CHARTERED FINANCE MANAGEMENT LTD,MUMBAI vs. DCIT CIR2(1) (1), MUMBAI

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ITA 816/MUM/2021Status: DisposedITAT Mumbai30 August 2022AY 2010-116 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee was not given an opportunity to cross-examine the deponent whose statement was used against them, violating principles of natural justice. Therefore, the case was restored to the AO for fresh adjudication.

What were the facts?

The assessee claimed a deduction under Section 35AC for a donation of Rs. 10 lakhs to a trust. The Assessing Officer (AO) disallowed this deduction, considering the donation bogus based on information from a search in the trust's case and a statement from the trust. The CIT(A) upheld the AO's decision.

What were the issues?

The primary issues were the validity of the reassessment proceedings and the denial of the deduction under Section 35AC without providing an opportunity for cross-examination.

Which sections of the Income-tax Act were involved?

Section 35AC,Section 147,Section 148,Section 143(3),Section 234D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI BASKARAN BR & SHRI PAVAN KUMAR GADALE

For Appellant: Mr. Anand Mundra.AR
For Respondent: Mr. Ujjawal Kumar.DR
Hearing: 24.08.2022Pronounced: 25.08.2022

PAN/GIR No. : AABCC9172D Appellant .. Respondent Appellant by : Mr. Anand Mundra.AR Respondent by : Mr. Ujjawal Kumar.DR Date of Hearing 24.08.2022 Date of Pronouncement 25.08.2022 आदेश / O R D E R

PER PAVAN KUMAR GADALE JM:

1. The assessee has filed the appeal against the order of the CIT(A)-National Faceless Appeal Centre (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 circumstance of the matter and in law the Id CIT(A) failed to uphold the ground of appeal raised by the appellant about validity of Chartered Finance Management Ltd., Mumbai. - 2 -

re-opening of the case and issuing of notice u/s. 147 of the Act.

2. On the facts and in the circumstance of the matter and in law the Id CIT(A) failed to delete the addition made by the assessing officer to the tune of Rs. 10,00,000/- to the total income of the appellant under Section 35AC of the Act.

3.

On the facts and in the circumstance of the matter and in law the Id CIT(A) failed to decide the issue in favour of the appellant regarding cross examination of one Mr. Subhash Kadam and violation of principle of natural justice

4.

On the facts and in the circumstance of the matter and in law the Id CIT(A) failed to delete the interest imposed by the AO under Section 234D of the Act

2.

The brief facts of the case are that the assessee company is engaged in the business of consultancy services, dealing in shares / stocks, power generation and distribution. The assessee has filed the return of income on 27.01.2016 for the A.Y 2010-11 disclosing a total income of Rs.2,75,63,870/- and the return of income was processed u/s 143(1) of the Act. The Assessing Officer (A.O.) has received information from investigation wing and recorded reasons for reopening

Chartered Finance Management Ltd., Mumbai. - 3 - of the assessment u/s 148 of the Act referred at page 1 of the AO order in respect of donations made by the assessee and deduction claimed u/s 35Ac of the Act. The AO has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. In compliance to the notice the assessee has filed the return of income on 27.01.2016, subsequently notice u/s 143(2) and 142(1) of the Act was issued. The assessee also filed objections after obtaining the reasons for reopening of the assessment from the AO. Further in compliance to statutory notices, the Ld. AR of the assessee appeared from time to time and submitted the details.

3. The AO has received the information from the DGIT(Inv), Mumbai that a search was conducted in the case of Navajeevan Charitable Trust on 27.10.2010, where the trust was notified by the National Committee, Min of Finance, Govt of India for the purpose of deduction u/s 35AC of the Act. The A.O dealt on the Modus Operandi with respect to activities of the trust and the donations and a statement of the trust recorded in respect of fictitious activities and donations. Finally the AO found that Chartered Finance Management Ltd., Mumbai. - 4 - the donation of Rs.10 lakhs made by the assessee to the trust is in the nature of bogus transaction and disallowed the claim and assessed the total income of Rs. 2,85,63,870,/- and passed the order u/s 143(3) r.w.s 147 of the Act. 4. 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, findings of the scrutiny assessment and finally concord with the action of the AO and dismissed the assessee appeal. Aggrieved by the order of the CIT(A) the assessee has filed an appeal before the Hon’ble Tribunal.

5. At the time of hearing, the Ld. AR submitted that the CIT(A) erred in confirming the addition made by the AO overlooking the various facts and submissions including the validity of reassessment proceedings. The Ld. AR also emphasized that the AO has made a disallowance of donation treating as bogus relying on the statement of the trust without providing an opportunity to cross examine the deponent on the allegation of bogus donation transaction and prayed

Chartered Finance Management Ltd., Mumbai. - 5 - for an opportunity before the lower authorities. Contra the Ld. DR supported the order of the CIT(A).

6.

We heard the rival submissions and perused the material on record. The sole grievance of the assessee that the CIT(A) has erred in confirming the disallowance made by the AO in respect of donation made by the assessee to a trust and claimed deduction u/s 35AC of the Act. The contentions of the Ld. AR that the assessee is not aware of the activities of the trust which are indulging in the bogus entries and the assessee has made a genuine transaction. The Ld.AR also emphasized that the AO should have provided an opportunity to cross examine the deponent, whose statement was recorded against the assessee and there is a violation of principles of natural justice. The submissions are duly supported with the material information and we considering the facts, circumstances and to meet the ends of justice provide an opportunity of cross examination. Accordingly we restore the entire disputed issues to the file of the AO to adjudicate a fresh on merits and provide benefit of cross examination. Further the assessee should be provided adequate opportunity of Chartered Finance Management Ltd., Mumbai. - 6 - hearing and shall cooperate in submitting the information and allow the grounds of appeal

of the assessee for statistical purposes.

7. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 25.08.2022.

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