BHAVESH ARUNKUMAR SHAH, MUMBAI V. ASSTT. CIT -19(1), MUMBAI

ITA 720/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6079 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Accommodation entries; Set aside
• Section: 148; 143(3); 12A; 12AA; 143(1); 250; 143(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 720/Mum/2021 (A.Y: 2012-13) Bhavesh Arunkumar Shah G-7, Sarvodaya Nagar, 1st Panjrapole Lane, CP Tank, Mumbai – 400004 Vs. ACIT – 19(1) Matru Mandir Grant Road, Tardeo, Mumbai-400007 ./ज आइआर ./PAN/GIR No. : ANDPS5035M Appellant .. Respondent Appellant by : Mr.Suchek Anchaliya.AR Respondent by : Mr.C.T. Mathews. Sr. DR Date of Hearing 08.03.2022 Date of Pronouncement 23.03.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals), (NFAC) Delhi passed u/s 143(3) r.w.s 147 and 250 of the Act. The assessee has raised the following grounds of appeal. 1. On the facts and in the circumstances of the case and in law the Ld. CIT (A) erred in not considering that the assumption of jurisdiction by the Ld. Assessing Officer is bad in law as the conditions laid down under the Act for initiating reassessment proceeding u/s 147 of the Act have ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 2 - not been fulfilled. 2. On the fact and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition of Rs. 52,50,000/- by treating genuine donation claimed as deduction by the appellant u/s 35(l)(ii), as bogus, without appreciating the fact that the appellant has submitted all relevant documentary evidences to substantiate the genuineness of the impugned donation. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition made by Ld. Assessing Officer, without considering that the appellant was neither provided any opportunity of cross examination of persons on whose statements reliance was placed nor provided any copy of such statements or any material or evidences on which reliance was placed, which is against the principles of natural justice. 4. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another. 2. The brief facts of the case are that the assessee is engaged in the business of trading in chemicals. The assessee has filed the return of income for the A.Y 2012-13 on 29.09.2012 disclosing a total income of Rs. 21,94,300/- and the return of income was processed u/s 143(1) of the Act and the assessment was completed u/s 143(3) of the Act on 11.02.2015 with a total income of Rs. 21,94,300/-.Subsequently, the Assessing Officer (A.O.) has received information from ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 3 - DDIT(Inv) Kolkata that the assessee has claimed the deduction u/s 35(1)(ii) of Rs. 52,50,000/- on account of donation paid to M/s Herbicure Health Care Bio Herbal Research Foundation (HHBRF) of Rs. 30 lakhs. Whereas, as per the information received from the DDIT(Inv), Kolkata, the assessee has given a bogus donation to the HHBRF and during the survey it was found that the HHBRF is engaged in providing accommodation entries for bogus donations. The assessee was issued notice u/s 148 of the Act along with reasons for reopening of the assessment. In response to notice, the assessee has filed a letter to treat the return of income filed earlier as due compliance. The A.O. has issued notice u/s 143(2) &142(1) of the Act. The A.O has dealt on the facts that the assessee has given bogus donation to HHBRF and discussed the modus operandi of the transactions and survey report at page 4 to 12 of the order and observed that the donation paid by the assessee is an accommodation entry and is not a business claim and denied the claim of deduction u/sec35(1)(ii) of the Act and assessed the total income of Rs. 74,44,300/- and passed the order u/s 143(3) dated 20.12.2016. ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 4 - 3. Aggrieved by the order the assessee has filed an appeal before the CIT(A).Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the scrutiny proceedings and confirmed the action of the A.O. and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal. 4. At the time of hearing, the Ld.AR has argued only the grounds of appeal in respect of claim of deduction u/sec35(1)(ii) of the Act and the other grounds of appeal are treated as not pressed and are left open. The Ld.AR submitted that the assessee has made donation genuinely and obtained the receipts and the transaction satisfied the conditions required for claiming the exemption/deduction. The Ld.AR supported the submissions with the donation receipts, certificate of registration u/sec 12AA of the Act, government notification in paper book and judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR submitted that the assessee has given donations to bogus institution and the recognition was cancelled and supported the order of the CIT(A). ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 5 - 5. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld. AR that the donation is genuine and duly supported with the facts and the material information to substantiate the eligibility of claim of deduction u/s 35(1)(iii) of the Act. The Ld.AR submissions are realistic and duly supported by the evidences. We find the Hon’ble Tribunal in the case of M/s Sopariwala Exports Pvt Ltd vs. DCIT in ITA No. 2039/Mum/2018 dated 17-06-2021 has dealt on the identical facts and granted the relief and observed at page 3 Para 9 to 15 of the order as under: 9. We have heard both the parties and perused the records. At the outset learned Counsel of the assessee submitted that the issue is covered in favour of the assessee by several decisions of the ITAT on identical facts. He referred to the following decisions : • Motilal Dahyabhai Jhaveri & sons Vs. ACIT (ITA No. 3453/Mum/2018 dt. 24.4.2019) • Borsad Tobacco Co. Pvt. Ltd. Vs. DCIT (ITA No. 2040/Mum/2018 dt. 17.6.2019) • Kitchen Essentials Vs. ACIT (ITA No. 6672&6673/Mum/2013 dt. 15.1.2019) 10. Per contra, learned Departmental Representative relied upon the orders of the authorities below. ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 6 - 11. Upon careful consideration we note that identical issue was decided in favour of the assessee in the aforesaid decisions of the ITAT. We may refer to the decision in the case of Kitchen Essentials (supra) as under :- “We have heard the rival submissions and perused the material on record including the decisions cited by the Id. AR. The undisputed facts are that the assessee has made donations of Rs.50 lakhs to the "The School of Human Genetics and Population Health" and claimed deduction u/s.35(1)(ii) of the Act equal to Rs.87,50,000/- being 175% of the amount paid. A survey was conducted at the office premises of the school namely, "The School of Human Genetics and Population Health" u/s.133A of the Act on 27.01.2015 and it was observed by the survey team that this institute in connivance with donors, brokers and accommodation entry providers has indulged in a duvious scheme of tax evasion, under which bogus donations were received from donors and money used to be returned back to the donors in lieu of commission, even while the donor availed of deductions u/s.35(1)(ii) of the Act. The registration of the institution was cancelled by the Government of India with retrospective effect and it was held that the institution has misused the exemption. However, under similar facts and circumstances, various coordinate benches have taken the view that mere admission on the part of the office bearers of the body/trust, the assessee cannot be penalized and the amount of donations claimed by the assessee on account of payment to the said school cannot be denied. In the case of Narbheram Vishram Qua, ITA No.42&43/Kol/2018, order dated 27.07.2018, the Kolkata Bench of the Tribunal under similar circumstances and facts has held as under :- ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 7 - "13 we have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assesses has challenged disallowance of weighted deduction of Rs.4,81,25,0007- for A.Y. 2013-14 and disallowance of weighted deduction of Rs.10,50,00,000/-, for A.Y. 2014-15, claimed by him under section 35(l)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' (hereinafter referred to as 'Matrivani') and 'The School of Human Genetics and Population Health' (hereinafter referred to as 'SHG'). The Assessee Firm in A.Y. 2014-15, made donation of Rs,2,00,00,000/ to Matrivani and Rs,4,00,00,000/ to SHG and claimed weighted deduction Assessing Officer. We note that not providing the opportunity of crossexamination is against the principle of natural justice and for that we rely of-the judgment of Hon'ble Delhi High Court in the case of CIT vs. Dharam Pal Prern Chand Ltd. [2007] 295 ITR 105, 108 (del). We note that on identical facts, the similar proposition was upheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, ITA No.333/Kol/2017,for Assessment Year 2013-14 wherein it was held as follows: "10. ....Thus we note from the entire facts and circumstances, that the AO got swayed away with the statement recorded on oath of Mr. Swapan Ranjan Dasgupta during survey conducted at the premises of M/s. Herb/cure. We have reproduced Question no. 22 and 23 and answers given by Shri Swapan Ranjan Dasgupta, wherein he admits to provide accommodation entries in lieu of cash. This information we should say can be the tool to start an investigation when the assessee made the claim for weighted deduction. The general statement of Shri Swapan Ranjan Dasgupta against donation made the claim of assessee for deduction suspicious. However, when the AO investigated, Shri Swapan Ranjan Dasgupta has ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 8 - confirmed that M/s. Herb/cure was in receipt of the donation and it has not given any refund in cash, then the sole basis of disallowance of claim as a matter of fact disappeared. It should be remembered suspicion howsoever strong cannot take the place of evidence. The confirmation from Shri Swapan Ranjan Dasgupla fortifies the claim of the assessee for weighted deduction u/s. 35(1 )(ii) of the Act. The sole basis of the addition/disallowance based on statement recorded on oath during survey cannot be allowed as held by Hon'ble Supreme Court in Kader Khan & sons (supra). Moreover, we note that if the AO was hell bent determined to disallow the claim of the assessee, then he should have granted an opportunity to cross examine Shri Swapan Ranjan Das Gupta and Shri Kishan Bhawasingka as held by Hon'ble Supreme Court in Andaman Timber (supra). 11. In the light of the aforesaid facts and circumstances, we cannot sustain the order of the authorities below. Therefore, we set aside the impugned order and direct the AO to allow the deduction of Rs.26,28,500/- u/s. 35(l)(ii) of the Act. 15. Now, we deal with the arguments of Id DR for the Revenue. We note that the solitary grievance of the Id DR for the Revenue is that since the registration had been cancelled by the CBDT, with retrospective effect that is, with effect from 1sl April 2007, by issuing notification dated 06.09.2016, for both the institutions viz: 'Matrivani' and 'The School of Human Genetics and Population Health', therefore these institutions are not entitled to claim benefit under section 35 (1) (ii) of the Act. ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 9 - We note that the withdrawal of recognition u/s 35(l)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assesses herein for claim of weighted deduction u/s 35(1 )(ii) of the Act, for that we rely on the judgment of the Coordinate Bench, Kolkata, in the case of M/s Maco Corporation India (P) Ltd, ITA No.l6/Kol/2017, for Assessment Year 2013-14, wherein it was held as follows: "29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration fill 01.10.2004; and lastly. Section 21 of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred on the CIT by Section I2AAC3) of the Act w.e.f. 01.10.2004. We hold that the ratio decidendi of the aforesaid judgement of the Hon'ble Apex Court would squarely be applicable to the facts of the instant case. In fact the assessee's case herein falls on a much better footing than the facts before the Hon'ble Apex Court. In the case before Hon'ble Apex Court, the power of cancellation of registration us 12A of the Act was conferred by the Act on the Id CIT w.e.f. 1.10.2004 and the Hon'ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(l)(ii) of the Act. Hence we hold that the withdrawal of recognition u/s 35(l)(ii) of the Act in the hands of the payee organizations would not ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 10 - affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(H) of the Act." 16.1n view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we direct the Id AO to grant deduction u/s 35(1 )(ii) of the Act, in the sum of Rs. 4,81,25,000/- for A. Y, 2013-14 and in the sum of Rs. 10,50,00,000/-, for A. Y. 2014-15, as claimed by him under section 35(l)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' and The School of Human Genetics and Population Health'. Accordingly, the Grounds 1 to 4 raised by the assessee for A.Y. 2013-14 and the Grounds 1 to 5 raised by the assessee for A. Y. 2014-15 are allowed. " 9. Similarly in various other decisions the issue has been decided by the Tribunal in favour of the assessee by disregarding the revenue's contentions that the registration of the school has been cancelled by the CBDT with retrospective effect by issuing Notification and, therefore, the assessee is not entitled to benefit u/s.35(1)(ii) of the Act. The facts before us being materially same involving the same school, namely, "The School of Human Genetics and Population Health", we, therefore, respectfully following the decisions of the coordinate benches of the Tribunal, hold that the deduction u/s.35(1 )(ii) of the Act cannot be denied to the assessee. Accordingly, we direct the AO to grant deduction u/s.35(1 )(ii) of the Act. Appeal of the assessee for the assessment year 2013-2014 (ITA No.6672/Mum/2017) is hereby allowed.” 12. We note that facts in the present case are identical. The withdrawal of the approval to the payee has taken place subsequent to the payment by the assessee. The ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 11 - assessee’s case duly follows under section 35(1)(ii) of the Act which read as under :- Section 35(1)(ii) : an amount equal to one and one half times of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research : Provided that such association, university, college or other institution for the purposes of this clause— (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government : Provided further that where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid; 13. Hence the payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly, following the above said precedent and noting that it is not the case that Hon'ble Bombay High Court has reversed the decision, we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) of the Act. 15. In the result, appeal filed by the assessee is allowed. 6. We find the facts of the present case are similar in respect of donation u/sec35(1)(ii) of the Act and we ITA No. 720/Mum/2021 Bhavesh Arunkumar Shah, Mumbai. - 12 - respectfully follow the judicial precedence and set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the ground of appeal in favour of the assessee. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 23.03.2022. Sd/- Sd/- (SHAMIM YAHYA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 23.03.2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ानुसार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai