Rakesh Balubhai Padariya, Ahmedabad V. The Pr. CIT -3, Ahmedabad

ITA 283/AHD/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4665 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-12-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 25-04-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Accommodation entries
• Section: 68; 263; 132; 143(3); 54B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No .2 83 /A h d / 20 23 ( A s se ss m e nt Y e a r : 20 18- 19 ) R a k es h B a lu bh ai P a da r i ya , 5, S a pt a v il la , B /h . Si n d hu bha va n H a ll O p p. N a r m ad a A v a s Y o j an a , T ha l tej , A h m e da ba d - 3 8 0 05 9 V s. Pr . C o mm i s si o ne r o f I n c o m e Tax - 3 , Ah me da b ad [ P A N N o. A A WP P6 17 5 B ] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divatia & Shri Samir Vora, A.Rs. Respondent by: Shri Darsi Suman Ratnam, CIT D.R. D a t e of H ea r i ng 06.12.2023 D a t e of P r o no u n ce me nt 15.12.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax-3, (in short “Ld. PCIT”), Ahmedabad in DIN & Order No. ITBA/REV/M/REV5/2022- 23/1050288020(1) vide order dated 01.03.2023 passed for Assessment Year 2018-19. 2. The assessee has taken the following grounds of appeal:- “1.1 The order Under Section. 263 passed on 01.03.2023 by Pr. CIT-3, A’bad holding that the order of assessment passed under Section 143(3) on 08.10.2020 was erroneous and prejudicial to the interest of the revenue to the extent the deduction under Section 80GGC of Rs. 25,00,000/- was allowed without making adequate inquiry is wholly illegal, unlawful and against the principles of natural justice. ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 2– 1.2 The order passed by Under Section.263 on 01.03.2023 by Pr. CIT-3, A’bad holding the order of assessment passed under Section 143(3) on 08.10.2020 as erroneous and prejudicial to the Revenue is illegal and unlawful. The ld. Pr. CIT has erred in law and or on facts in invoking the powers of revision under Section 263 of the Act, since the condition precedent were not satisfied. 2.1 The ld. Pr. CIT has grievously erred in law and or on facts in holding the order of assessment passed under Section 143(3) on 08.10.2023 by AO to the extent of claim of deduction under Section 80GGC was erroneous and prejudicial to the interest of the Revenue for want of adequate inquiry and on merits held to be inadmissible. 2.2 That the in the facts and circumstances of the ld. Pr. CIT ought not to have held that the order of assessment passed under Section 143(3) on 08.10.2020 by AO to the extent of claim of deduction/s 80GGC was erroneous and prejudicial to the interest of the Revenue for want of proper inquiry and on merits held to be inadmissible. 2.3 The ld. Pr. CIT has grievously erred in law and or on facts in relying upon the material, statements etc. relating to Apna Desh Party which was neither confronted nor copy provided to the appellant during the course of revision proceedings. The ld. Pr. CIT has grievously erred in law and or on facts in holding the impugned donation to the political party as bogus.” 3. The brief facts of the case are that the Assessee had filed return of income for AY 2018-19 on 31/10/2018 declaring total income at Rs. 66,20,230/-. The Assessment was finalised under Section 143(3) of the Act on 08/10/2020 accepting returned income. On verification of case records, Principal CIT noted that assessee has claimed deduction under Section 80GGC of Rs. 25,00,000/- for donation made to one political party "Apna Desh Party" which in the facts of the instant case, was found to be bogus. Accordingly, ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 3– Principal CIT issued notice under Section 263 of the Act, in response to which the assessee submitted as under: “2.3 So far as the reasons stated by you in the above said notice, the appellant would like to point out that the bank statement clearly narrate the name of Apna Desh Party in respect of donation of Rs. 10,00,000/- each given on 19.03.2018, 21.03.2018 and Rs. 5,00,000/- given on 23.02.2018 by cheque no.135, 139 and 140 respectively. Even the receipts issued by said party - donee bear the date of the cheque whereas there appears to be any inadvertent lapse on its part to mention the details of cheque number and name of the bank. The ledger account of this party also bear the aforesaid details. It is clarified that even if any payment is to be made by RTGS, the banker has to be given the cheque or make net banking. The bank statement also indicate the details of RTGS with UTR number.” 4. On going to the facts of the assessee on record and assessee’s submission, Principal CIT observed that assessee has furnished copy of three donation receipts of Rs. 5,00,000/- dated 22/03/2018, Rs. 10,00,000/- dated 19/03/2018 and Rs. 10,00,000/- dated 21/03/2018 totalling to Rs. 25,00,000/- being made to “Apna Desh Party”. On perusal of such receipts, it was found that receipts do not contain details of cheque number, bank name, date of cheque issued etc. It was further observed that though assessee has given donation in cheque, same is found to be out of amount received of Rs. 35,00,000/- from Ranchhorbhai Tapubhai Patel. It was further observed that on perusal of website which provides list of donors and name-wise list, it was observed that above list does not include the name of assessee for three different receipts which clearly proves that donation is bogus. Principal CIT also noted that Search action under Section 132 of the Act was carried out on 07.09.2022 in multiple locations including APNA DESH PARTY, it’s related persons and other layering dummy entities/exit providers. The findings ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 4– emanating from search action and post search investigation as well as survey action undertaken in the case of controller of dummy entities established the allegation of involvement, inter-alia, of APNA DESH PARTY in the racket of bogus donation in connivance with the dummy/paper entities facilitating accommodation entries to the donors. The search under Section 132 of the Act was carried out by ADIT, Ahmedabad, and as per report received from Investigation Wing, above referred party was receiving bogus donations in lieu of cash. Further statement of Abdul Razzak B Pathan, President of “Apna Desh Party”, it became clear that whatever purchase/expenditure have been claimed to have made by APNA DESH PARTY from the entities enlisted above are non-genuine and merely book entries. Principal CIT observed that this goes on to prove beyond doubt that these purchase/ expenditure entries were recorded in the books of “Apna Desh Party” with the ulterior motive to layer the funds received by “Apna Desh Paty” in the garb of donation and no actual transactions have ever been carried out. In view of aforesaid facts, Principal CIT held that donation received by “Apna Desh Party” is bogus and cash has been received back by the Assessee in lieu of cheque. The donation receipts submitted by Assessee contain the signature of Mr. A. Razak whose statement was elaborately discussed in 263 order wherein he has admitted that cash has been given in lieu of cheque. The entire modus operandi of said political party indicates that donation given by Assessee is bogus. The Assessee has claimed deduction under Section 80GGC of the Act which is bogus and therefore to that extent Assessment Order passed by AO is erroneous and prejudicial to the interest of Revenue. Principal CIT observed that though Assessee has given cheque of Rs. 25,00,000/- but as per modus operandi elaborated in the 263 order, Assessee has received cash against such donation which is not found to be recorded in books of account. Principal CIT also observed that before ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 5– making donation Assessee has received loan of Rs.35,00,000/- from Ranchhorbhai Tapubhai Patel and no evidences regarding such loan was called for by the Assessing Officer as per provision of Section 68 of the Act. According to the Principal CIT, it was quite unusual that Assessee is taking loan for making such donation and which also suggest that above referred loan does not appear to be genuine loan. Accordingly, in light of the above facts, Principal CIT held that AO has not made proper inquiries into the nature of such loan and that the AO accepted the assessee's version without any discussion in assessment order. While passing the Assessment Order, AO did not enquire into the details /list of donation received by such party which is available on public domain and such list does not include the name of Assessee. Accordingly, in light of the above facts, Principal CIT held that the above facts clearly proves that assessment order passed by AO is prejudicial to interest of revenue as well as erroneous as envisaged under Section 263 of the Act. Accordingly, the Principal CIT set aside the assessment order as being erroneous and prejudicial to the interests of the Revenue and directed the assessing officer to pass fresh assessment order after calling for additional details/evidences as required for verification of the issue. 5. The assessee is in appeal before us against the aforesaid order passed by principal CIT setting aside the assessment order under Section 263 of the Act. The counsel for the assessee submitted that adequate opportunity was not provided to the assessee both during the course of search as well as revision proceedings under Section 263 of the Act. Further, the counsel for the assessee submitted that the observations made by the Principal CIT were general observations regarding the modus operandi of the “Apna Desh Party” in question and no specific allegation has been made against the assessee. The ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 6– counsel for the assessee relied on the case of Smt. Shardaben B. Patel112 taxmann.com 118 (Ahmedabad - Trib.) wherein the Ahmedabad Tribunal held that where Principal Commissioner invoked revision under Section 263 on ground that an information was received from DIT (Investigation) that long term capital gain (LTCG) earned by assessee on sale of shares was bogus and accordingly, disallowed claim of assessee for exemption under Section 10(38) in respect of such LTCG, since assessee had filed all relevant documents in relation to LTCG which reflected occurrence of transaction of sale of shares in normal course on platform of stock exchange, impugned revision under Section 263 was unjustified. The counsel for the assessee submitted that all the information and material which were used by the principal CIT while passing the 263 order were not provided to the assessee so as to give an opportunity to rebut the same. 6. In response, DR submitted that the assessing officer passed a cryptic order and did not make any efforts to enquire into the receipts issued by “Apna Desh Party” to ascertain whether they were genuine or not, while allowing deduction to the assessee under Section Chapter VI of the Act. The DR submitted that the Assessing Officer simply accepted the version of the assessee and did not make any effort to make any inquiries regarding the source of making the aforesaid donations (loans received by the assessee prior to giving of such donations) and also did not verify the genuineness of the receipts issued by “Apna Desh Party”. Accordingly, it was submitted that the order passed by the principal CIT under Section 263 of the act is correct, looking into the instant facts, where there was an evident lack of enquiry on part of the assessing officer while completing the assessment. ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 7– 7. We have heard the rival contentions and perused the material on record. In the case of Rajmandir Estates (P.) Ltd. 77 taxmann.com 285 (SC), during relevant year, assessee-company had increased its share capital by issuing 7.93 lakhs shares of Rs.10 each at a premium of Rs.390/-. Assessing Officer completed assessment without holding requisite investigation except for calling for records. Principal Commissioner passed order under Section 263 and opined that this could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non-application of mind. High Court by impugned order held that since assessee with an authorised share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees was an important pointer necessitating investigation and thus, Commissioner was justified in treating assessment order erroneous and prejudicial to interest of revenue. The Supreme Court dismissed the special leave petition filed against impugned order passed by High Court. In the case of Deniel Merchants (P.) Ltd.95 taxmann.com 366 (SC), the Hon’ble Supreme Court dismissed SLP order of High Court that where Assessing Officer did not make any proper inquiry while making assessment and accepting explanation of assessee insofar as receipt of share application money was concerned, Commissioner rightly set aside such assessment order under Section 263. In the case of Principal CIT vs. Swati Bajaj 139 taxmann.com 352 (Calcutta), the Hon'ble High Court held that where Assessing Officer was fully aware of investigation which was being done on penny stock companies and failed to take note of such report to put assessee on notice and commence an enquiry by calling upon assessee to justify genuineness of claim of LTCG/STCL and merely accepted submission ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 8– that stock broker was a public sector company in such case assumption of jurisdiction under Section 263 by Commissioners was fully justified. In the case of Pratik Syntex (P.) Ltd.94 taxmann.com 12 (Mumbai - Trib.), where AO made addition to assessee's income under sec. 68 in respect of amount received as share capital, in view of fact that assessee could not even give correct address of share applicant companies and, moreover, such companies were not in a financial position to subscribe to shares issued at a huge premium, impugned addition was to be confirmed. In the case of Ramanbhai Bholidas Patel 148 taxmann.com 92 (Ahmedabad - Trib.), the Tribunal held that Section 54B would not be applicable in case land was not used for agricultural purposes in two years preceding date of transfer; where Assessing officer had not made necessary inquiry before allowing deduction under Section 54B but grossly allowed claim made by assessee, revisional order passed by Principal Commissioner under Section 263 setting aside assessment order, should not call for any interference. 8. Accordingly, on going to the instant facts, we observe that there was an evident lack of enquiry by the assessing officer, while accepting the claim of deduction of donation by the assessee, while framing the assessment order. In the instant case, certain noteworthy discrepancies emanating from facts of the case ought to have been enquired by the assessing officer, while framing the assessment, and he should not have simply accepted the version offered by the assessee. In this case, an analysis of receipts issued by “Apna Desh Party” it was observed that such receipts did not contain details of cheque number, bank name, date of cheque etc. issued. The Ld. PCIT has also correctly observed that on perusal of website of “Apna Desh Party”, which provided list of donor and name-wise list, the list did not include the name of the assessee in respect ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 9– of three different receipts, which also establishes the fact that the donation is bogus. It was further observed that though the assessee has given donation in cheque, same is found to be out of donation / loan received of Rs. 35,00,000/- from Ranchhorbhai Tapubhai Patel. We agree with the observations made by Ld. PCIT that it is quite unusual that assessee is taking loans for making the aforesaid donations and accordingly, the Assessing Officer should have made further enquiries to ascertain whether the aforesaid loan is genuine in the first place or not. While passing the assessment order, the Assessing Officer did not enquire into the details / list of donations received by such party which is available in public domain and such list does not include the name of the assessee. While framing the assessment, the Assessing Officer simply accepted the version of the assessee and did not make any attempt to verify the genuineness of the receipts issued by “Apna Desh Party”. Accordingly, looking into the totality of facts as highlighted above, even without considering the material which Ld. PCIT took note of pertaining to adverse material / information obtained during search proceedings, in our view the assessment order is still erroneous on account of evident lack of enquiry in respect of information available in public domain. Therefore, the arguments of the Ld. Counsel for the assessee that Ld. PCIT could not have held that the assessment order is erroneous and prejudicial to the interest of the Revenue, on the basis of material which was not confronted to the assessee, merits no consideration. Accordingly, in the present facts, we observe that despite the apparent discrepancies emanating from the facts of the case placed on record, the assessing officer simply allowed the claim of deduction of donation by the assessee, without carrying out the necessary enquiries which ought to have been made looking into the instant facts. ITA No. 283/Ahd/2023 Rakesh Balubhai Padariya vs. PCIT Asst.Year –2018-19 - 10– 9. Accordingly, looking into the instant facts, we find no infirmity in the order passed by the principal CIT under Section 263 of the Act, so as to call for any interference. 10. In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 15/12/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 15/12/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 11.12.2023(Dictated by Hon’ble Member on his Dragon Software) 2. Date on which the typed draft is placed before the Dictating Member 11.12.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 13.12.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .12.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 15.12.2023 7. Date on which the file goes to the Bench Clerk 15.12.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................