RAVINDRA K RESHAMWALA,MUMBAI vs. THE INCOME TAX OFFICER WARD 17(1), MUMBAI

The present appeal has been filed by the assessee challenging the impugned order dated 26/06/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2010-11.

“The Grounds of Appeal mentioned hereunder are without prejudice to one another:-

1. On the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals), NFAC erred in confirming the Notice issued u/s.148 without obtaining requisite satisfaction as required u/s.151(2) of the Income Tax Act and therefore the said Notice is void ab initio and bad in law.

Ravindra K. Reshamwala ITA no.2925/Mum./2023

2. On the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals), NFAC erred in confirming the action of assessing officer i,e. not disposing of the complete objections raised by the assessee during the course of reassessment proceedings as required u/s.147 as laid down by Honourable Supreme Court in case of GKN Driveshafts (India) Ltd, 251 ITR 19.

3. On the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals), NFAC erred in confirming the Reopening Notice issued u/s 148 without bringing out any tangible material on the basis of which the reason to believe that income has escaped assessment was formed. 4. On the facts and circumstances of the case, the Id. Commissioner of Income Tax (A) failed to appreciate that at the time when the donation of Rs.35,00,000/- was made by the appellant, the proper Approvals/Exemptions were in force and in favour of the said Trust i.e. Navjeevan Charitable Trust. 5. On the facts and circumstances of the case, the ld. Commissioner of income tax (A) erred in confirming the order of assessing officer without appreciating that the cancellation of approval in the subsequent year which was earlier granted to the trust u/s.35AC to avail exemption of donation made by the appellant does not affect the availability and genuineness of the claim made by the appellant company as held by Hon supreme court in case of Chotatingrai Tea & Ors Etc., 258 ITR 529. The appellant craves leaves to add, to delete or amend any of the above grounds of appeal at the time of hearing.”

Ravindra K. Reshamwala ITA no.2925/Mum./2023 asked to show cause as to why the donations made by it to Navjeevan Charitable Trust be not treated as non-genuine and corresponding claim of deduction under section 35-AC of the Act be not disallowed. In response thereto, the assessee submitted that there is no material available on record that the donation was received by the trust and after deduction of commission the cash was given to the assessee. It was further submitted that nowhere assessee’s name has been mentioned for cash returned back in view of donations made. The assessee also submitted that the grant of income tax exemption certificate and time-to-time renewal of the same makes the assessee to believe that the trust activities are being carried out for the purpose for which the approval was granted. The Assessing Officer (“AO”) vide order dated 22/12/2017 passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that it is established beyond doubt that Navjeevan Charitable Trust was only involved in taking donations and giving the cash back to the donors and this fact has also been accepted by the trustee of Navjeevan Charitable Trust an accommodation entry provider. The AO also took into consideration the notification dated 30/11/2016 whereby the approval granted to Navjeevan Charitable Trust was cancelled. Accordingly, the AO disallowed the deduction of Rs. 35,00,000 claim by the assessee under section 35-AC of the Act and added the same to the total income of the assessee. The learned CIT(A), vide impugned order, upheld the initiation of reassessment proceedings under section 147 of the Act and also dismissed the appeal filed by the assessee against disallowance of deduction claimed under section 35-AC of the Act. Being aggrieved, the assessee is in appeal before us.

Ravindra K. Reshamwala ITA no.2925/Mum./2023

5. On the other hand, the learned Departmental Representative (“learned DR”) by vehemently relying upon the orders passed by the lower authorities submitted that the initial notifications granting approval to Navjeevan Charitable Trust were withdrawn vide notification dated 30/11/2016. It was further submitted that since the earlier notifications were withdrawn therefore the assessee is not entitled to claim the deduction under section 35-AC of the Act and the same has rightly been disallowed by the lower authorities.

Ravindra K. Reshamwala ITA no.2925/Mum./2023 statement of the trustee recorded during the course of search action under section 132 of the Act at the premises of Navjeevan Charitable Trust. We find that a similar issue came up for consideration before the Co-ordinate Bench of the Tribunal in assessee’s own case in Ravindra K. Reshamwala v/s DCIT, in ITA No.2648/Mum./2022, for the assessment year 2009-10, wherein assessee claimed deduction under section 35-AC of the Act in respect of donation made to Navjeevan Charitable Trust. The Co-ordinate Bench of the Tribunal vide its order dated 03/04/2023 decided the issue in favour of the assessee by observing as under:-

“10. Considered the rival submissions and material placed on record, we observe from the record that assessee has raised grounds challenging the reopening as well as on merit. Since the issue involved is covered in favour of the assessee on merits, we do not intend to go into jurisdictional issue at this stage. We kept open this ground open.

6. After going through documents on record, it could be seen that the assessee had given donation on 21/06/2004 against valid receipt issued by the Trust. The donation was made through cheque which got cleared from assessee’s Page | 5 Ravindra K. Reshamwala ITA no.2925/Mum./2023 bank account. The assessee was issued requisite Form No.58A by the trust. The trust had valid registration at the time of making of donation. The approval was withdrawn only subsequently vide notification dated 30/11/2016. Further, it is evident from the assessment order that the deduction has been denied to the assessee only in the basis of allegations that the donations were bogus donations and the amount so donated has flown back to the assessee. However, except for statement of trustee of the society, we find that there is no positive evidence on record to substantiate the same. There is nothing on record which would show that on the date of donation, the trust did not have valid registration or its registration stood withdrawn. It was only subsequently that the approval was withdrawn. This being so, the deduction could not be denied to the assessee since Ld. AO failed to conduct any inquiry before making disallowance and except for mere allegations, he did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash. The assessee, in our opinion, has duly discharged the onus casted upon him and it was incumbent upon Ld. AO to refute the same. However, no such inquiry has been conducted and the deduction has been denied more on mere allegations. Therefore, the deduction could not be denied to the assessee as held by this very bench in the case of Devajyoti N. Bhattacharya V/s ACIT (ITA No. 5051/Mum/2018 order dated 12/03/2020). Our observations therein were as follows: - 4. Upon due consideration, we find that the assessee was denied aforesaid deduction, in more or less similar factual matrix, in AYs 2009- 10, 2012-13 & 2014-15 which was agitated before this Tribunal vide common order dated 30/09/2019. The coordinate bench, vide para-7, held that that the assessee had adduced evidence to establish that payment of donation to Navjivan Charitable Trust and the onus had shifted to Ld.AO. However, Ld. AO failed to conduct any inquiry before making disallowance and did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash except mere allegations. Reliance was placed on the decision of Hon’ble Delhi High Court in CIT V/s A and A Bakery P. Ltd. (2008 302 ITR 51) to support the conclusions. Finally, the disallowance was deleted. We find that fact to be pari-materia the same in this year. The assessee has duly discharged the onus casted upon him and it was incumbent upon Ld. AO to refute the same. However, no such inquiry has been conducted and the disallowance has been made on mere allegations. Therefore, respectfully following the earlier order, we delete the disallowance as made by Ld. AO. Therefore, we direct Ld. AO to grant the deduction u/s 80GGA and recompute assessee’s income.”

Ravindra K. Reshamwala ITA no.2925/Mum./2023 ordinate Bench of the Tribunal rendered in assessee’s own case, the AO is directed to allow the claim of deduction under section 35-AC of the Act. Accordingly, grounds No. 4 and 5 raised in assessee’s appeal are allowed.