Pondicherry AGro Foods Pvt. Ltd., CHENNAI V. DCIT Non Corporate Circle 5(2), CHENNAI

ITA 3054/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5178 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 12-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Principle of natural justice; Accommodation entries
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 3054/CHNY/2017 / ASSESSMENT YEAR : 2013-14 PONDICHERRY AGRO FOODS PVT. LTD., NEW NO. 80, OLD NO. 141, GREAMS ROAD, THOUSAND LIGHTS, CHENNAI 600 006. [PAN: AAACP 4418N] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 5(2), CHENNAI 600 034. ( / APPELLANT) ( / RESPONDENT ) ASSESSEE BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE REVENUE BY : SHRI. N. MADHAVAN, ADDL. CIT - /DATE OF HEARING : 07.05.2018 - /DATE OF PRONOUNCEMENT : 07.05.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 3, CHENNAI IN ITA NO. 159/ 16-17/A-3 DATED 30.08.2017 FOR ASSESSMENT YEAR 2013-14. :-2-: ITA NO. 3054/CHNY/2017 2. M/S. PONDICHERRY AGRO FOOD PVT. LTD., IS ENGAGED IN MANUFACTURING OF WHEAT PRODUCTS. THE ASSESSEES ASSESSMENT FOR ASSE SSMENT YEAR 2013-14 WAS COMPLETED U/S. 143(3) ON 10.02.2016. THEREAFTE R ON THE INVESTIGATION DONE BY THE INVESTIGATION WING IN KOLKATA, THE ASSE SSING OFFICER RECEIVED INFORMATION THAT ACCOMMODATION ENTRIES WERE MADE IN THE GRAB OF DONATION OF SCIENTIFIC RESEARCH BY HERBICURE HEALTH BIO HERBAL RESEARCH FOUNDATION. ITS DIRECTORS AND EMPLOYEES ADMITTED IT IN THEIR SWORN STATEMENT. CONSEQUENTLY, THE APPROVAL GRANTED U/S. 31(5)(II) WITHDRAWN BY GO VERNMENT OF INDIA W.E.F. 01.04.2007 ETC. BASED ON WHICH, THE AO RE-OPENED THE ASSESSMENT TO CONSIDER THE DONATION OF RS. 25 LAKHS CLAIMED TO HA VE BEEN MADE TO M/S. HERBICURE HEALTH BIO HERBAL RESEARCH FOUNDATION AND ITS CONSEQUENTIAL CLAIM MADE BY THE ASSESSEE U/S. 35(1)(II). AFTER CONSIDE RING ASSESSEES REPLY ETC., THE AO REFUSED TO ALLOW ASSESSEES CLAIM OF DEDUCTI ON U/S. 35(1)(II). AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). 3. IN THIS REGARD THE RELEVANT PORTION OF THE CIT(A ) ORDER IS EXTRACTED AS UNDER: 4.4 IT IS TRITE LAW THAT ADMITTED FACTS NEED NO FURT HER EXPLANATION. THE ENTIRE MODUS OPERANDI OF THE M/S. HHBHRF HAS BEEN UNEARTHE D BY SURVEY TEAM. IT HAS BEEN CATEGORICALLY STATED BY THE MANAGING DIRECTOR OF THE TRUST THAT M/S. HHBHRF IS INDULGING IN PROVIDING ACCOMMODATION ENTRIES. 4.5 IN THIS REGARD, AC HAS REPRODUCED THE RELEVANT PORTION OF THE STATEMENT OF THE FOUNDER DIRECTOR OF THE TRUST, MR.SWAPAN RANJANDAS GU PTA RECORDED ON 27.01.2015. IN THE SAID STATEMENT, VIDE Q.NO.23, HE HAS CLEARLY NARRATED THE WHOLE GAMUT OF MODUS OPERANDI ADOPTED BY THE TRUST. AS PE R HIS STATEMENT, THEY USED TO RECEIVE CHEQUE FROM VARIOUS PERSONS AND RETURN THE CASH AFTER CHARGING COMMISSION @ 5% TO 8%. HIS STATEMENT WAS FURTHER SUP PORTED BY THE AUDITOR OF :-3-: ITA NO. 3054/CHNY/2017 THE TRUST AND ANOTHER DIRECTOR CALLED IN MR. ANAD K ISHAN MAITAN. IT IS ALSO SEEN THAT CBDT VIDE ITS ORDER 15.09.2016 HAS WITHDRAWN ITS AP PROVAL GRANTED U/S 35(1)(II) ON THE BASIS OF FINDINGS OF THE SURVEY CONDUCTED BY INVE STIGATION WING, CALCUTTA. THEREFORE, THE CONTENTIONS RAISED BY THE ID. AR ARE NOTHING BUT EMPTY RECITALS WITHOUT SUBSTANCE. THE CONTEMPORANEOUS EVIDENCE CLE ARLY PROVE THAT APPELLANTS CLAIM WAS BOGUS. THE PREPONDERANCE OF PROBABILITY OF RECEIVING CASH BACK IS HEAVILY LOADED AGAINST THE APPELLANT. WHEN THE APPELLANT WA S ASKED TO AVAIL CROSS- EXAMINATION AS TO WHETHER ITS DONATION WAS BOGUS OR NOT, THE SAME WAS NOT AVAILED BY THE APPELLANT. IT SHOWS THAT APPELLANT IS NOT IN A POSITION TO MEET THE PERSONS OF THE TRUST DUE TO THE FEAR OF TRUTH COMING OUT. IN MY OPINION, THE CONTENTIONS RAISED BY THE LD. AR ARE ILLOGICAL, UNSUBSTANTIATED, DEVOI D OF MERITS AND NOT SUPPORTED BY EVIDENCES. 4.6 FURTHER, THE ID. AR HAS ALSO FILED THE XEROX COP IES OF SURVEY REPORT OF M/S. HHBHRF FROM PAGE-59 TO 171. THE FACT PROVES THAT AC H AS HANDED OVER ALL THE STATEMENTS RECORDED DURING THE SURVEY ALONG WITH INC RIMINATING MATERIAL TO THE APPELLANT. NUMBER OF OPPORTUNITIES ALONG WITH SUPPLY OF INCRIMINATING MATERIAL SHOW THAT AC HAS STRICTLY FOLLOWED THE PRINCIPLES O F NATURAL JUSTICE IN APPELLANTS CASE. 4.7 IN VIEW OF THE ABOVE DISCUSSIONS, I HOLD THAT A C HAS RIGHTLY HELD THE CLAIM U/S35(1)(II) OF THE APPELLANT AS BOGUS. THEREFORE, THE ADDITIONS MADE BY THE AO ARE SUSTAINED. THE GROUNDS TAKEN ON THIS ISSUE ARE DISM ISSED. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE ASSE SSEE FILED THIS APPEAL. 4. WE HEARD THE RIVAL SUBMISSIONS. SIMILAR ISSUE C AME UP BEFORE THIS TRIBUNAL IN THE CASE OF M/S. MEGATRENDS INC., VS AC IT IN ITA NO. 417 & 740/CHNY/2017 FOR ASSESSMENT YEARS 2012-13 & 2013-1 4 DATED 05.03.2018. THE RELEVANT PORTION IS EXTRACTED AS UNDER: 11. COMING TO THE ISSUE OF THE DONATIONS IN RESPECT OF WHICH, THE ASSESSEE HAS CLAIMED WEIGHTED DEDUCTION U/S.35(1)(II) OF THE ACT , IT IS NOTICED THAT THE AO HAS DISBELIEVED THE DONATIONS ON THE BASIS OF STATEMENT RECORDED FROM ONE MR.SWAPAN RANJAN DAS GUPTA, ONE OF THE MAJOR SHAREHOLDERS OF H HBHRF AND ON ACCOUNT OF A :-4-: ITA NO. 3054/CHNY/2017 LETTER FROM CROSS AND IN RESPECT OF M/S.SHGPH ON THE BA SIS OF SURVEY REPORT. IT IS NOTICED THAT THE ONUS OF PROVING THE GENUINENESS OF THE DONATION RESTS ON THE ASSESSEE. HOWEVER, THE AC HAS TAKEN UP HIMSELF THE O NUS TO DISPROVE THE GENUINENESS OF THE DONATION MUCH BEFORE THE ASSESSE E HAS PROVED THE GENUINENESS OF THE DONATION. WHEN AN ASSESSEE STEPS FORWARD TO GI VE DONATIONS OF RS.1.25 CRS, RS.25.OO LAKHS, RS.1.45 CRS. RESPECTIVELY, THE ASSE SSEE WOULD HAVE ADEQUATE REASONS TO GIVE SUCH DONATIONS. HERE, IT IS NOTICED THAT THE ASSESSEE HAS NOT BEEN GIVEN ANY OPPORTUNITY TO PROVE THE GENUINENESS BUT THE ASSESSMENT HAS BEEN MADE BASED ON THE EVIDENCES COLLECTED BY THE REVENU E IN THE COURSE OF THE SURVEY CONDUCTED ON THE RESPECTIVE ORGANIZATIONS. THIS IS NOT PERMISSIBLE. THIS BEING SO, IN THE INTEREST OF NATURAL JUSTICE, THE ISSUE OF THE G ENUINENESS OF THE DONATIONS ARE RESTORED TO THE FILE OF THE AC FOR RE-ADJUDICATION. T HE AC MUST KEEP IN MIND THAT THE ONUS OF PROVING THE DONATIONS ARE ACTUALLY DONAT IONS AND NOT ACCOMMODATION ENTRIES AND THAT THE SAID ORGANIZATIONS WERE ELIGIB LE FOR CLAIMING DEDUCTION U/S.35(1)(II) OF THE ACT RESTS ON THE ASSESSEE. IF TH E AC DOES HAVE ANY EVIDENCE TO THE CONTRARY, IT IS TO BE PUT TO THE ASSESSEE FOR H IS REBUTTAL. THE ASSESSEE SHALL PRODUCE THE RECIPIENTS OF THE DONATION FOR EXAMINAT ION ALONG WITH THE EVIDENCES TO PROVE THE RECEIPT OF THE DONATION. THE INTERNAL COM MUNICATIONS OF THE REVENUE ARE EVIDENCES FOR DRAWING AN OPINION ON POSSIBLE WRONG C LAIMS BUT THEY ARE NOT THE FINAL EVIDENCE. THIS BEING SO, THE ISSUE OF THE DONAT ION IN THESE APPEALS ARE RESTORED TO THE FILE OF THE AC FOR RE-ADJUDICATION A FTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO PROVE THE GENUINENESS OF TH E DONATION. FOLLOWING THE ABOVE ORDER, THE ISSUE OF DONATION IN THIS APPEAL IS RESTORED BACK TO THE FILE OF THE AO FOR RE-ADJUDICATION ON T HE LINES INDICATED ABOVE. SINCE, THE RIGHT TO EXEMPTION MUST BE ESTABLISHED B Y THOSE WHO SEEK IT, THE ONUS THEREFORE, LIES ON THEM. IN ORDER TO CLAIM TH E EXEMPTION FROM PAYMENT OF INCOME TAX, THE ASSESSEE HAD TO PUT BEFORE THE I NCOME TAX AUTHORITIES PROPER MATERIALS WHICH WOULD ENABLE TO COME TO A CO NCLUSION. (35 ITR 312 (SC)). HENCE, THE AO SHALL REQUIRE THE ASSESSEE; T O ESTABLISH WHO, WITH WHOM, HOW AND IN WHAT CIRCUMSTANCES THE IMPUGNED SU MS WERE DONATED :-5-: ITA NO. 3054/CHNY/2017 ETC., TO PROVE THAT THE IMPUGNED DONATIONS ARE ACTU AL DONATIONS AND NOT ACCOMMODATION ENTRIES, THE HEALTHCARE BIO-HERBAL RE SEARCH FOUNDATION IS ELIGIBLE FOR CLAIMING DEDUCTION U/S. 35 ETC. THE A SSESSEE SHALL COMPLY TO THE AOS REQUIREMENTS AS PER LAW. ON APPRECIATION OF A LL THE ABOVE ASPECTS, THE AO WOULD DECIDE THE MATTER IN ACCORDANCE WITH LAW. THE AO IS ALSO FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT, BUT SHAL L FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSEE ON THE MATERIAL ETC TO BE USED AGAINST IT AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. CERTAIN OTHER GROUNDS ARE ALSO RAISED BY THE ASSESSEE , HOWEVER, THEY ARE NOT CANV ASSED AND HENCE THEY ARE TREATED AS DISMISSED. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH MAY, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) '# /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 07 TH MAY, 2018 JPV -45676 /COPY TO: 1. 8 / APPELLANT 2. 4:8 /RESPONDENT 3. ; ) ( /CIT(A) 4. ; /CIT 5. 64 /DR 6. /GF