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Income Tax Appellate Tribunal, MUMBAI “B” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Bhavesh Arunkumar Shah v. Shri Suchek Anchalia Shri Chetan M. Kacha
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah v. ACIT – 19(1) G-7, Sarvodaya Nagar Matru Mandir 1st Panjrapole Lane Mumbai – 400 007 C.P. Tank, Mumbai - 400004 PAN: ANDPS5035M (Appellant) (Respondent) Assessee Represented by : Shri Suchek Anchalia Department Represented by : Shri Chetan M. Kacha
Date of Hearing : 13.09.2022 Date of Pronouncement : 29.11.2022
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 21.05.2021 for the A.Y.2013-14.
Brief facts of the case are, assessee is engaged in the business of trading in chemical in the name and style of M/s. Sahara Impex. Assessee
2 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah filed E- return of income on 30.9.2013 declaring an income of ₹.1,24,510/. Subsequently, the case was selected for scrutiny and notice u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response AR of the assessee attended and submitted the information as called for.
During the course of assessment proceedings, the Information has been received from the DDIT (Inv), Mumbai, that M/s School of Human Genetics & Population Health is a bogus trust which has issued receipt to various entities, on the basis of these receipt the entities have claimed deduction u/s 35(1)(ii) of the Act. On perusal of same record, Assessing Officer observed that the assesse has claimed deduction u/s 35(1)(ii) equivalent to 175% of donation given u/s 35(1)(ii) to the aforementioned trust M/s Navjeevan Charitable trust. The assesse has made donation of ₹.35 Lakh to the above mentioned trust, on the basis of this assesse has claimed, 175% being of ₹.61,25,000/-.
In order to verify the above claim, the assessee was asked to submit the details and justify the claim u/s 35(1)(ii). In response assesse vide letter dated 22.2.2016, provided the details of donation given to the above mentioned trust along with receipt issued by that trust. The Assessing
3 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah Officer observed that the cheque have been issued by the assesse firm on the various date but receipt Issued in Serial no. i.e., SL.No 1688 to 1692,, the detail of Sl.No receipt is as under:-
Sr.No Receipt No Date of RTGS Amount of Donation 1. 1688 09.03.2013 10,00,000/- 2. 1689 12.03.2013 5,00,000/- 3. 1690 14.03.2013 5,00,000/- 4. 1691 28.03.2013 10,00,000/- 5. 1692 30.03.2013 5,00,000/-
Assessing Officer observed that from the above information, the issuance of receipt in serial order create a doubt about the genuineness of the donation. As regards, genuineness of the donation, the authorized representative vide submission dated 23.03.2016 has submitted that donation given are genuine.
Not convinced with the submissions of the assessee, Assessing Officer proceeded to deny the benefit observing that the explanation offered by the assesse has been carefully considered and taking into consideration finding of the investigation wing, the genuineness of the trust is not proved. Further, all the receipt is in serial order though the cheques has been issued on different dates. As a result, Assessing Officer is not convinced to the submission of the assesse and proceeds to disallow assessee's claim of deduction u/s.35(1)(ii) of ₹.61,25,000/-.
4 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 7. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions relying on various decisions. After considering the submissions of the assessee Ld.CIT(A) distinguished the cases relied by the assessee and dismissed the appeal filed by the assessee with the following observations: -
“7. Therefore, on the basis of facts and circumstances of the case and the case laws referred to above, I come to the conclusion that on the basis of documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities what appears to be apparent in this case is actually not real. I affirm the conclusion reached by the Assessing Officer in this regard that the financial transactions are actually sham and the entire edifice is only a colorable device meant to be a smoke screen to defraud the revenue and evade taxes. The donation u/s 35(1)(ii) of the Act to "School of Human Genetics & Population Health", who was engaged in providing accommodation entry through a designed, preplanned, arranged manner in cahoots with operators, brokers and syndicate members is fit to be disallowed. Therefore, the disallowance of deduction u/s 35(1)(ii) of the Act made by the Assessing Officer is legally justified and does not call for any interference. Appellant's grounds fail.”
Aggrieved, assessee preferred appeal before us raising following grounds in its appeal: -
“1. On the fact and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition of Rs. 61,25,000/- by treating genuine donation claimed as a deduction by the appellant us 35(1)(ii) of the Act, as bogus, without appreciating the fact that the appellant has submitted all relevant documentary evidences to substantiate the genuineness of the impugned donation. 2. 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 was neither provided any opportunity of cross examination of persons on whose
5 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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. 3. 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.”
At the time of hearing, Ld. AR submitted that issue involved in this case is deletion of claim of the assessee on the donation made to scientific research institution, in this regard he brought to our notice Page No. 36 of the Paper Book the decision of the Coordinate Bench in assessee’s own case for the A.Y. 2011-12 and A.Y. 2012-13 (Page No. 43 of the Paper Book) in the similar facts in which Coordinate Bench has allowed the claim of the assessee. Since the issue raised by the assessee in this case is squarely covered in favour of the assessee. On the other hand, Ld.DR relied on the orders of the lower authorities and further, he relied on the decision of the Hon'ble Madras High Court in the case of Krupa Trading Co. v. ITO [2020] 116 taxmann.com 142 (Madras).
Considered the rival submissions and material placed on record, we observe that in assessee’s own case similar issue was decided in favour of the assessee and we observe that facts in the present appeal are exactly similar to the facts in the other Assessment Years in which the Coordinate Bench has allowed the claim of the assessee in A.Y. 2011-12
6 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah and 2012-13. Since the issue involved in this appeal is also exactly similar to those Assessment Years. Therefore, we are inclined to follow the decision of the Coordinate Bench in which the issue is decided as under:-
“4. I have heard learned DR and perused the record. I noticed that identical disallowance made in the hands of the assessee in A.Y.2012-13 has since been deleted by the Division Bench of the Tribunal, vide its order referred supra. For the sake of convenience I extract below decision referred by the Division Bench in A.Y. 2012-13 :- “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/sSopariwala 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. 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
7 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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:- "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. 4,81,25,000/- for A.Y. 2013-14 and disallowance of
8 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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 cross examination 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 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
9 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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(1)(ii) of the Act. 15. Now, we deal with the arguments of ld DR for the Revenue. We note that the solitary grievance of the ld DR for the Revenue is that since the registration had been cancelled by the CBDT, with retrospective effect that is, with effect from 1st 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. 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.16/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
10 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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 affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(H) of the Act." 16. In 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
11 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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 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;
12 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah 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/sec 35(1)(ii) of the Act and we 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.” 5. Since facts relating to the issue under consideration are identical in nature, following the above said decision rendered by the Division Bench of the ITAT, I set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to allow deduction of Rs. 17.50 lakhs claimed by the assessee.”
At the time of hearing, Ld. DR relied in the case of Krupa Trading Co. v. ITO (supra) in which the Hon'ble High Court has observed that the Founder/Director of organization had made a sworn statement during the survey u/s. 133A of the Act that donation made to organization was returned back to assessee after deducting 5% commission. Relying on the above sworn statement the ITAT has decided the issue in favour of the revenue and the same was confirmed by the Hon'ble High Court. In the given case no such findings were recorded by the lower authorities.
13 ITA NO. 757/MUM/2022 (A.Y: 2013-14) Shri Bhavesh Arunkumar Shah Therefore, this case is distinguishable to the facts of the present case. Respectfully relying on the decision of the Coordinate Bench in assessee’s own case we are inclined to allow the appeal filed by the assessee.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 29th November, ,2022.
Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 29.11.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum