Mrs. Rashmiben Sharadbhai Patel, Ahmedabad V. Teh DCIT, Circle-2(2)(1), Ahmedabad

ITA 266/AHD/2021

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0779 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 21-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries
• Section: 147; 133A; 143(1); 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Mrs. Rash miben Sharad bhai Patel, Bu nglow-5 , Sudarshan Society Part-2, Naranpura, Ah medabad -3 80013 PAN: AHPP P 4795 F (Appellant) Vs The DCIT, Circle-2(2)(1 ), Aayak ar Bhavan, Vejalpur, Near Sachin tower, 100 Ft. Road Ah med abad-3800 15 (Resp ondent) Asses see b y : Shri S. N. Div atia, A. R. Revenue by : Shri Asho k Kuma r Suthar, Sr. D.R. Date of hearing : 19-07 -2 023 Date of pronouncement : 16-10 -2 023 आदेश/ORDER PER : WASEEM AHMED, ACCOUNTANT MEMBER:- This assessee’s appeal for AY 2014-15, arises from order of National Faceless Appeal (NFAC), Delhi dated 23-08-2021, in the proceedings under section 250 of the Income Tax Act, 1961, in short “the Act”. ITA No. 266/Ahd/2021 Assessment Year 2014-15 I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 2 2. The assessee has raised following grounds of appeal: “1. The order passed u/s. 250 on 23/08/2021 for A.Y.2014-15 by Commissioner of Income Tax (Appeals) National Faceless Appeal Centre upholding the disallowance of donation u/s 35(l)(ii) of Rs. 17,50,000/- is wholly illegal, unlawful and against the principles of natural justice. 2. The Ld. CIT(A) has grievously erred in law and/or on facts while upholding disallowance Rs. 17,50,000/- u/s 35(l)(ii) by wrongly concluding that the donation given by the appellant as bogus donation. 3. The Ld. C1T(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowance. 4. The Ld. CIT(A) has grievously erred in law and or on facts in not upholding the grounds of Appeal of the appellant about the wrong interpretation and application of the CBDT Notification No. F.No.203/31/2018-ITA(II) dated 28/02/2019 relating to withdrawal of approval u/s 35(l)(ii) of the I T Act, 1961 in the case of M/s Bioved Research Society, Allahabad and while interpreting and applying said CBDT circular in the case of appellant, the ld. DCIT also not fulfilling his duty of making proper enquires in the matter of appellant. Further, the Ld. CIT(A) has grievously erred in law and or on facts in not upholding the grounds of Appeal of the appellant about the misinterpretation and ignoring the explanation to section 35(1) as inserted by Taxation Laws (Amendment) Act, 2006 with retrospective effect from 01/04/2006. Further, the Ld. CIT(A) has grievously erred in law and or on facts in not upholding the grounds of Appeal of the appellant about the wrong interpretation of details of the investigation proceedings against M/s Bioved Research Society as conducted by Investigation wing, Kolkata and have wrongly linked the same with the donation given and deduction claimed u/s 35(l)(ii) by the appellant. Further, the Ld. CIT(A) has grievously erred in law and or on facts in not upholding the grounds of Appeal of the appellant about I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 3 the misinterpretation of Rule 5C(11) of the I T Rule, 1962. Further, the Ld, CIT(A) has grievously erred in law and or on facts in not upholding the grounds of Appeal of the appellant about the misinterpretation of section 35(l)(ii) and Rules 5C and 5E of the I T Rules, 1962 vis-a-vis CBDT Notification dated 25/01/2019. Considering all the above submissions, your Honour is requested to delete the said disallowance of donation u/s 35(l)(ii) of Rs. 17,50,000/- and oblige.” 3. The only effective issue 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/- only. 4. The facts in brief are that the assessee is an individual and has income from trading of land as well as income from partnership firm. The assessee in the return of income for the year under consideration claimed weighted deduction under section 35(1)(ii) of the Act for Rs. 17.50 Lacs on account of donation of Rs. 10 Lacs given to an approved research organization/society namely M/s Bioved Research Society Allahabad. The return filed by the assessee was processed under section 143(1) of the Act. 4.1 Subsequently the AO received information that the approval of the above-mentioned research society was revoked by the CBDT with retrospective effect by notification dated 28-02-2019. As per the CBDT notification, the above-mentioned research society was involved in providing accommodation entries in guise of bogus donations. Therefore, the approval under section 35 of the Act was withdrawn with retrospective I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 4 effects. The CBDT in the said notification directed the revenue authority to take necessary remedial action against the donor claiming weighted deduction under section 35(1)(ii) of the Act. The CBDT also provided the list of the donors in annexure 4 to the notification against whom remedial action should be taken and name of assessee was appearing at serial number 90 of the impugned list. Accordingly, the assessment of the assessee was reopened under section 147 of the Act. 4.2 The assessee during the reassessment proceedings submitted that at the time of making the donation, the impugned research society was duly approved under section 35(1)(ii) of the Act by the prescribed authority i.e. CBDT. Such approval cannot be withdrawn with retrospective by issuing notification. CBDT has been empowered under section 295(4) of the Act to make rules with retrospective effect which are not prejudicial to the assessee. But the power to make rules or power to issue notification are distinct. Therefore, cancellation of approval of impugned research society under section 35(1)(ii)of the Act by issuing notification is invalid and accordingly the believe formed by the AO was based on such invalid cancellation for escapement of income which is not sustainable. 4.3 The assessee further submitted that she given donation to an approved organization for the purpose of furtherance of research activity. Subsequently, the approval of such organization was cancelled on account of the involvement of such organization in the activity of accommodation entries cannot vitiate the genuine donation given by her. As such, the entire basis of allegations of accommodation entry and cancellation of approval is I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 5 investigation report of investigation wing-Kolkata but in nowhere in that report, her name is appearing, and no allegation made against her. 4.4 However the AO dismissed the submission of the assessee by holding that the CBDT/central government is empowered under rule 5C(11) of the income tax Rule to withdraw the approval under section 35(1)(ii) of the Act upon finding the fact that the activity of research organizations is not genuine. Thus, the AO, by relying on the notification of the CDBT date 28- 02-2019 disallowed the weighted deduction claimed by the assessee for Rs. 17.5 Lacs and added the same to the total income of the assessee. 5. The aggrieved assessee preferred an appeal before the learned NFAC/CIT(A) who confirmed the disallowance made by the AO by observing as under: “15. In that view of the matter, the petition being devoid of merits, is discharged. Notice is discharged. Interim relief, if any, stands vacated forthwith. From the above it is clear that there were two questions involved in this appeal. 1. Whether AO was competent to reopen the case on the basis of information received from the investigation done by the CBDT or not? This question has already been answered by the honourable Gujarat High Court which happens to be the jurisdictional High Court also in case of assessee and therefore no further issue remains to be decided in this appeal as far as this question is concerned. 2. The second question that was involved in the appeal was 'Whether the donation was bona fide one and therefore need to be allowed'. This was the second limb of the assessment and till date the assessee has failed to answer this question and to establish that the donation I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 6 was a bona fide one and therefore the assessee is entitled to deduction under section 35(1 )(ii). As assessee has failed to do so I have no reason to deviate from the assessment order. 3. In view of the above the appeal of the assessee stands dismissed. In the result the appeal is dismissed” 6. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 7. The learned AR before us filed a paper book running from pages 1 to 48 and contended that at the relevant point of time when the donation was made by the assessee, the done was duly registered with the authorities. As such, no adverse inference can be drawn against the assessee based on the cancellation of the registration certificate in a future date. 8. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that this Tribunal involving identical facts and circumstances in the case of Inspiron Engineering Pvt. Ltd vs. DCIT in ITA No.968/Ahd/2018 for A.Y. 2014-15 has decided the issue in favour of the assessee. The relevant extract of the order is reproduced as under: I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 7 “7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue before us arises with respect to the donations made to the institution “SGH & PH” and “NCT”. Regarding the donations made to “SGH & PH” it is the undisputed facts that at the relevant time of donation to “SHG & PH”, the institution was approved under section 35(1)(ii) of the Act though such approval has been withdrawn on a later date by the Government by issuing notification. Thus, the assessee cannot be denied the benefit of deduction provided under section 35(1)(ii) of the Act merely on the ground that the approval was withdrawn by the Government on a later date. In this regard we place our reliance on the order of this tribunal involving identical issue which has been decided in favour of the assessee in the case of ACIT v/s M/s Thakkar GovindbhaiGanpatlal HUF in ITA No. 2318/AHD/2017 wherein it was held as under: 5. We have duly considered rival contentions and gone through the record carefully. In the case of S.G. Vat care P. Ltd.(supra), the tribunal has recorded the following finding: 2. In the first ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.8,75,000/- on account of alleged bogus donation to Herbicure Healthcare Bio-Herbal Research Foundation. 3. Brief facts of the case are that the assessee has filed return of income on 20.11.2014 declaring total income at Rs.4,47,910/-. On scrutiny of the accounts, it revealed that the assessee-company has given donation to Herbicure Healthcare Bio-Herbal Research Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issued by the Income Tax Department. It has been getting donations from various sources, and after deducting certain amount of commission, these donations were refunded in cash. On the basis of that survey report registration granted to its favour was cancelled. On the basis of the outcome of that survey report, the Id.AO construed the donation given by the assessee as bogus. Appeal to the Id.CIT(A) did not bring any relief to the assessee. 4. Before us, the ld.counsel for the assessee contended that donations were given on 25.3.2014. At that point of time, donee was notified as eligible institution and fall within the statutory eligibility criterion. Certificate for receiving donation was cancelled on 5.9.2016. There is no mechanism with the assessee to verify whether such donee was a genuine institute or not, which can avail donation from the society. I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 8 5. The Id. DR, on the other hand, contended that in the investigation it came to know about bogus affairs conducted by the donee. Hence, these donations are rightly been treated as bogus, and addition is rightly made. 6. We have duly considered rival contentions and gone through the record carefully. The AO is harping upon an information supplied by the survey tern of Calcutta. He has not specifically recorded statement of representatives of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of a general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. In the absence of such circumstances, donation given by the assessee tothe donee, on which the assessee no mechanism to check the veracity, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. We allow this ground. " 6. There is no disparity on the facts. On the basis same survey report, the genuineness of the donation has been doubted in the case of the assessee also. Therefore, the issue in dispute is squarely covered in favour of the assessee. Respectfully following the order of the ITAT in the case of S.G.Vat care P.Ltd., we do not find any merit in the appeal of the Revenue. It is dismissed. 7. In the result, appeal of the Revenue is dismissed. 7.1 As the issue decided by this tribunal in the case above, is squarely applicable to the present facts of the case, therefore we disagree with the finding of the authorities below. Accordingly we hold that the assessee is entitled for the benefit of the donation made to “SHG & PH” under section 35(1)(ii) of the Act. 7.2 Regarding the donation made to the “NCT”, we note that the benefit of the deduction under section 35AC of the Act was denied to the assessee on the reasoning that the trustee of such trust in the statement given under section 133A during the survey operation has admitted the fact the NCT is engaged in the activity of providing the accommodating entries to the parties. However, admittedly there was no cross-examination provided to the assessee of the I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 9 trustees who have admitted to be engaged in providing accommodating entries. Thus the question arises whether the assessee can be denied the benefit of the deduction under section 35AC of the Act on the basis of the statement recorded during survey operation which were not cross verified despite the request was made to the AO by the assessee. In our considered view the answer stands in favour of the assessee. The statement recorded during survey operation cannot be used against the assessee until and unless it is cross verified in view of the judgment of Hon’ble Gujarat High Court in the case of CIT v/s Chartered Speed Pvt. Ltd. reported in Tax Appeal No. 126 of 2015 wherein it was held as under: “It is an undisputed position that the statement of the persons concerned which were recorded by the department, those persons were not made available for cross examination, may be for one reason or another inspite of the attempts made by the department. Therefore the Tribunal has rightly found that the statement of those persons cannot be read against the assessee.” 7.3 Furthermore, the revenue has not brought any tangible material suggesting that the donation paid by the assessee to “NCT” has come back to it in the form of cash. Thus in the absence of necessary documentary evidence, we are not inclined to confirm the order of the authorities below. 7.4 In view of the above, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.” 9.1 Before us, no material has been placed on record by the Revenue demonstrating that the decision of Tribunal as discussed above has been set aside/ stayed or overruled by the higher Judicial Authorities. Before us, the Revenue has not placed any material on record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of case referred above nor has placed any contrary binding decision in its support. Thus, respectfully following the above decision of the Co-ordinate Bench, we allowed the ground of appeal of the assessee. I.T.A No. 266/Ahd/2021 A.Y. 2014-15 Page No. Mrs. Rashmiben Sharadbhai Patel vs. DCIT 10 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 16-10-2023 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 16/10/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद