ASHOKKUMAR GOKULCHAND SANANDA,BULDHANA vs. ASSISTANT COMMISIONER OF INCOME TAX AKOLA CIRCLE, AKOLA

Brief facts of the case are that assessee is an individual, filed his e-return of income on 30.09.2014 declaring total income of Rs. 2,23,54,457/-. Assessment was completed u/s. 143(3) of the Act vide order dated 27.10.2016 at total income of Rs. 2,26,97,913/- after making addition of Rs. 3,43,456/-. Against the assessment order, assessee preferred appeal before the Ld. CIT(A), who vide order dated 25.06.2018 allowed the appeal and deleted the addition of Rs. 3,43,456/-. Case of the assessee was reope3ned u/s. 147 of the Act by issuing notice u/s. 148 and assessment was completed at a total income of Rs. 2,42,54,457/- after making disallowance of Rs. 17,50,000/- u/s. 35(1)(ii) and addition of Rs. 1,50,000/- u/s. 69C of the Act. Based on the information received from ACIT, (Ashokkumar Gokulchand Sananda) Central Circle-4(4), Mumbai, a search and seizure action u/s. 132 of the Act was carried out in the case of M/s. Sri Renuka Mata Multi State Urban Co-op. Credit Society Ltd. (for short, “Society”) on 26.05.2017. During the course of search, it was found that huge money was deposited in the bank account and the society could not explain the source for the same. The society was transferred these amounts to various beneficiaries through NEFT/RTGS/DD, in which assessee is one of the beneficiaries, who had received a sum of Rs. 16,30,50,000/-. Therefore, it was concluded that income has escaped assessment and accordingly proceedings u/s. 147 were initiated after recording the reasons, notice u/s. 148 was issued and served upon the assessee.

In compliance to the notice u/s. 148, assessee filed income tax return on 23.04.2021 declaring the same income as declared in earlir return of income filed u/s. 139(1) of the Act. Statutory notices u/s. 143(2) & 142(1) of the Act were issued and in response thereto, assessee filed his submissions along with supporting documents and stated therein that 4 (Ashokkumar Gokulchand Sananda) assessee is a proprietor concern of M/s. Rana Traders, Khmgaon has received payments towards sale of goods from customers through DDs/Pay Orders during the F.Y. 2013-14 totaling to Rs. 16,70,50,000/-. All these DDs/Pay Orders were deposited in his current bank account maintained with Axis Bank, Khamgaon, copy of which is also furnished. Again, assessee was requested to furnish complete name and address, PAN and email ID of the parties to whom sale were made and consideration was received through accounts held with the Society. In reply, assessee submitted ledger extracts of the customers and the Ld. AO noticed that none of the ledger accounts furnished by the assessee reflects receipts of payment through DD/Pay Order drawn on Society. Therefore, a sum of Rs. 16,70,50,000/- was propose to be added to the income of the assessee u/s. 68 of the Act. The draft assessment order proposing the above addition of Rs. 16,70,50,000/- was sent to the assessee vide show-cause notice dated 25.03.2022. IN response to the show-cause notice, assessee furnished written submissions along with relevant documents. After considering the submissions and 5 (Ashokkumar Gokulchand Sananda) documents, explanation of the assessee was accepted and assessment is completed u/s. 147 r.w.s. 143(3) & 144 B of the Act and assessed income at Rs. 2,42,54,457/- without making further any additions.

Being aggrieved by the assessment order, assessee preferred appeal before the Ld. CIT(A), who vide its order dismissed the appeal of the assessee. Now assessee is in appeal before this Tribunal.

Learned counsel for the assessee submitted that Learned counsel for the assessee erred in not considering the written submissions of the assessee on validity of notice issued u/s. 148 an on merits of the addition. He further submitted that Ld. CIT(A) has referred to judicial precedents at page Nos. 21- 61 have no bearing on the facts of the present case. Reassessment was framed without providing reasons recorded along with notice u/s. 148, which is not in accordance with law. He submitted ground-wise gist and reliance have been placed which are as follows:-

The Ld. Departmental Representative (DR) supported the orders passed by the authorities below. He submitted that the donation given by the assessee to the institution holding approval u/s 35(1)(ii) of the Act has been cancelled by CBDT pursuance to investigation of Directorate of Investigation Kolkata. The aforesaid information was forwarded to AO and considering the same notice u/s 148 of the Act 8 (Ashokkumar Gokulchand Sananda) was issued in the case of assessee to bring escapement of income by grant of deduction allowed u/s 35(1)(ii) of the Act at Rs.17,50,000/-. It is submitted that order passed by authorities below are well reasoned and there is no merit in the appeal filed by the assessee. He therefore submitted that appeal of the assessee be dismissed.

We have heard rival submissions and perused the material placed before us. We observe that in the case of assessee donation of Rs.10 lacs was given to School of Human Genetics & Population Health on 29/03/2014 through banking channel. Receipt of donation is placed on record at page 28 of paper book. Perusal of receipt indicates the details of notification issued to such institution u/s 35(1)(ii) of the Act, dated 28/01/2010. Donation given by the assessee was claimed in terms of statutory provisions of section 35(1)(ii) at Rs.17,50,000/- in the return of income. Regular assessment has been framed in the case of assessee u/s 143(3) of the Act on 27/10/2016 wherein claim of deduction u/s 35(1)(ii) of the Act was accepted. Based on the report of Investigation Wing received by AO at subsequent point of time, a notice u/s 148 of the Act has been issued for escapement of income being deduction (Ashokkumar Gokulchand Sananda) allowed u/s 35(1)(ii) of the Act not allowable as the same was bogus donation. The report of Investigation Wing has not been provided to the assessee along with notice u/s. 148 of the Act before using the same adversely to make disallowance of claim of deduction u/s 35(i)(ii) of the Act. We observe from the assessment order that disallowance has been made without pointing out any specific incriminating evidence/information with regard to transaction made by assessee with the aforesaid scientific research association. Subsequent cancellation of approval u/s 35(1)(ii) can be no reason for denial of deduction u/s 35(1)(ii) of the Act in view of specific statutory provisions of explanation to section 35(1)(ii) & (iii) of the Act. Relevant provisions of explanation to section 35(1) is reproduced hereunder for ready reference: “Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a 93[research association], university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn;”

It is seen that the Ld. CIT(A) has dismissed the appeal merely referring to two decisions. First is the judgement of ITAT, Chennai in the case of Smt. Deviyani Dilip Patel vs. ITO (2019) 69 TLC 122 .

The subject matter of dispute has been considered by the decision of co-ordinate bench of this Tribunal in to 312/Nag/2019 in the case of C-DET Explosive Industries Pvt. Ltd. vide order dated 30/10/2023. The relevant extract is reproduced hereunder for ready reference: 10. We note that notification of approval dated 14-03-2008 in the case of Herbicure Healthcare Bio-Herbal Research Foundation is at page 1 of the paper book. The Central Government approved the Herbicure Healthcare Bio-Herbal Research Foundation for the purpose of clause (ii) of subsection (1) of section 35 of the Act subject to the following conditions therein. According to the AO, the Central Government withdrew the said notification vide order dated 21-09-2016 with retrospective effect i.e. for Financial Year 2006-07 onwards. The Kolkata Tribunal held there is no provision in the Act u/s. 35(1)(ii) of the Act withdrawing the recognition with retrospective effect. The assessments before us are 2012-13, 2013-14 and 2014-15 when there is no provision for withdrawing recognition retrospectively the order of CIT(A) in confirming the order of AO in denying weighted deduction at 175% based on withdrawal recognition order dated 14-09-2016 is not justified. Further, the contention of Revenue is that the assessee given donation through Cheque/RTGS to Herbicure Healthcare Bio-Herbal Research Foundation and after taking commission the Herbicure Healthcare Bio-Herbal Research Foundation given back the said donation amount to the assessee in the form of cash vide 3-4 layers after bogus billing or other accommodation entries. There is no evidence whatsoever brought on record by the AO as well as CIT(A) in this regard that the donation amount given by the assessee is routed back in the form of cash. As contended by the ld. AR that there was no report of Investigation Wing of Income Tax, Kolkata was brought on record to show that the transaction between the assessee and Herbicure Healthcare Bio- Herbal Research Foundation is bogus and not genuine. As it appears from the orders of both the authorities below that there was no reference to any report except making allegation in the form of diagram claiming the modus operandi without any basis. The ld. AR placed on record letter of Herbicure Healthcare Bio-Herbal Research Foundation appealing Gokulchand Sananda) for donation at page 2 of the paper book, wherein, it is clear that the approval is valid for the year under consideration i.e. up to 31-03-2015 vide order dated 13-08-2012 No. 14/444/2006-TU-V by the Ministry of Science & Technology, Govt. of India. Further, the Donation and Charity Ledger Account of assessee at page 6 of the paper book establishes debit entries in favour of the Herbicure Healthcare Bio-Herbal Research Foundation vide chqeues which are supported by bank statements at page 6, 7 and 8 of the paper book. Therefore, at the time of giving donation by the assessee the approval is valid and the order of CIT(A) in confirming the order of AO in denying the weighted deduction to the assessee is not justified.

The respondent-revenue challenged the order of Kolkata Tribunal in the case of MACO Corporation (India) Pvt. Ltd. (supra) before the Hon’ble High Court of Calcutta and the Hon’ble High Court was pleased to dismiss the question raised therein by the Revenue, the order of which at page 30 of the paper book. The relevant portion of Calcutta High Court in the case of MACO Corporation (India) Pvt. Ltd. (supra) is reproduced hereunder for ready reference: “This appeal filed by the revenue under Section 260A of the Income Tax Act 1961 (the ‘Act’ for brevity) is directed against the order dated 14th March, 2018 passed by the Income Tax Appellate Tribunal, "B" Bench, Kolkata [the Tribunal] in for the assessment year 2013-14. The appeal was admitted on 11th March, 2020 on the following substantial question of law : “(i) Whether on the facts and the circumstances of the case, the impugned order of the tribunal dated 14th March, 2018 is perverse for failing to take into account that the donation in question to the trust was not “genuine” and also not considering the effect of cancellation of registration of the done?” We have heard Ms. Smita. Das De, learned standing Counsel for the appellant/revenue and Mr. J. P. Khaitan, learned senior Advocate assisted by Mr. Anil Dugar and Mr. Rajarshi Chatterjee, advocates for the respondent assessee. The short issue involved in the instant case is whether the donation given by the assessee to two organizations can be held to be not genuine on the ground that the registration granted those organization sunder Section 35C of the Act having been ……………………………………….. effect. On facts, the tribunal noted that there is nothing on record to show that the respondent/assessee connived with the scheme of arrangement between the concerns in 13 (Ashokkumar Gokulchand Sananda) bogus billing etc. The factual finding recorded by the CIT(A) is to the following effect: 5.5 It has been brought to my notice that vide notification No.82/2016 dated 15.09.2016 and notification No.79/2016 dated 06.09.2016 the registration of SHG&PH & HHBHRF respectively has been cancelled by CBDT. Thus there remains no doubt that these concerns were engaged in the improper utilization of moneys received by them. If the statements are taken at face value then on perusal of extracts of statements of brokers/mediators/and entry operators as reproduced in the assessment order I find that there remains no doubt that the management of these concerns were directly or indirectly engaged is misappropriating the funds and not utilizing the donation amounts entirely for research related activities. However the connivance of appellant in this scheme of arrangements between these concerns as well as the bogus billing parties is not established either by DDlT, (Inv), Kolkata or by the AD. The allegation that the cash was refunded to the appellant after deducting commission by these concerns remains in serious doubt. It is observed that a suspicion how so ever strong it may be cannot form disallowing any claim of the appellant until any material is brought on record. After noting the above factual position, the tribunal examined the law on the subject and took note of the decision of the Hon'ble Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwal/ior) M.P. Ltd. vs. Commissioner of Income Tax reported in [2018] 403 ITR 1 (SC). "In our considered view, we need not travel this far to decide the substantial question of law in the case on hand as we are considering the case falling under Section 35 of the Act. In terms of Explanation to Section 35(1)(iii) of the Act, deductions to which the assessee is entitled to in respect of any sum paid to a research organisation, university etc. shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to the research organisation or university etc. has been withdrawn. This issue was considered by the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Chotatingrai Tea & Ors. reported in (2002) 258 ITR 529 (SC). The operative portion of the said decision is as follows: "It is not in dispute that the assessees had made donations to the Society for Integral Development, Calcutta, which had as its object the undertaking to carry out approved programmes of rural development. The society had granted a certificate to the assessee which had also been approved by the prescribed authority.

In the light of the above, the order of CIT(A) is not justified in confirming the order of AO in denying weighed deduction at 175% u/s. 35(1)(ii) of the Act basing on the withdrawal of recognition dated 14-09-2016 retrospectively and also for want of evidences in support of allegations made by the AO that the donation is bogus. Therefore, following the order of Kolkata Tribunal which was confirmed by the Hon’ble High Court of Calcutta, we hold that the order of CIT(A) is not justified and the addition made by the AO is deleted. Thus, ground Nos.3 and 4 raised by the assessee are allowed.

The aforesaid decision of ITAT, Nagpur Bench has been upheld by the Hon’ble Bombay High Court in vide its judgement dated 24/12/2025. The relevant extract of judgement is reproduced hereunder: “After having heard for some time, we find that special order to file appeal is absent and its requirement is not superseded by any circular. The counsel for appellant, on instructions, seeks permission to withdraw the appeals.

Permission is granted. The appeals are dismissed as withdrawn.”

It is pertinent to note that institution to which assessee has donated was same as has been considered by Hon’ble High Court of Calcutta in the case Maco Corporation (India) Pvt. Ltd. The aforesaid

Respectfully following the decision of this Bench, we are of the considered opinion that deduction claimed u/s 35(1)(ii) in the case of assessee ought not to have been made on the basis of general report of Investigation Wing without indicating any specific reason/justification for denial of benefit of statutory claim. We therefore set-aside the order of Ld. CIT(A) and direct the Ld. AO to allow deduction u/s 35(1)(ii) at Rs.17,50,000/-.

With regard to the addition of Rs.1,50,000/- on inference of bogus donation will also not survive in view of acceptance of ground of appeal of raised by the assessee for allowing the claim of deduction u/s 35(1)(ii) of the Act. In any case the aforesaid addition is also not based on any specific evidence on record. The addition made by Ld. AO is on drawing adverse inference and the same is not legally sustainable. The addition of Rs. 1,50,000/- made by the Ld.AO is directed to be deleted and the grounds of appeal on this issue raised by the assessee is allowed.

In the result, appeal filed by the assessee is partly allowed.