BHAVITA CHEMICALS PVT. LTD, MUMBAI V. ITO - 6(1)(3), MUMBAI

ITA 3665/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1455 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Charitable institution; Principle of natural justice
• Section: 143(3); 201; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 3665 / / 2019 (%. .2010-11 ) ITA NO. 3665/MUM/2019 (A.Y.2010-11) BHAVITA CHEMICALS PVT. LTD., 208, ALANKAR BUILDING, SAMUEL STREET, MASJIT BUNDER,MUMBAI 400 009 PAN:AAACB2209B / VS. : / APPELLANT THE ITO -6(1)(3), ROOM NO.508, 5 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 : / RESPONDENT ASSESSEE BY : SHRI MANOJ PANDIT REVENUE BY : SHRI SANJAY J. SETHI / DATE OF HEARING : 01/12/2020 / DATE OF PRONOUNCEMENT : 01/12/2020 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI (IN SHORT THE CIT(A)) DATED 22/02/2019 FOR THE ASSESSMENT YEAR 2010-11. 2. SHRI MANOJ PANDIT, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTUR ING CHEMICALS. THE 2 ITA NO. 3665/MUM/2019 (A.Y.2010-11) ASSESSEE HAD MADE DONATION OF RS.5,00,000/- THROUGH CHEQUE TO NAVJEEVAN CHARITABLE TRUST (IN SHORT NCT) ON 10/03/2010. IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE CLAIMED THE AMOUNT OF DONATION AS DEDUCTION UNDER SECTION 35AC OF THE INCOME TAX ACT, 1961( ( IN SHORT THE ACT). THE LD. AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE REFERRED TO THE BANK STATEMENT AND RECEIPT FROM NCT AT PAGE 33 TO 35 OF THE PAPER BOOK. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMIT TED THAT A SEARCH ACTION WAS CARRIED OUT ON NCT WHEREIN IT WAS ALLEGEDLY FOU ND THAT THE TRUST IS ENGAGED IN ISSUING BOGUS DONATION RECEIPTS. ON THE BASIS OF THE SAID INFORMATION, THE ASSESSMENT FOR ASSESSMENT YEAR 201 0-11 WAS REOPENED IN THE CASE OF ASSESSEE. IN THE PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTIO N 35AC WAS DISALLOWED. AGAINST THE ASSESSMENT ORDER DATED 19/12/2016 PASSE D UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE FILED APPEAL B EFORE THE CIT(A). THE CIT(A) VIDE IMPUGNED ORDER DISMISSED THE APPEAL OF ASSES SEE. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT ON THE DATE OF DONATION IN THE FINANCIAL YEAR 2009-10, NCT WAS HOLDING VALID CERT IFICATE OF REGISTRATION, WHICH WAS SUBSEQUENTLY RENEWED BY THE DEPARTMENT IN 2011. THE ASSESSEE HAD NO REASON TO DOUBT THE DONATION RECEIPT ISSUED BY TH E TRUST. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED TH AT THE STATEMENT AND THE DOCUMENTS RECORDED/FOUND ON THE BASIS OF WHICH THE ASSESSMENT FOR ASSESSMENT YEAR 2010-11 HAS BEEN REOPENED AND THE B ENEFIT OF DONATION HAS BEEN WITHDRAWN, WAS NEVER PROVIDED TO THE ASSESSEE. THE OPPORTUNITY TO CROSS EXAMINE THE PERSON ON WHOSE STATEMENT THE BEN EFIT OF DEDUCTION UNDER SECTION 35AC HAS BEEN WITHDRAWN WAS NOT PROVIDED TO THE ASSESSEE. THE 3 ITA NO. 3665/MUM/2019 (A.Y.2010-11) LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMIT TED THAT IN IDENTICAL STATE OF FACTS ADDITION WAS MADE IN THE HANDS OF JADSTO NE TRADING PVT. LTD. THE TRIBUNAL IN ITA NO.7143 & 6628/MUM/2018 FOR ASSESSM ENT YEARS 2013-14 AND 2014-15 DECIDED ON 12/06/2019 DELETED THE ADDITION AND ALLOWED ASSESSEES CLAIM OF DEDUCTION. THE CASE OF THE ASSESSEE IS O N SIMILAR FOOTING. 3. SHRI SANJAY J. SETHI, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD.DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT IT WAS ONLY AFTER THE SEARCH ACTION IN THE CASE OF NCT THAT IT TRANSPIRED THAT THE TRUST IS ENGAGED IN ISSUING BOGUS DONATION CERTIFI CATE BY CHARGING NOMINAL COMMISSION FROM DONORS. THE LD.DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE MODUS OPERANDI OF THE TRUST WAS TO RECEIVE CHEQ UE AND AFTER DEDUCTING COMMISSION, RETURN THE BALANCE AMOUNT IN CASH. TH E LD.DEPARTMENTAL REPRESENTATIVE PLACED HEAVY RELIANCE ON THE ORDER O F CIT(A) AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. 4. BOTH SIDES HEARD, ORDERS OF AUTHORITIES BELOW PE RUSED. THE ASSESSEE MADE DONATION OF RS.5,00,000/- TO NCT IN MARCH, 201 0 AND CLAIMED THE BENEFIT OF DEDUCTION UNDER SECTION 35AC OF THE ACT IN ITS R ETURN OF INCOME FOR ASSESSMENT YEAR 2010-11. SUBSEQUENTLY, SEARCH AC TION WAS CARRIED OUT IN THE CASE OF NCT AND IT WAS FOUND THAT THE TRUST WAS ISS UING BOGUS DONATION RECEIPTS. ON THE BASIS OF SEARCH ACTION, THE ASSES SEES CLAIM OF DEDUCTION IN ASSESSMENT YEAR 2010-11 WAS DISALLOWED IN REASSESS MENT PROCEEDINGS. THE CONTENTION OF THE REVENUE IS THAT THE DONATION AMOU NT PAID BY THE ASSESSEE TO NCT HAS FLOWN BACK TO THE ASSESSEE. I FIND THAT NO POSITIVE EVIDENCE IS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT ON T HE DATE OF DONATION MADE BY THE ASSESSEE, NCT WAS NOT HOLDING VALID REGISTRA TION CERTIFICATE. ON THE CONTRARY, THE ASSESSEE HAS FILED EVIDENCE TO SHOW T HAT NCT WAS HOLDING VALID 4 ITA NO. 3665/MUM/2019 (A.Y.2010-11) REGISTRATION CERTIFICATE FROM THE DEPARTMENT ON THE DATE OF DONATION AND THE SAME WAS SUBSEQUENTLY RENEWED IN 2011. THIS FACT IS EVIDENT FROM NOTIFICATION ISSUED BY MINISTRY OF FINANCE DATED 30 /11/2010 AT PAGE 70 TO 72 OF THE PAPER BOOK. IT IS FURTHER OBSERVED THAT ON THE BASIS OF STATEMENT/EVIDENCE COLLECTED AT THE BACK OF ASS ESSEE, THE CLAIM OF DEDUCTION UNDER SECTION 35AC OF THE ACT HAS BEEN DI SALLOWED IN PROCEEDINGS UNDER SECTION 147 R.W.S. 148 OF THE ACT. IT IS A WELL SETTLED LAW THAT ANY EVIDENCE COLLECTED AT THE BACK OF ASSESSEE IF NOT PUT TO THE ASSESSEE FOR CROSS- EXAMINATION WOULD RESULT IN VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE. IN THE INSTANT CASE THE ASSESSEE ASKED FOR CROSS-EXAMINATI ON OF THE TRUSTEE , HOWEVER, THE SAME WAS REJECTED BY THE ASSESSING OFFICER.THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF ANDMAN TIMBER INDUSTRIES VS. C CE, 62 TAXMANN.COM 3 HAS HELD THAT NOT PROVIDING OPPORTUNITY TO CROSS-EXAMI NE THE WITNESS IS A SERIOUS FLAW WHICH RENDERS THE ORDER NULLITY. THE IMPUGNED ORDER IS LIABLE TO BE QUASHED ON THIS GROUND ALONE. IT IS FURTHER OBSER VED THAT NO COGENT EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SUBSTA NTIATE THAT THE DONATION MADE BY ASSESSEE THROUGH BANKING CHANNEL HAS BEEN R ECEIVED BACK BY ASSESSEE IN CASH. THE ASSESSMENT ORDER AND THE IMPUGNED ORDER HAS BEEN PASSED PURELY ON ASSUMPTIONS AND PRESUMPTIONS. 5. THE CO-ORDINATE BENCH IN THE CASE OF JADSTONE TRADING PVT. LTD., (SUPRA), DELETED THE ADDITION MADE FOR SIMILAR R EASONS IN RESPECT OF DONATION MADE TO NCT, HOLDING THAT IN THE ABSENCE OF ANY E VIDENCE ON RECORD THAT THE AMOUNT HAS BEEN RECEIVED BACK BY THE ASSESSEE FROM THE CHARITABLE TRUST, THE ADDITION IS SOLELY BASED ON SURMISES AND CONJECTURE S AND, HENCE, IS 5 ITA NO. 3665/MUM/2019 (A.Y.2010-11) UNSUSTAINABLE. I FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE, HENCE, SAME ARE ACCEPTED AND THE IMPUGNED ORDER IS QUASHED. 6. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY THE 1 ST DAY OF DECEMBER, 2020. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, (%/ DATED: 01/12/2020 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT , 2. *+ / THE RESPONDENT. 3. ,+ ( )/ THE CIT(A)- 4. ,+ CIT 5. -.*+% , . . . , / DR, ITAT, MUMBAI 6. ./012 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI