UDAY K LAPSIA, MUMBAI V. ACIT 17(3) , MUMBAI

ITA 1203/MUM/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0032 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 18-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Reassessment proceedings
• Section: 147; 148; 143(3); 143(1); 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI SHRI M. BALAGANESH, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1203/MUM/2020 (Assessment Year: 2014-15) Uday K Lapsia, A-43, Bharat Thirth CHS, V N Purav Marg, Chembur - 400071 [PAN:ABXPL3176C] Assistant Commissioner of Income Tax – 17(3), Mumbai, R. No. 137, Aayakar Bhavan, M.K. Road, Mumbai - 400020 .................. Vs ................ Appellant Respondent Appearances For the Appellant/Assessee For the Respondent/Department : : Shri M. Subramanian Shri Rajiv Singh Date of conclusion of hearing Date of pronouncement of order : : 25.07.2022 20.10.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 21.11.2019, passed by the Ld. Commissioner of Income Tax (Appeals)-28, Mumbai [hereinafter referred to as „the CIT(A)‟] for the Assessment Year 2014-15, whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 22.12.2017, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 2 2. The Appellant has raised multiple grounds challenging the assessment framed under Section 147 read with Section 143(3) of the Act on the ground that jurisdiction as well as on merits. 3. The brief facts of the case are that the Appellant filed return of income for the Assessment Year 2014-15 declaring income of INR 12,01,090/- after claiming deduction of INR 19,25,000/- under Section 35(1)(ii) of the Act at the rate of 175% of the donation amount of INR 11,00,000/- made to School of Human Genetics and Population Health (SHGPH). The aforesaid return was processed under Section 143(1) of the Act. Subsequently, survey operations were conducted in case of SHGPH and another two institutions viz. Matrvani Industries of Experiential Research and Education (MIER&E) and Herbicure Healthcare Bio-Herbal Research Foundation (HHBRF). In the course of such survey operation, it was found that these institutions were not carrying out any activities relating to scientific research. From the statements recorded of persons attached to such institutions it was found that donations were received through brokers and after retaining some commission amount, the money is returned back to the donors. Due to the irregularities committed by these institutions, the registration certificates issued to these institutions under the Act were cancelled with retrospective effect. 4. Subsequently, re-assessment proceedings were initiated against the Appellant and notice under Section 148 of the Act was issued on 23.03.2017 after information was received from the Investigation Wing Kolkata that the Appellant has obtained bogus donation receipts from SHGPH. The re-assessment proceedings culminated into the order, dated 29.11.2017 ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 3 passed, under Section 147 read with Section 143(3) of the Act, whereby income of the Appellant was assessed at INR.31,26,090/- after making disallowance of deduction of INR.19,25,000/- claimed by the Appellant under Section 35(1)(ii) of the Act. 5. The appeal preferred by the Appellant against the assessment order was dismissed by the CIT(A), vide order, dated 21.11.2019 leading to the filing of the present appeal. 6. When the matter was taken up for hearing, the Ld. Authorised Representative for the Appellant placed on record paper-book containing the following documents: - Copy of money receipt dated 08.03.2014 issued by the SHG&PH) for donation of INR 11,00,000/-. - Copy of Certificate of Registration issued by the Registrar of Firms, Societies & Non-Trading Corporations, West Bengal. - Copy of Registration Certificate dated 27.10.2004 issued u/s 12A of the Act, by Director of Income Tax (Exemptions) - Copy of letter dated 12.12.2011 of Renewal of approval u/s 80G(5)(vi) of the Act issued by the I.T. Department. - Copy of letter dated 01.04.2013 of Renewal of Recognition as Scientific and Industrial Research Organizations issued by Ministry of Science & Technology along with enclosure. - Copy of weekly Gazette Notification dated 31.01.2010 of approval issued u/s 35(1)(ii) of the I.T. Act issued by CBDT. 7. He submitted that SHGPH held a valid registration at the time when the donations was made by the Appellant and also at the time deduction under Section 35(1)(ii) of the Act was claimed by the Appellant. Learned Authorised Representative for Appellant submitted that in identical facts and circumstances, ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 4 the Hon‟ble Bombay High Court had, in the case of National Leather Cloth Manufacturing Company vs. Indian Counsel for Agricultural Research: 241 ITR 481, quashed the re-assessment proceedings under Section 147/148 of the Act holding that retrospective withdrawal and/or cancellation of registration/certificate would have no impact on an assessee who had acted upon such registration/certificate while it was valid and operative. He also placed reliance upon the following decision of the Tribunal - Vora Financial Services (P) Ltd. Vs. A.C.I.T, Mumbai 171 ITD 646, Motilal Dahyabhai Jhaveri & Sons Vs. A.C.I.T., Mumbai ITA No. 3453/Mum/2018 & 1584/Mum/2019, and Urnish Jewellers Vs. A.C.I.T. Circle – 19(3) Mumbai, 177 ITD 364. 8. Per contra, the Ld. Departmental Representative submitted that re-assessment proceedings were initiated on the basis of information received regarding bogus donation from DIT (Inv.), Kolkata and submitted that SHGPH was engaged in issuing receipts in respect of bogus donations. Since, the Appellant claimed deduction under Section 35(1)(ii) of the Act on the basis of such bogus receipt issued by the SHGPH, the Assessing Officer was justified in initiating re-assessment proceedings. Therefore, he reliance placed upon the orders passed by the CIT(A) to support this contentions. 9. We have heard the rival contention and perused the material on record. During the previous year relevant to the assessment year before us, the Appellant had donated INR.11,00,000/- to SHGPH. In the return of income filed for the relevant assessment year, Appellant had claimed deduction of INR.19,50,000/- in terms of section 35(1)(ii) of the Act. It is not ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 5 disputed that at the time of making such donation, SHGPH was having a valid approval granted under the Act. Therefore, the subsequent cancellation of registration granted to SHGPH with retrospective does not invalidate assessee's claim of deduction under section 35(1)(ii) of the Act. In this context, it would be pertinent to consider Explanation to section 35(1)(ii) of the Act which reads as under: "Explanation.-The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn;" A bare perusal of the above provisions makes it clear that if at the time of giving the donation registration was valid, subsequent withdrawal thereof would not be a ground to deny deduction claimed by the donor. 10. In the case of National Leather Cloth Manufacturing Company (supra), the Hon'ble Jurisdictional High Court while dealing with identical issue of denial of deduction claimed under section 35(1)(ii) of the Act due to subsequent withdrawal of approval with retrospective effect, has held that retrospective cancellation of registration will have no effect upon the deduction claimed by the donor since such donation was given acting upon registration when it was valid and operative. The relevant extract of the aforesaid judgment is as under: “3. The only question that arises for consideration is whether the assessee who donated a sum of Rs. 2 lakhs to the scientific ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 6 research association on the basis of the approval granted by the prescribed authority to it for the purposes of clause (ii) of sub- section (1) of section 35 by Notification in the Official Gazette at the material time, can be adversely affected by the withdrawal of the approval subsequently with retrospective effect by the prescribed authority. We have already decided identical controversy in the context of deduction under section 35CCA of the Act in Writ Petition No. 957 of 1990. Law is now well-settled that the assessee is entitled to rely upon the certificate granted by the prescribed authority under section 35(1)(ii) to the institution or association to which it had donated any sum of money for claiming deduction under that section if it was subsisting and valid at the time the donation was made. The retrospective with-drawal and/or cancellation of the certificate will have no effect upon the assessee who has acted upon it when it was valid and operative.” (Emphasis Supplied) 11. We also note that the Mumbai Bench of the Tribunal has, in the case of Mitilal Dahyabhai Jhaveri & Sons vs. ACIT, Mumbai [ITA NO. 3453/Mum/2018 & 1584/Mum/2019], the Tribunal while allowing deduction claimed under section 35(1)(ii) of the Act, in respect of donation given to SHGPH held that, since, at the time of giving donation the assessee had acted on the strength of a valid registration/approval assessee's claim of deduction cannot be disallowed even if such registration was subsequently cancelled with retrospective effect. The relevant extract of the aforesaid decision of the Tribunal read as under: “6.1 We find that the reliance placed by the ld AR on the decisions of Hon‟ble Supreme Court in the case of CIT vs Chotatingrai Tea reported in (2003) 126 Taxman 399 (SC) dated 29.10.2002 and State of Maharashtra vs Suresh Trading Company reported in (1998) 1998 taxmann.com 1747 (SC) dated 7.2.1996 are very well founded and are squarely applicable to the facts of the instant case before us. The ratio decidendi of the said judgements are not reproduced herein for ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 7 the sake of brevity. We also find that the ld AR had rightly placed reliance on the decision of the Hon‟ble Jurisdictional High Court in the case of National Leather Cloth Manufacturing Co. vs Indian Council of Agricultural Research reported in (2000) 110 Taxman 511 (Bom) dated 7.10.1999 in the context of withdrawal of deduction u/s 35(1)(ii) of the Act due to withdrawal of recognition with retrospective effect . In any case, we find that the provisions of section 35(1)(ii) of the Act vide its Explanation reproduced hereinabove clearly proves that the donor (i.e assessee herein) cannot be affected due to subsequent withdrawal of recognition with retrospective effect. Respectfully following the aforesaid decisions and the provisions of the Act, we direct the ld AO to grant deduction u/s 35(1)(ii) of the Act in the sums of Rs 26,25,000/- and Rs 21,00,000/- for the Asst Years 2013-14 and 2014-15 respectively. In view of these findings, the other arguments advanced by the ld AR on merits are not adjudicated herein and are left open. Accordingly, the grounds raised by the assessee for both the years are allowed.” (Emphasis Supplied) 12. Thus, in view of the statutory provisions and the ratio laid down in the decisions discussed hereinabove, the Appellant was entitled to rely upon the certificate granted by the prescribed authority under Section 35(1)(ii) to SHGPH which for claiming deduction under that section as it was subsisting and valid at the time the donation was made. There was no escapement of income. Further, as held by the Hon‟ble Supreme Court retrospective withdrawal and/or cancellation of the certificate would have no effect upon the Appellant as the appellant acted upon it when it was valid and operative. Accordingly, the reassessment proceedings under Section 147/148 of the Act are quashed as being bad in law and the order, dated 29.11.2017, passed under Section 147 read with Section 143(3) of the Act is set aside. Ground No.1 and 2(a) are allowed while rest of the ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 8 grounds raised by the Appellant are disposed off as being infructuous. 13. In the result, the present appeal is allowed. Order pronounced on 20.10.2022. Sd/- Sd/- (M. Balaganesh) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 20.10.2022 Alindra, PS ITA. No. 1203/Mum/2020 Assessment Year: 2014-15 9 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai