THE ACIT (OSD), CIRCLE-3(3), AHMEDABAD vs. SHRI THAKKAR GOVINDBHAI GANPATLAL, AHMEDABAD

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ITA 2318/AHD/2017Status: DisposedITAT Ahmedabad17 July 2019AY 2014-154 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the donation cannot be doubted solely on the basis of a general survey report of the donee, especially when the donee's representatives were not cross-examined and no specific evidence of repayment was produced. The cancellation of the donee's registration occurred subsequent to the donation.

What were the facts?

The assessee claimed a deduction for donation of Rs. 96,25,000/- under section 35(1)(ii). The AO disallowed this claim, treating the donation as bogus based on a survey report of the donee foundation which indicated fraudulent practices. The CIT(A) deleted this disallowance.

What were the issues?

Whether the donation claimed as deductible under Section 35(1)(ii) is to be treated as bogus based on a survey report of the donee foundation without specific evidence against the assessee.

Which sections of the Income-tax Act were involved?

Section 35(1)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH

Hearing: 17/07/2019Pronounced: 17/07/2019

PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-3, Ahmedabad dated 8.8.2017 passed for the Asstt.Year 2014-15.

2.

Though the Revenue has taken four grounds of appeal, but its grievance revolves around a single viz. the ld.CIT(A) has erred in deleting the disallowance of donation amounting to Rs.96,25,000/- which was added by the AO with the aid of section 35(1)(ii) of the Act.

3.

Brief facts of the case are that the assessee has filed its return of income on 9.9.2014 declaring total income at Rs.31,23,870/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2)

1.

2 was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed deduction under section 35(1)(ii) at Rs.96,25,000/- on the ground that it has incurred this expenditure towards donation. He observed that donations were given to Herbicure Health Care Bio-herbal Research Foundation (“Herbicure” for short). According to the AO a survey under section 133A was conducted by the DDIT(Investigation) Unit-1 & 2, Kolkatta on 27.1.2015 at “Herbicure” foundation. During the course of survey, it was found that donors/ beneficiaries in connivance with donee and with active help of certain brokers, entry operators/bogus billers were engaged in arranging these entries of bogus donation. According to the AO after an inquiry, “Herbicure” was prohibited from receiving donation. On the strength of this report of survey team, the AO has treated this donation as bogus and disallowed the claim of donation made by the assessee. On appeal, the ld.CIT(A) has deleted the disallowance.

4. Before us, the ld.counsel for the assessee at the very outset submitted that similar donations were given by S.G. Vat Care P.Ltd. It was disallowed to the assessee, but the Tribunal has deleted the disallowance. He placed on record copy of the Tribunal’s order passed in ITA No.1943/Ahd/2017. According to the ld.counsel for the assessee, the issue in dispute is squarely covered in favour of the assessee. On the other hand, the ld.DR was unable to controvert this contention of the ld.counsel for the assessee.

5. We have duly considered rival contentions and gone through the record carefully. In the case of S.G.Vat care P.Ltd. (supra), the Tribunal has recorded the following finding:

2. In the first ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.8,75,000/- on 3 account of alleged bogus donation to Herbicure Healthcare Bio-Herbal Research Foundation.

3. Brief facts of the case are that the assessee has filed return of income on 20.11.2014 declaring total income at Rs.4,47,910/-. On scrutiny of the accounts, it revealed that the assessee-company has given donation to Herbicure Healthcare Bio-Herbal Research Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issued by the Income Tax Department. It has been getting donations from various sources, and after deducting certain amount of commission, these donations were refunded in cash. On the basis of that survey report registration granted to its favour was cancelled. On the basis of the outcome of that survey report, the ld.AO construed the donation given by the assessee as bogus. Appeal to the ld.CIT(A) did not bring any relief to the assessee.

4.

Before us, the ld.counsel for the assessee contended that donations were given on 25.3.2014. At that point of time, donee was notified as eligible institution and fall within the statutory eligibility criterion. Certificate for receiving donation was cancelled on 5.9.2016. There is no mechanism with the assessee to verify whether such donee was a genuine institute or not, which can avail donation from the society.

5.

The ld.DR, on the other hand, contended that in the investigation it came to know about bogus affairs conducted by the donee. Hence, these donations are rightly been treated as bogus, and addition is rightly made.

6. We have duly considered rival contentions and gone through the record carefully. The AO is harping upon an information supplied by the survey tem of Calcutta. He has not specifically recorded statement of representatives of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of a general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. In the absence of such circumstances, donation given by the assessee to 4 the donee, on which the assessee no mechanism to check the veracity, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. We allow this ground.”

6.

There is no disparity on the facts. On the basis same survey report, the genuineness of the donation has been doubted in the case of the assessee also. Therefore, the issue in dispute is squarely covered in favour of the assessee. Respectfully following the order of the ITAT in the case of S.G.Vat care P.Ltd., we do not find any merit in the appeal of the Revenue. It is dismissed.

7.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the Court on 17th July, 2019 at Ahmedabad.

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