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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
PER PRASHANT MAHARISHI, AM:
ITAs No. 1474/Mum/2019 for AY 2009-10 & 1475/Mum/2019 for AY 2010-11 are pertaining to the same assessee involving common issue and therefore both these appeals are heard and disposed off by this common order.
For Assessment Year 2009-10 in ITA No.1474/Mum/2019, the assessee has preferred an appeal against the order passed by the learned Commissioner of Income Tax (Appeals)-17, [in short the learned CIT(A)] Mumbai dated 31.01.2019, wherein the donation given by the assessee
The learned DR did not raise any objection to the same. In view of the above application of the assessee the appeal of the assessee is treated as dismissed as withdrawn.
For Assessment Year 2010-11 in ITA No.1475/Mum/2019, the facts are also identical.
The assessee is a firm who filed its original return of income declaring income of Rs.4,02,80,040/- on 26th September, 2010. The return of income was processed under section 143(3) of the Act. The notice under section 148 of the Act was issued on 16th March, 2016. The basis of the reopening of the assessment was that a search under section 132 of the Act was conducted on Navjivan Trust on 27th October, 2014. During the course of search it was found that all the expenses of the Trust were merely book entries and no genuine expenses were made by the Trust for section 35AC of the Act. One of the trustee also accepted that all these expenses are bogus and donations received in cheques were returned in cash to all the doners after ongoing normal commission. The assessee
The assessee preferred the appeal before the learned CIT(A), who also dismissed the appeal of the assessee.
Aggrieved by the order of the learned CIT(A), the assessee preferred the appeal before Tribunal.
This appeal was posted for hearing on 24th March, 2021, 08. 9th June, 2021 and was heard on 16th August, 2021 in absence of assessee. Subsequently, the order could not be
In view of this, the appeal of the assessee is decided on the merits of the case.
The learned Departmental Representative vehemently supported the order of the learned CIT(A). He extensively referred to the order of the learned CIT(A) and submitted that in the case of CIT vs. Batanagar Education And Research Trust [2021] 129 taxmann.com 30 (SC) has dealt with an identical issue where the registration of the Trust is cancelled. He also referred to the fact that these are bogus donation and for immediately preceding year for Assessment Year 2009-10, the assessee itself has gone in Vivad Se Vishwas Scheme-2020. He therefore, submitted that the order passed by the learned CIT(A) deserve to be upheld. He also stated that in some of the cases the deduction under section 35AC of the Act is allowed. Further, after the decision of the Supreme Court as stated above, the order of the learned CIT(A) cannot be found fault with.
We have carefully considered the rival submissions and perused the orders of the lower authorities. The learned CIT(A) has dealt with this issue at pages No. 20-30 of the above issue as under:-
A Search & Seizure operation u/s.132 of the Act was carried out in case of M/s. Navjeevan Charitable Trust on 27.10.2014. The investigation of the financial transaction of the Trust revealed that the trust had received donation of about Rs 80 crores in last 5 financial years. It was further revealed that the said amount was transferred to 20 parties as expenses The verification and investigation of the bank accounts also revealed that, after receipt of cheque, parties were withdrawing the same amount in cash. The associated persons were not filing return of income. Many of these persons were non-traceable and wherever the persons could be traceable, they were not doing any business and living in a small chawl. The trust was not actually carrying out any charitable activity but was being run from a very small office and did not have even a Name plate/Board. Along with the Search & Seizure operation in case of M/s. Navjeevan Charitable Trust, certain premises of some associated persons were also covered under Search and Seizure operation as well as Survey actions. These operations were resulted in gathering of rich haul of evidence in unearthing the scam of financial manipulations in order to claim bogus donations for deduction u/s.35AC of the Act. The AO has detailed the persons against whom the investigation have been carried out
4.2.2 The assessment order is culmination of the process of investigation carried out by the department against the financial fraud perpetuated by certain unscrupulous brokers, trusts and beneficiary companies/entities like the appellant. Let us examine the chronology of the events. The Investigation wing of the I.T. Department, Mumbai conducted a Search & Seizure operation u/s 132 of the Act against the premises of M/s Navjeevan Charitable Trust on 27.10.2014. The investigation revealed that the Trust has collected non-genuine donation of Rs.80 cores during last 5 financial years, which was transferred to around 20 parties as expenses, part of which were ultimately withdrawn in cash. Rest of the amounts were transferred to various entities, whose activities or whereabouts could not be authenticated or found. In spite of best effort of Investigation Wing, only 7 associated persons could be traced and that too without having any business and living standard. The
4.2.3 Arguments during the Appellate proceeding:
During the appellate proceeding, various arguments have been taken which are summarized as under:
a. It has been contended that the prescribed authority had issued certificate to Navjivan Charitable Trust and the project "Shree Navjivan" notified under section 35AC vide Notification No. SO 121(E) dated 12.01.2009 issued from File No. NC-274/17/2008 and submitted that donation of Rs. 15,00,000/- in aggregate made during the year to Navjivan Charitable Trust in good faith are genuine and not bogus as alleged.
b. It has been contended that the no addition can be made when no independent enquiry is conducted by the A.O.
c. It has been contended that no addition can be made when the A.O. does not provide any opportunity to confront and cross-examine the evidence obtained by him.
e. It was also submitted that it had provided all the necessary details to prove the genuineness of the donations and to enable the A.O. to make an independent enquiry with the A.O. Therefore, the A.O. failed to discharge his onus cast under the law while disallowing the claim made by the appellant and made an addition of Rs. 15,00,000/- to the income of the appellant on suspicion, surmises and conjectures.
The case of M/s. Navjeevan Charitable Trust is a classical example of a financial fraud through misutilization of approval given to so-called Charitable Organization like M/s. Navjeevan Charitable Trust. The Search and Seizure operation carried out in case of M/s Navjeevan Charitable Trust on 27.10.2014 has yielded evidences showing how the provisions of exemption/deduction allowed under the provisions of I.T. Act has been misused by the Trust together with interested parties like appellant with the help of unscrupulous brokers. The investigation has revealed that many of the recipients in the name of charity were either listed as Hawala traders on Sales tax website or parties, whose activity/addresses could not be authenticated or found. In case of many parties even the return of income was not filed. The Trust was operated from very small place and did not have even Name plates/Board. There was no information what so ever available on internet with regard to the
One of them is Mr.Amish Modi, who has operated as broker between the trust and interested parties. Mr. Modi has detailed, how the cheques were collected from the parties in the guise of donation and given to the trustees. The Trust after taken nominal commission used to return the equivalent cash to all the donors. Thus, the so called donors used to claim deduction u/s.35AC of the Act and the brokers as well as the trustees use to get money in the form of commission. It was confessed by Mr.Kadam that no genuine philanthropic activity was being carried out by the trust and bogus expenditures were booked to camouflage the philanthropic activity. In this background, the claim of the appellant that it is responsible only to the extent that at the time of giving donation, whether trust was an approved trust or not is a very weak argument having no legal basis. It is a kind of an argument that the appellant was not at all concerned with the money which is being given as a donation for its utilization. Mr. Manish Shah has
In the background of above facts and analysis, the argument that the appellant is only concerned with the approval at the time of giving donation and not with the subsequent withdrawal of approval. It is a part of a scam and it has been duly acknowledged by the associates of the Trust that the money has been received back in cash and surreptitiously deduction u/s.35AC of the Act has been claimed.
As regards the contention that no addition can be made when no independent enquiry is conducted by the A.O. It is true that the A.O. has not conducted any independent enquiry during the assessment proceedings but relied on the findings of the Investigation Wing. However, the fact that the so- called bogus donation claimed by the appellant from Navjeevan Charitable Trust cannot become genuine. It is also a fact that during the search & seizure operation u/s 132 carried out by the Investigation Wing, enquiries were carried out by issuing notices u/s 133(6) and summons u/s 131 and they have proven the modus operandi and the lack of genuineness of the entire nexus of transactions.
The contention that it had provided all the necessary details to prove the genuineness of the donations and to enable the A.O. to make an independent enquiry with the A.O. and therefore, the A.O. failed to discharge his onus cast under the law while disallowing the claim made by the appellant and made an addition of Rs. 15,00,000/- to the income of the appellant on suspicion, surmises and conjectures. This contention is not correct as the appellant had failed to discharge its onus of proving the claim of
4.2.4 Retraction of a statement:
The statement of Shri Manish M. Shah, recorded on oath u/s.131 is claimed to have been retracted subsequently through an affidavit. After affidavit copy of affidavit has been filed during appellate proceeding. An attempt was made unsuccessfully to get it examined by the AO through Remand. However, by virtue of power entrusted in me by provisions of rule 46A(4), I proceed to examine the affidavit. The contention of the affidavit can be summarized as under. The contention of the affidavit can be summarized as under:
a) It was communicated to Mr.Manish M.Shah that investigation has proved that M/s Navjeevan Charitable Trust is not a genuine Trust and has not carried out any genuine charitable activity. On the basis of finding in M/s. Navjeevan Charitable Trust, the premises of the appellant was surveyed u/s.133A of the Act.
c) After completion of survey operation, Mr. Manish M. Shah was advised by his consultant that proving the genuineness of charitable activity of the Trust is the job of Department. His onus was only limited to see that on the date of giving donation, the Trust was approved or not. Then he realized that the statement giving withdrawal of deduction u/s.35AC was under tremendous pressure. Then on the advice of the consultant, he realized that he did not give a correct statement that donation was bogus and money given by cheque was received back in cash for utilization of establishment of factory.
d) Mr. Manish M. Shah has also given a philosophical argument that he cannot meet Mr. Ashok Bagaria of the Trust at a public place and exchange lakhs of cash between them.
e) He categorically refers that he has been advised by his consultant that claim is decided on the basis of law as enacted and appropriate stand would be taken on the issue on that basis.
The content of the affidavit of Mr. Manish M. Shah is examined. The Director of the company has made statement based on his assertion that a statement was given in a confused state of mind on the consistent pressure of the survey party from the Investigation wing. First of all, no such complaint has been filed before the higher authorities regarding the pressure exerted upon by Income-tax officer, officials and secondly the entire affidavit has been filed on the advice of the consultant and not a single word has been referred that donation was given for charitable purpose. Rather on the advice of the consultant, Mr. Manish M. Shah was given to understand that his onus is limited to see that Trust is approved at the time of giving donation. Can a person of a normal prudence will believe such statement that a company is giving lakhs and lakhs of donation, not in one year, but continuously three years without carrying out any due diligence and asking the donee trust whether any charitable activity has actually been done or not. In usual course, company would like to project themselves or their brand when huge amounts are being invested for the purpose of Philanthropic/charitable work. Specific details are
Admission on oath is an integral part of assessment and they are the best evidence of facts within the personal knowledge of an assessee and if the admission is voluntary not attracted to coercion and force the same does not loose its evidentiary value. There are various judicial review on this issue in case of Sanjeev Agarwal (2015) 56 Taxman.com 214 Allahabad, it has been held that a statement made virtually can form basis of assessment. The mere fact that the Petitioner has retracted his statement could not make his statement unacceptable. The burden lies upon the petitioner to establish that the statement made by him was wrong with cogent evidences. In this case, the evidences gathered are critical and clearly shows that the appellant was a
Thus, the retraction of a statement through an affidavit is an afterthought without any corroborative supporting evidence.
4.2.5 Human Probability:
The facts and circumstances of the case has to be tested on the concept of surrounding circumstances and human probability. The appellant claims to have given donation to a trust which is established as bogus trust indulged in providing accommodation entry camouflaging charitable activity in order to claim the non-genuine deduction u/s.35AC of the Act.
The Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence
The facts remain uncontroverted are
i. M/s. Navjeevan Charitable Trust is a bogus trust only run for the purpose of accommodation entry for interested parties who want to obtain the certificate for non-genuine donation for claiming deduction u/s.35AC of the Act.
ii. Neither M/s. Navjeevan Charitable Trust, nor by any of the beneficiary or broker has been able to lay down an iota of evidence to show that the trust has carried out any charitable activity during its entire existence.
iii. During Search and Seizure operation u/s. 132 and Survey operation u/s. 133A covering the main player of the scam, no trace of any documents, no books of accounts has been found which can indicate any actual charitable activity by the Trust.
iv. The crucial finding of the investigation wing, that so-called donation deposited by cheque has ultimately been withdrawn in cash, has not at all been rebutted.
V. The specifics given by the associates explaining how the cheque was given, cash was accepted and its subsequent utilization has not
In view of the above, it is held that the appellant is part and parcel of scam of non-genuine donation in order to claim deduction u/s.35AC of the Act. The candid confession by Mr.Manish M.Shah and ultimate withdrawal of deduction under section 35AC forthe year under consideration, have not been disapproved then, I have no reasons to interfere with the findings of the AO. The denial of deduction u/s.35AC of the Act is upheld and an amount of Rs. 15,00,000/- claimed as deduction and added to the total income is confirmed. The ground of appeal filed on this issue is therefore dismissed.”
We find that all the judicial precedents available were prior to the decision of Honourable supreme court in case of CIT V Batanagar Education trust [2021] 129 taxmann.com 30 (SC) where cancellation of registration of The Trust u/s 12 A as well as 80 G were upheld. When the recipient of donation has confirmed that donation were taken in lieu of cash and no activity is done, it would be too naïve to believe that assessee has donated sum in good faith.
We do not find any infirmity in the order of the learned CIT(A) and accordingly, we do not find merit in this appeal.
In the result, both the appeals of the assessee for Assessment Years 2009-10 and 2010-11 are dismissed.
Order pronounced in the open court on 25.03.2022.
Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated:25.03.2022 Sudip Sarkar, Sr.PS
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT DR, ITAT, Mumbai 5. 6. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai