response to which the assessee contended that there was no error in the assessment order since the AO had allowed the claim of the assessee taking a plausible view after conducting due inquiry and considering all documents filed by the assessee which showed that the deduction had been claimed as per law. The Ld.CIT, however, rejected the contention of the assessee stating that the fact was that the Trust/ Institute was not approved for the purposes of receiving donation under section 35(1)(ii) of the Act during the impugned year, and the Assessing Officer had not made necessary inquiries before allowing an ineligible claim of weighted deduction to the assessee, rendering the assessment order erroneous and causing prejudice to the Revenue. He accordingly set aside the order of the Assessing Officer directing him to make a fresh assessment on the issue. 5. Before us, the Ld.counsel for the assessee contended that he had been provided documents by the Institute which clearly demonstrated that it was approved for receiving donations u/s 35(1)(ii) of the Act. The Ld.Counsel for the assessee thereafter made arguments challenging the exercise of revisionary jurisdiction contending that: (i) the Assessing Officer had examined the issue during assessment and taken a plausible view allowing the claim of weighted deduction to the assessee based on documents placed before him exhibiting approval granted to the said Institute for receiving donations u/s 35(1)(ii) of the Act for the impugned 4 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 year and hence eligibility of assessee’s claim of weighted deduction u/s.35(1)(ii) of the Act on donations made to it during the year (ii) That the documents provided to the assessee by the Institute sufficiently demonstrating approval granted to it for receiving donations u/s 35(1)(ii) of the Act for the impugned year, there was no occasion to doubt assessee’s claim, for prompting any further enquiry on the issue by the AO. (iii) That, it was only subsequently that the Instruction wasissued by the CBDT in F.No.225/351/2018-ITA(II) dated 14/12/2018 based on which Ld.CIT had exercised revisionary powers.That, on the date of which the assessment order was passed, this was the only plausible view that the Assessing Officer could have taken. (3) That, the assessee had bonafidely made the claim on the basis of documents furnished to it by M/s.Shri Arvindo Institute of Applied Scientific Research Trust reflecting approval granted to it u/s 35(1)(ii) of the Act and neither the assessee nor the Assessing Officer would have known that the approval was no longer in existence. 6. The Ld.counsel for the assessee heavily relied on the decision of the ITAT Mumbai Bench in the case of M/s.Long Life Realtors LLP vs. Pr.CIT-17 in ITA No.525/Mum/2021 dated 05/04/2022 pointing out that the ITAT had quashed an identical revisionary order passed noting incorrect claim of weighted deduction u/s 35(1)(ii)allowed by the Assessing Officer on donation made to the very same Institute, M/s.ShriArvindo Institute of Applied Scientific Research Trust. Copy of the order was placed before us. 5 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 7. The Ld.counsel for the assessee has also relied on the decision of the ITAT Rajkot Bench in the case of M/s.Emboza Granito Pvt.Ltd. vs. Pr.CIT in ITA No.240/Rjt/2019 dated 03/10/2022 in support of the proposition that where the Assessing Officer had taken a plausible view on an issue there could not be said to be any error in his order calling for revision of the same u/s.263 of the Act. Further, reliance was also placed on the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Kamal Galani reported in (2018) 95 taxmann.com 261 (Guj.) for the above proposition and it was also pointed out that SLP filed by the Department against the order of the Hon’ble Jurisdictional High Court was dismissed by the Hon’ble Supreme Court it its decision reported in (2019) 110 taxmann.com 213(SC) in the case of CIT vs. Kamal Galani copies of both the orders were placed before us. 8. The Ld.DR, on the other hand, contended that the fact remained, as noted by the Ld.CIT, that the Trust, i.e. M/s.Shri Arvindo Institute of Applied Scientific Research Trust was not approved for the purposes of section 35(1)(ii) of the Act, for the impugned year A.Y 2015-16; its approval having expired on 31/03/2006. Thatby way of CBDT Instruction in F.No.225/351/2018-ITA(II) dated 14/12/2018 it was informed to all field officers that the Institute was fraudulently accepting donations u/s 35(1)(ii) of the Act after expiry of approval based on forged documents. He contended that clearly the assessee had been allowed an otherwise patently ineligible claim of deduction u/s.35(1)(ii) of the Act rendering the assessment order erroneous causing prejudice to the Revenue. 9. We have heard the rival contentions. We have perused all the documents placed before us and also carefully gone through the orders as well as the decisions referred to before us and also the relevant provision of law on the issue raised before us. 6 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 As noted above, the Ld.CIT’s finding of error in the assessment order, for exercising revisionary jurisdiction, iswith respect to wrong allowance by AO of assesses claim toweighted deduction u/s 35(1)(ii) of the Act on donation made to an Institute, i.e. M/s.ShriArvindo Institute of Applied Scientific Research Trust ,in the absence of approval to the said institute for receiving donations under the said section in the impugned year. The quantum of donation made is of Rs.70 Lakhs and the deduction claimed by the assessee and allowed by the Assessing Officer is of Rs.1,22,50,000/- i.e. @ 175% of the donation as allowed by section 35(1)(ii) of the Act. 10. During the course of hearing before us, the Ld.counsel for the assessee had pointed out that this claim was duly examined during assessment proceedings when the assessee had placed relevant documents proving its eligibility to the claim of and even the genuineness of the claim by furnishing documents pointing out that the donation had been made through banking channels and the donee Institute had furnished receipts and certificates issued by CBDT showing that it was approved for receiving donations u/s.35(1)(ii) of the Act. Our attention was drawn to the documents so produced to the Assessing Officer which are reproduced in the Ld.CIT’s order also at paragraph Nos.2.1 & 2.2 read as under: “2.1 During the course of assessment proceedings, the Assessing Officer had asked for the details for the deduction u/s 35(1)(ii) of the Act at 175% claimed by the assessee. The assessee had duly submitted the copy of the receipt for payment made to the said institution. Therefore, the AO made an inquiry with the assessee in response to which the assessee has submitted the details to the AO as mentioned below: i. Assessee made payment of Rs. 70,00,000 to donee trust on 09.10.2014 ii. Payment was made by way of account payee cheque iii. Payment made was for donation towards Thalassemia Project iv. PAN of done trust was AAFTS7349D v. Trust Registration number 7 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 vi. Main office vii. Registered office viii. Project for which donation is to be applied ix. Eligibility under section 35(1)(ii) of the Income Tax Act. 2.2 After necessary review of the details called for, the AO was satisfied and accordingly allowed the claim of the assessee. The donation was made in the year 2014 and the assessment was completed in the year 2018. As per the notice issued u/s 263 of the Act, the approval of the trust has already expired on 31.03.2006. Accordingly, it is possible that the fact of approval having expired was not available when the donation was made and the assessment order was passed by the AO. Just because there is no mention in the assessment order regarding the reasons for allowing the deduction, it cannot be concluded that the AO has not made necessary enquiry regarding the applicability of section 35 of the Act. While making the payment to the trust, it has issued a receipt which clearly demonstrated that the said trust is eligible for donation u/s 35(1)(ii) of the Act. The trust has also provided the following documents to the assessee regarding approval u/s 35(1)(ii) of the Act: *Notarized copy of CBDT notification SO No. 1856(E) dated 30th October 2006 stating that Shri Arvindo Institute of Applied Scientific Research Puduchery (registration granted earlier under F. N. 0.203/107 / 2000 – ITA II ) is one time registration and renewal is necessary *Renewal letter by CBDT dated 14/05/2012 stating that validity period for exemption to trust is forever unless and until it is withdrawn and *Letter of CBDT dated 2/7 / 2012 stating that the validity of project expires on 31/3 / 2015 and is subject to further renewal. Based on the documents submitted by the assessee, the AO was satisfied regarding the claim of the assessee and therefore, the deduction has rightly been allowed. Therefore, it was requested by the assessee to withdraw the notice issued u / s 263 of the I.T.Act, 1961.” 11. Based on the above facts, the arguments of the Ld.counsel for the assessee are that since the documents fairly exhibited the genuineness and the eligibility of the claim of the assessee to weighted deduction u/s.35(1)(ii) of the Act, the Assessing Officer had committed no error allowing the said claim to the assessee. The case of the assessee is that the CBDT Notification 8 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 dated 30/10/2006 ,stating that the registration granted to the impugned Trust was one-time registration and the subsequent renewal letter by the CBDT Notification dated 14/05/2012 stating that the validity period for exemption to the Trust forever along with the letter of the CBDT dated 02/07/20212 stating that the validity expired on 31/03/2015 ,sufficiently exhibited the fact that the assessee was eligible to claim weighted deduction on the donation made to the Trust during the impugned year, i.e. Financial Year 2014-15 relevant to Assessment Year 2015-16. It was pointed out thatthe letter of the CBDT dated 02/07/2012 categorically stated that the validity of the project expired on 31/03/2015 and was subject to further renewal and, therefore, it was contended that upto 31/03/2015 all donations made to the said Institute, as per the CBDT notifications filed by the assessee to the Assessing Officer, were eligible for weighted deduction u/s.35(1)(ii) of the Act. The contention of the Ld.Counsel for the assessee is that all these notifications/ documents were given to it by the said Institute, therefore the assessee harboured a bonafide belief based on them that it was eligible to claim weighted deduction and so also the Assessing Officer believed these documents and allowed the assessee’s claim to weighted deduction u/s.35(1)(ii) of the Act. Based on these documents, the contention of the Ld.counsel for the assessee is that, there was no occasion at all to doubt these documents either by the assessee or by the Assessing Officer and, therefore, there was no occasion for making any further enquiry also. That, accordingly, the allowance of claim of weighted deduction by the Assessing Officer based on the above documents was a probable and bonafide view taken by him which could not be termed as erroneous for the purposes of exercising revisionary jurisdiction u/s.263 of the Act. 12. The Ld.DR, on the other hand, has pointed out that in the year 2018, the CBDT issued an Advisory to its Field Officers pointing out that the said 9 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 Trust, M/s.Shri Arvindo Institute of Applied Scientific Research Trust had been granted approval u/s.35(1)(ii) of the Act only upto 31/03/2006 and that subsequently it was fraudulently receiving donations from various donors by issuing forged certificates. The relevant Instruction is reproduced hereunder:- “F.No. 225/351/2018-ITA (II) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Room N0. 245A, North Block New Delhi, the 14th December, 2018 To All Principal Chief Commissioners of Income Tax All Director Generals of Income Tax (Investigation) Sir/Madam Subject: Information regarding bogus donation racket under section 35(1)(ii) of Income-tax Act, 1961-reg.- Kindly refer to the subject mentioned above. 2. In this connection, I am directed to state that Section 35(1)(ii) of the Income-tax Act,1961 (‘Act’) prescribes a weighted deduction @ 150% (175% before 01.04.2018) to a donor for any sum paid to an approved ‘research association having as its sole object the undertaking of scientific research or to a ‘university, college or other institution’ for carrying out scientific research. Very recently, Board has received several references from the field authorities for clarifying whether a Trust namely M/s Shri Arvindo Institute of Applied Scientific Research Trust (PAN:AAFTS7349D) (Hereinafter ‘the Trust’) having offices at Mumbai & Puducherry is an entity specified by the Central Government through a Notification for purposes of section 35(l)(ii} of the Act or not. Presently, the trust is assessed with CIT(Exemption), Mumbai. 3. In this regard, upon perusal of records,it emerges that the above Trust was earlier approved under section 35(1}(ii} of the Act which expired on 31.03.2006. Thereafter ,this entity, being not recognized for purpose of section 35(1)(ii) of the Act, is not eligible to raise donations for undertaking scientific research however, the Trust has raised substantial donations over the last six years on the basis of a forged certificate while the donors have irregularly claimed weighted deduction u/s. 35(1)(ii) of the Act on donations made to the Trust. 4. In view of above, I am directed to state that the pending scrutiny assessment cases of donors who have claimed irregular weighted deduction u/s 35(1)(ii) should be handled in light of above facts. In case of donors whose cases are presently not under scrutiny,the Board desires that a list of donors who had provided funds to the Trust u/s 35(1}(ii) of the Act should be drawn by CIT (Exemption}, Mumbai for the period from A.Y 2012-13 to 2018-19 and circulated to the concerned field authorities expeditiously. 5. I am further directed to state that while handling investigations/ enquiries in these cases, the concerned Assessing Officer should examine the specific transactions related to the sum donated and cash trail should be clearly identified. Also, various provisions pertaining to enquiry and investigation under the Act should be effectively used and assessment orders should be passed under the monitoring of supervisory authorities. 10 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 6. This issues with approval of Member (IT&C), CBDT. Yours faithfully , (Rajarajeswari R.) Under Secretary (ITA.II)” 13. The case of the Revenue is that the fact of the matter is that the impugned Trust was not approved for the purposes of receiving donations u/s.35(1)(ii) of the Act after 31/03/2006 and all donations subsequently received by it were based were forged documents furnished by it. That the said Institute,not being approved for the purposes of section 35(1)(ii) of the Act.,there was no question of the assessee being granted weighted deduction on donations made to it u/s.35(1)(ii) of the Act in the impugned year. And there was no doubt therefore that the allowance of claim of deduction to the assessee was an error in the assessment border. 14. The Ld.counsel for the assessee, in counter, has stated that this Notification was issued by the CBDT on 14/12/2018 subsequent to the allowance of assesses claim by the AO vide assessment vide order dated 20/02/2018. On consideration of the above contentions a very important fact which emerges is that the Institute, to which donation was made by the assessee during the impugned year and weighted deduction claimed thereon u/s.35(1)(ii) of the Act, was not approved for the said purposes for the impugned year. The fact on record available with the Ld.CIT is that the approval granted to the said Institute expired on 31/03/2006. Impugned year before us is A.Y 2015-16. The Advisory issued by the CBDT in December-2018 brought this fact to the notice of all its Field Officers. Therefore, the fact on record was that the said Institute was not approved for receiving donations u/s.35(1)(ii) of the Act during the impugned year. 11 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 15. In the light of the above fact there can be no two views that when the assessment order was passed by the AO, assessees claim to weighted deduction u/s 35(1)(vii) of the Act was impermissible in law. And it is a foregone conclusion therefore that the allowance of the said claim in assessment framed was patently incorrect. The assessment order was obviously in error in having allowed a patently ineligible deduction to the assessee. This is probably the simplest and most straight forward example /instance of an assessment order being erroneous causing prejudice to the Revenue, for a valid exercise of revisionary jurisdiction. All arguments of the Ld.Counsel for the assessee against the revisionary order passed by the Ld.CIT fail and are of no consequence in the backdrop of the fact, as noted above by us, that the assessee was not eligible to claim weighted deduction on the said donation u/s 35(1)(ii) of the Act. Even if the assessee and the AO had bonafidely claimed and allowed respectively the deduction based on documents furnished by the said Institute,the fact still remains that the claim was not allowable as per law. What is material for claiming deduction is its eligibility as per law and not the intention with which it is claimed, whether bonafidely or malafidely. Even a bonafidely claimed deduction if found ineligible in law, it cannot be allowed to the assessee. 16. Also on a patently ineligible claim there can be no question of the AO taking a plausible view in allowing assesses claim. Therefore, reliance placed by the Ld.counsel for the assessee on the decision of ITAT Rajkot Bench in the case of M/s.Emboza Granito Pvt.Ltd. vs. The Pr.CIT (supra) on the proposition that where due enquiries have been conducted by the 12 ITA No. 106/Ahd/2021 Joshi Technologies International Inc. vs. CIT (IT & TP) AY :2015-16 Assessing Officer who has taken a plausible view there cannot be any error in the order of Assessing Officer, does not, we hold, help the case of the assessee. The reliance placed by the Ld.counsel for the assessee on the decision of ITAT Mumbai Bench in the case of M/s.Long Life Reators LLP vs. CIT-17 (supra), also does not help the case of the assessee because it held that the assessment order was not in error noting the fact that it was only subsequently that the CBDT had issued the Advisory in 2018.But as noted by us above, the Advisory was only to the effect to point out the fact of approval to the Institute u/s 35(1)(ii) having expired in 2006 and the Institute fraudulently receiving donations thereafter by forging documents showing- subsistence of approval .This Advisory did not have the effect of withdrawing the approval granted to the Institute subsequently, but it only pointed out the fact that the approval was not inexistence after 31/03/2006 and the said Trust was subsequently receiving donations fraudulently. The subsequently issued advisory of the CBDT only reiterates the fact of donations to the said institute being ineligible for deduction to donors u/s.35(1)(ii) of the Act. In view of the above, we have no hesitation in upholding the order of the Ld.CIT holding the assessment order erroneous for having allowed a patently ineligible claim of weighted deduction to the assessee. 17. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 7 th December, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 07/12/2023