Deviyani Dilip Patel, CHENNAI V. ITO, CHENNAI

ITA 2316/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8640 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 23-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: T C A SANGEETHA
• Keywords: Principle of natural justice
• Section: 133(6)

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL A / SMC BENCH, CHENNAI ... , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER ./ ITA NO.2316/MDS/2015 ' #$' / ASSESSMENT YEAR : 2011-12 SMT. DEVIYANI DILIP PATEL, NO.66, FLAT NO.12 ALSUHA FLATS, SPUR TANK ROAD, CHETPET, CHENNAI - 600 031. PAN : AALPP 6624 L V. THE INCOME TAX OFFICER, BUSINESS WARD XV (3), CHENNAI - 600 034. (&'/ APPELLANT) (()&'/ RESPONDENT) &' * + / APPELLANT BY : MS. T.C.A. SANGEETHA, ADVOCATE ()&' * + / RESPONDENT BY : SH. P. RADHAKRISHNAN, JCIT , # * -. / DATE OF HEARING : 14.06.2016 /0$ * -. / DATE OF PRONOUNCEMENT : 18.08.2016 / O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 4, CHENN AI, DATED 15.10.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. MS. T.C.A. SANGEETHA, THE LD.COUNSEL FOR THE ASS ESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO DISALLOWANCE OF ` 25,00,000/-. ACCORDING TO THE LD. COUNSEL, THE 2 I.T.A. NO.2316/MDS/15 ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTING IN SHARES AND DEBENTURES. DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE BORROWED A SUM OF ` 25,00,000/- FROM M/S MEGATRENDS INC IN WHICH THE ASSESSEES HUSBAND WAS A PARTNER AND DONATED TH E SAME TO M/S SOCIETY FOR WELFARE OF HANDICAPPED PERSONS, DUR GAPUR, WEST BENGAL. ACCORDING TO THE LD. COUNSEL, M/S SOCIETY FOR WELFARE OF HANDICAPPED PERSONS, DURGAPUR, WEST BENGAL WAS NOTI FIED AS A SOCIETY ELIGIBLE FOR DEDUCTION UNDER SECTION 35(1)( III) OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS O F THE SO-CALLED COMMUNICATION SAID TO BE RECEIVED FROM THE SOCIETY INFORMING THAT THE AXIS BANK OPENED AN ACCOUNT WITH THE HELP OF SO ME MISCREANTS, INCLUDING BANK OFFICIALS, IN PRINCE ANWAR SHAH ROAD BRANCH, KOLKATA. THE ASSESSING OFFICER FURTHER FOUND THAT THE ACCOUNT IN AXIS BANK WAS OPENED WITHOUT COMPLIANCE OF KYC NORM S. ACCORDING TO THE LD. COUNSEL, IF AN ACCOUNT WAS OPE NED WITHOUT FOLLOWING THE KYC NORMS, THEN THE ACCOUNT HAS TO BE FREEZED AND THERE CANNOT BE ANY TRANSFER OF FUNDS FROM THAT ACC OUNT TO ANOTHER ACCOUNT. IN THIS CASE, THERE WAS TRANSFER OF FUNDS FROM AXIS BANK ACCOUNT TO WHICH THE AMOUNT TRANSFERRED BY THE ASSE SSEE WAS CREDITED. THEREFORE, ACCORDING TO THE LD. COUNSEL, THERE WAS NO 3 I.T.A. NO.2316/MDS/15 MEANING IN CLAIMING THAT THE AXIS BANK COULD NOT CO MPLY WITH KYC NORMS WHILE OPENING THE ACCOUNT. ON A QUERY FROM T HE BENCH WHAT IS THE STATUS OF CRIMINAL PROCEEDING PENDING BEFORE THE KOLKATA POLICE? THE LD.COUNSEL SUBMITTED THAT SHE HAS NO I DEA AND SHE DOES NOT KNOW THE STATUS OF THE INVESTIGATION. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GOVERNMENT OF INDIA GRANTED APPROVAL UNDER SECTION 35(1)(III) AND WHEN THE STATUTORY PROVISION ALLOWS DEDUCTION FOR THE DONATI ON GIVEN BY THE ASSESSEE, THE SAME CANNOT BE DISALLOWED BY THE ASSE SSING OFFICER ON THE GROUND THAT THE RECIPIENT-SOCIETY MISUSED TH E FUNDS. ACCORDING TO THE LD. COUNSEL, IT IS IMMATERIAL FOR THE ASSESSEE ABOUT THE UTILIZATION OF FUNDS. THE QUESTION TO BE CONSI DERED IN THIS CASE, ACCORDING TO THE LD. COUNSEL, IS WHETHER THE ASSESS EE HAS DONATED THE FUNDS TO THE INSTITUTION, WHICH IS APPROVED UND ER SECTION 35(1)(III) OF THE ACT. IN THIS CASE, THE DONATION WAS GIVEN TO THE INSTITUTION, WHICH WAS APPROVED BY COMPETENT AUTHOR ITY UNDER SECTION 35 OF THE ACT. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE RECIPIENT-INSTITUTION UTILISED THE FUNDS FOR WHICH THE APPROVAL WAS GRANTED. THE LD.COUNSEL PLACED HER RELIANCE ON THE JUDGMENT OF CALCUTTA HIGH COURT IN CIT V. M/S BHARTIA CUTLER HA MMER LTD. (1998) 232 ITR 785 AND ALSO JUDGMENT OF GAUHATI HIG H COURT IN 4 I.T.A. NO.2316/MDS/15 CHOTATINGRAI TEA ESTATE PVT. LTD. V. CIT (1999) 236 ITR 644. ACCORDING TO THE LD. COUNSEL, THE GAUHATI HIGH COUR T IN CHOTATINGRAI (SUPRA) FOLLOWED THE JUDGMENT OF CALCUTTA HIGH COUR T IN BHARTIA CUTLER HAMMER LTD. (SUPRA). THE LD.COUNSEL FURTHER SUBMITTED THAT THE JUDGMENT OF GAUHATI HIGH COURT WAS CONFIRMED BY THE APEX COURT IN CIT V. CHOTATINGRAI TEA & OTHERS (2002) 25 8 ITR 529. 3. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED THAT SHE DONATED A SUM OF ` 25,00,000/- AFTER BORROWING FROM A PARTNERSHIP FIRM IN WHICH THE ASSESSEES HUSBAND WAS A PARTNER. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD. D.R. SUBMITT ED THAT THE ASSESSEES HUSBAND, A PARTNER IN M/S MEGATRENDS INC ALSO CLAIMS THAT HE HAD DONATED A SUM OF ` 1.5 CRORE TO THE VERY SAME SOCIETY AT KOLKATA. THE MODUS OPERANDI OF THE ASSESSEE IS TO CREDIT AN AMOUNT IN THE AXIS BANK ACCOUNT OPENED IN THE NAME OF THE SOCIETY. IN FACT, ACCORDING TO THE LD. D.R., THE B ANK ACCOUNT TO WHICH THE AMOUNT WAS CREDITED DOES NOT BELONG TO TH E SOCIETY TO WHICH THE APPROVAL UNDER SECTION 35 WAS GRANTED. T HE SOCIETY, IN FACT, MADE A COMPLAINT TO THE KOLKATA POLICE ABOUT THE ILLEGAL ACTIVITIES IN OPENING THE BANK ACCOUNT IN THE NAME OF SO-CALLED SOCIETY. REFERRING TO THE ASSESSMENT ORDER, THE LD . D.R. SUBMITTED 5 I.T.A. NO.2316/MDS/15 THAT THE SOCIETY HAS MADE A COMPLAINT TO THE POLICE , A COPY OF COMPLAINT WAS GIVEN TO THE ASSESSING OFFICER. THE AXIS BANK WITH ITS OWN OFFICIALS OPENED AN ACCOUNT IN THE NAME OF THE SOCIETY AND CREDITED THE AMOUNT. THE ASSESSING OFFICER MADE A THOROUGH INVESTIGATION AND FOUND THAT THE ENTIRE TRANSACTION WAS SHAM. 4. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSEE ACTUALLY PARTICIPATED IN THE DECEPTIVE TRANSACTION IN ORDER TO EVADE PAYMENT OF TAX. THE SO-CALLED CREDI T GIVEN TO AXIS BANK ACCOUNT WAS THE AMOUNT TRANSFERRED FROM VARIOU S OTHER ORGANISATIONS AND CONCERNS AND NONE OF THEM ENGAGED IN SAID ACTIVITIES FOR THE PURPOSE FOR WHICH THE INSTITUTE WAS GRANTED APPROVAL. OF COURSE, THE UTILIZATION OF FUNDS BY T HE RECIPIENT-SOCIETY MAY NOT BE WITHIN THE CONTROL OF THE ASSESSEE, BUT, IT IS THE DUTY OF THE ASSESSEE TO DONATE FUNDS TO AN APPROVED INSTITU TION. IN THIS CASE, EVEN THOUGH THE INSTITUTION, TO WHICH THE FUN DS WERE DONATED, WAS APPROVED ONE, THE FACT REMAINS THAT THE AMOUNT WAS CREDITED IN AN ACCOUNT OPENED BY FICTITIOUS PERSONS IN THE NAME OF THE SOCIETY, THEREFORE, ACCORDING TO THE LD. D.R., THE REAL BENE FICIARY IS NOT THE SOCIETY APPROVED UNDER SECTION 35 OF THE ACT. 6 I.T.A. NO.2316/MDS/15 4. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSING OFFICER MADE AN INVESTIGATION IN EXER CISE OF HIS POWER UNDER SECTION 133(6) OF THE ACT. THE ASSESSING OFF ICER FOUND THAT CHEQUE NO.020716 DATED 25.02.2011 FOR AN AMOUNT OF ` 25,00,000/- WAS ISSUED BY M/S MEGATRENDS INC HOLDING ACCOUNT IN AXIS BANK AT RADHAKRISHNAN SALAI. THE AXIS BANK CLARIFIED THAT THE CHEQUE WAS DEPOSITED INTO ACCOUNT NO.255010100128834 IN THE NA ME OF SOCIETY FOR WELFARE OF HANDICAPPED PERSONS, AT AXIS BANK, NO.85, PRINCE ANWAR SHAH ROAD BRANCH, KOLKATA. THE ACCOUN T HOLDER ADDRESS WAS VILLAGE & POST MADHABPUR, C/O MEDICINE HOUSE, MADHABPUR BAZAAR, DISTRICT MOYNA, WEST BENGAL. THE ASSESSING OFFICER FURTHER FOUND THAT THE RECIPIENT-SOCIETY, A S PER THE BANK ACCOUNT, CONTINUED THE ACCOUNT FOR A PERIOD FROM 25 .2.2009 TO 14.3.2014. THE TOTAL CREDITS TO THIS BANK ACCOUNT WAS ` 20,79,36,287/-. AFTER CONSIDERING THE DEBITS IN TH E ACCOUNT, THE ASSESSING OFFICER FOUND THAT THE FUNDS CREDITED IN THE ACCOUNT WERE ADMITTEDLY TRANSFERRED TO OTHER ORGANISATIONS. THE REFORE, ACCORDING TO THE LD. D.R., IT IS OBVIOUS THAT THE ASSESSEE HA S ACTUALLY PARTICIPATED IN THE DECEPTIVE TRANSACTION IN ORDER TO EVADE PAYMENT OF TAX, THEREFORE, THE ASSESSING OFFICER HAS RIGHTL Y DISALLOWED THE CLAIM OF THE ASSESSEE. 7 I.T.A. NO.2316/MDS/15 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT A PAYMENT OF ` 25,00,000/- WAS MADE TO M/S SOCIETY FOR WELFARE OF HANDICAPPED PERSONS, DURGAPUR, WEST BENG AL, WHICH WAS APPROVED UNDER SECTION 35 OF THE ACT. FOR RESE ARCH ACTIVITIES, THERE IS NO PROHIBITION IN THE INCOME-TAX ACT TO MA KE DONATION TO THE SOCIETIES APPROVED UNDER SECTION 35 OF THE ACT. BU T, SIMILAR TRANSACTIONS WERE MADE BY SEVERAL PERSONS IN CHENNA I TO THE INSTITUTION AT KOLKATA THROUGH AXIS BANK AND CLAIME D DEDUCTION UNDER SECTION 35 OF THE ACT. THE AXIS BANK AT KOLK ATA OPENED A FICTITIOUS ACCOUNT TO GIVE CREDIT TO THIS KIND OF T RANSACTIONS AND SUBSEQUENTLY THE SAME WAS TRANSFERRED TO VARIOUS OT HER INSTITUTIONS AND PERSONS. IN ONE SUCH TRANSACTION, A DIVISION B ENCH OF THIS TRIBUNAL FOUND ONE CREDIT IN THE FICTITIOUS ACCOUNT OPENED IN THE AXIS BANK BY WAY OF DONATION WAS, IN FACT, TRANSFERRED T O REAL ACCOUNT MAINTAINED BY THE SOCIETY ITSELF IN STATE BANK OF I NDIA. THEREFORE, IT IS OBVIOUS THAT THE SO-CALLED SOCIETY FOR WELFARE O F HANDICAPPED PERSONS, DURGAPUR, WEST BENGAL IS ALSO A PARTY TO T HE FRAUDULENT TRANSACTION FOR RECEIVING DONATION. ON IDENTICAL S ET OF FACTS, THIS TRIBUNAL REMITTED BACK THE MATTER TO THE FILE OF TH E ASSESSING OFFICER TO EXAMINE THE MATTER FURTHER AND TO FIND OUT THE A CTION TAKEN 8 I.T.A. NO.2316/MDS/15 AGAINST THE OFFICIALS OF THE AXIS BANK FOR OPENING SUCH FRAUDULENT ACCOUNT AT KOLKATA. THE ASSESSING OFFICER WAS ALS O DIRECTED TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMIN E THE PERSONS WHO ARE IN-CHARGE OF SOCIETY AT THE RELEVANT POINT OF TIME AND FIND OUT HOW THEY WERE ABLE TO RECEIVE SUCH KIND OF DONA TION AND TRANSFER THE SAME TO OTHER INSTITUTIONS. THE ASSES SING OFFICER ALSO NEEDS TO EXAMINE WHEN THE FUNDS WERE CREDITED IN TH E SO-CALLED FICTITIOUS ACCOUNT, HOW THIS MONEY CREDITED INTO SU CH FICTITIOUS ACCOUNT WAS TRANSFERRED TO REAL ACCOUNT MAINTAINED BY THE SOCIETY FOR WELFARE OF HANDICAPPED PERSONS. THESE FACTS AR E NOT EXAMINED BY THE ASSESSING OFFICER. THE CHAIN OF TRANSACTION S, WHICH HAPPENED TO CREDIT THE LARGE AMOUNT OF FUNDS WITH F ICTITIOUS ACCOUNT OPENED BY AXIS BANK AT KOLKATA, THE ROLE PLAYED BY THE OFFICIALS OF AXIS BANK AND THE RECEIPT OF SOCIETY NEED TO BE EXA MINED. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE MATTER NEEDS TO BE RE-EXAMINED. THE DIVISION BENCH OF THI S TRIBUNAL, IN FACT, ON IDENTICAL SET OF FACTS IN I.T.A. NO. 2244/ MDS/2016 DATED 01.06.2016 IN THE CASE OF MRS. REKHA GOENKA V. ITO HAS REMITTED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICE R AFTER OBSERVING AS FOLLOWS:- 9 I.T.A. NO.2316/MDS/15 THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHE N THE SOCIETY CLAIMS THAT THEY HAVE NO ACCOUNT IN AXIS BANK, HOW THE FUNDS WERE TRANSFERRED FROM THAT ACCOUNT TO STATE BANK OF INDIA ACCOUNT NEEDS TO BE EXAMINED. MOREOVER, WHEN THE ASSESSING OFFICER RECEIVED A LETTER DATED 24.03.2014 FROM THE SOCIETY, THE COPY OF THE SAME SHALL BE FURNISHED TO THE ASSE SSEE. SINCE THE COPY OF THE LETTER WAS NOT FURNISHED, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WA S VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. WHEN T HE ASSESSING OFFICER RECEIVED A LETTER FROM THE RECIPI ENT- SOCIETY CLAIMING THAT THEY HAVE NO BANK ACCOUNT IN AXIS BANK AND THE ONLY ONE BANK ACCOUNT IS MAINTAINED WIT H STATE BANK OF INDIA, THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT THE ASSESSING OFFICER OUGHT TO HAVE GI VEN AN OPPORTUNITY TO THE ASSESSEE TO RESPOND TO THE AB OVE CLAIM OF RECIPIENT-SOCIETY. SINCE SUCH AN OPPORTUN ITY WAS NOT GIVEN TO THE ASSESSEE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER AFTER FURNISH ING A COPY OF THE LETTER DATED 24.03.2014 TO THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO FURN ISH A COPY OF THE LETTER DATED 24.03.2014 SAID TO BE RECEIVED FROM THE SOCIETY FOR WELFARE OF THE HANDICAPPED PERSONS, DURGAPUR, KOLKATA AND THEREAFTER DECIDE TH E ISSUE AFTER GIVING REASONABLE OPPORTUNITY TO THE 10 I.T.A. NO.2316/MDS/15 ASSESSEE. IT IS MADE CLEAR THAT THIS TRIBUNAL IS N OT COMMENTING UPON THE MERIT OF THE ADDITION MADE BY T HE ASSESSING OFFICER AND IT IS FOR THE ASSESSING OFFIC ER TO DECIDE THE SAME IN ACCORDANCE WITH LAW WITHOUT BEIN G INFLUENCED BY ANY OF THE OBSERVATION MADE BY THE CIT(APPEALS) AND MADE BY THIS TRIBUNAL IN THIS ORDE R. 6. IN VIEW OF THE ABOVE, BY FOLLOWING THE DECISION OF DIVISION BENCH OF THIS TRIBUNAL BY ORDER DATED 01.06.2016, T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE MATTER AS INDICATED BY THE DIVISION BENCH OF THIS TRIBUNAL AND THEREAFTER DECIDE THE IS SUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 18 TH AUGUST, 2016 AT CHENNAI. SD/- ( ... ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 2 /DATED, THE 18 TH AUGUST, 2016. KRI. 11 I.T.A. NO.2316/MDS/15 * (-34 54$- /COPY TO: 1. &' /APPELLANT 2. ()&' /RESPONDENT 3. , 6- () /CIT(A)-4, CHENNAI-34 4. PRINCIPAL CIT-5, CHENNAI 5. 4#7 (- /DR 6. 8' 9 /GF.