SHAH RAKESH BHIKHABHAI (HUF),AHMEDABAD vs. THE PCIT, AHMEDABAD-1, AHMEDABAD

3.1 In reply, vide email dated 29.03.2023 the assessee requested to furnish copy of the documents/statements relied by the Ld.PCIT. Accordingly, a copy of the relevant portion of the statement dated 02.02.2021 of Shri Champak N Prajapati was furnished to the assessee by official email dated 29.03.2023. The assessee again by reply email dated 30.03.2023 stated that the assessee has no connection with Shri Champak N Prajapati since he did not have any position in any of the political party and the statement of same cannot be relied upon and requested to drop the revision proceedings, since the Assessing Officer has made proper inquiry of the donations during the assessment proceedings. The assessee further made serious objection for the revision proceedings as follows:

The above reply was considered by the Ld. PCIT and the same was found not acceptable by observing as follows:

Aggrieved against the revision order, the assessee is in appeal before us raising the following Grounds of Appeal: Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 8– 1.1 The order passed u/s.263 on 31.03.2023 for A.Y.2018-19 by PCIT, Ahmedabad-1, Ahmedabd directing the AO to review the allowability of Donation claimed u/s 80GGC is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. PCIT has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant. 2.1 The Ld.PCIT has grievously erred in law and on facts in initiating the proceedings u/s.263. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. PCIT ought not to have held that the AO has passed erroneous or prejudicial assessment order as enumerated in Section 263.

We have given our thoughtful consideration and perused the materials available on record including the Paper Books filed by the assessee and the case laws relied by both the parties. It is seen from the Paper Book 1 filed by the assessee, pursuance to the show-cause notice dated 27.03.2023, the assessee requested for copies of the statement relied by the Ld. PCIT, which were furnished to him on 29.03.2023. In reply, the assessee claimed that the statement furnished is in- complete and so called person Shri Champak N Prajapati’s statement cannot be relied upon, since he did not have any Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 10– position in any of the political parties. However, the same was considered by the Ld.PCIT and found not acceptable, the same which is reproduced in paragraph no.4 above, which is self explanatory. Thus, we do not find any infirmity in the revision order passed by the PCIT setting-aside the Assessment Order passed by the Assessing Officer to make fresh assessment by properly verifying the claim of donation claimed u/s.80GGC of the Act.

We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the Id. PCIT and other material brought on record. First, we should examine the fact whether assessing officer has conducted enquiry by issuing notice under section 142 (1) of the Income Tax Act 1961. in respect of the donation given by Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 12– the assessee to the tune of Rs. 30,00,000/-to Rashtriya Samajwadi party (Secular). The relevant para of the notice issued by the assessing officer under section 142(1) of the Income Tax Act 1961, is reproduced below: "You have furnished the detail/documents in response to the notice u/s 142(1) of the Income Tax Act, 1961 vide letter dated 02 12 2020, It is seen that you have claimed deduction u/s 80D of the Act amounting to Rs 25,0000/- You have submitted the receipt of the payment of the premium towards the mediclaim of amounting to Rs. 26.163/-, paid to the New India Assurance Co. Ltd., dated 23.03.2017. The receipt of the premium paid is belong to the FY 2016-17, te. AY 2017-18 Therefore, you are requested to furnish your explanation and furnish the documentary evidence in respect of the deduction claimed u/s 80D of the Act for the F.Y. 2017-18. Please note that in case you fail to furnish the documentary evidence in respect of the deduction claimed u/s 80D of the Act. The deduction of Rs. 25,000/- claimed by you in the ROI of AY 2018-19, may be disallowed and added to the total income." From the above notice of the assessing officer, issued under section 142 (1) of the Act, it is vivid that assessing officer had conducted enquiry only in respect of deduction under section 80D of the Act amounting to Rs.25,000/-, We note that assessee had paid donations of Rs 30,00,000/- to one political party known as "Rashtriya Samajwadi Party(Secular)" and claimed the 100% deduction under chapter VI-A, under section 80GGC of the Act, for said donation, the assessing officer never conducted enquiry by way of issuing notice under section 142 (1) of the Act. That is, assessee had contributed donation of a sum of Rs 30,00,000/- under section 80GGC of the Act to the "Rashtriya Samajwadi Party (Secular), a political party. which remain unexamined and unattended on the part of the assessing officer Hence, it is a case of no enquiry, on the part of the assessing officer, so far deduction under section 80 GGC of the Act, is concerned.

The findings of the id PCIT in respect of donation paid to Tara Foundation of Rs.2,25,000/-,u/s 80G(5) of the Act, is also correct, as the assessing officer has not conducted any enquiry in respect of said donation by issuing notices under section 142(1) of the Act.

We are aware of the fact that the Assessing Officer's role while framing an assessment is not only an adjudicator. The assessing officer has a dual role to dispense with i.e he is an investigator as well as an adjudicator, therefore, if he fails in any one of the roles, as afore- stated, his order will be termed as erroneous. We note that it is also a Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 13– case of non-application of mind by the assessing officer, so far deductions under section 80GGC of the Act and under section 80G(5) of the Act, are concerned. Hence, it is evidently clear that there is no enquiry on the part of the assessing officer. therefore order passed by the assessing officer is erroneous as well as prejudicial to the interest of revenue. As stated above that the Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. We derive support for the proposition as stated above, from the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises 99 ITR 375 (Del). Therefore, we find that what the talk to conduct further enquiry, we note that assessing officer has never conducted enquiry, so far donationsof Rs 30,00,000/- to political party, "Rashtriya Samajwadi Party(Secular)" and donation to Tara Foundation of Rs.2,25,000/-,u/s 80G(5) of the Act, are concerned. Hence, we find merit in the submissions of Ld. DR to the effect that assessing officer has not conducted any enquiry so far these two deductions are concerned.

Let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact, or (ii) incorrect application of law, or (iii)Assessing Officer's order is in violation of the principle of natural justice, or (iv) if the order is passed by the Assessing Officer without application of mind; or (v) if the AO has not investigated the issue before him; Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 14– Then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". Therefore, we are of the considered opinion that the judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd(supra) is applicable to the assessee's facts under consideration, as the conditions mentioned in the above judgment, viz: (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him, are applicable to the facts of the assessee's case under consideration therefore, the order passed by the Assessing Officer can be termed as erroneous order which is prejudicial to the interest of Revenue also.

On the identical facts, our view is fortified by the Judgment of the Coordinate Bench of ITAT Mumbai in the case of Babulal as Solanki, in order dated March 4, 2019, wherein the coordinate Bench held as follows: 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.

We find that the Assessing Officer, vide letter dated 9th December 2013, did state, in rather general terms, that where the stamp duty valuation (i.e jantri value) is different from sale consideration, the assessee has to state whether the stamp duty valuation was adopted as sale consideration. There was neither a specific reference to the facts of this case or the application of Section 50. In reply to this letter, the assessee stated that the land sold is agricultural land as clearly mentioned in the sale deed that "index copy dated 3rd June 2011 (he after the date of sale deed) clearly shows the said land as an agricultural land and that "jantri value of said agricultural land is Rs Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 15– 4,900 per sqmtr which was clearly mentioned as per letter of Superintendent of Stamps. Gandhinagar Gujarat It was further clarified that the value of Rs 11,750 per square meter on which stamp duty is paid by the purchaser is for non agricultural land". The assessee thus explained that the sale consideration is less than the stamp duty valuation for the land sold, and then he pointed out the computation of conversion premium paid by the assessee was on the basis of valuation of agricultural land. This plea, however, proceeds on the assumption that the provisions of Section 50C come into play on a fair stamp duty valuation of the land or building or both, rather than the actual valuation adopted by the stamp valuation authority Section 50 C comes into play, for substitution of actual sale consideration by the value adopted for stamp duty valuation purposes, where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority". What is thus clear is that, on the face of it the actual stamp duty valuation adopted by the assessing authority rather than what would be the right, even if that he different from actual, stamp duty valuation which ought to have been adopted by the stamp duty valuation authority. If the registration does not take place in the year of transfer and no stamp duty is actually assessed us such, then, of course, value assessable could come into play but that's not the case here The reply of the assessee was thus less than acceptable in law and on the basis of this explanation. The correctness of claim, on this basis of this claim by the assessee, cannot be established. Of course there can be other aspects on which the jantri value may, or may not be applicable but that is a different issue. The claim made by the assessee was thus clearly something which should have provoked further examination or at least being dealt by way of a speaking order, but the Assessing Officer chose to remain silent on the same. As observed by Hon'ble Delhi High Court, in the case of Gee Vee Enterprises Vs ACIT (99 ITR 375). "The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. correct Of course, if the explanation given by the assessee was of the nature as could possibly satisfy the situation would have been different. The explanation given by the assessee in this case, however was simply not a legally possible view of the matter Even in the oft quoted case of Malabar Industrial Co Ltd Vs CIT (243 ITR 83), Hon ble Supreme Court Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 16– has observed that when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where we views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law (Emphasis supplied by us now). The view canvassed by the assessee, in our considered view, was unsustainable in law Therefore, even if the matter was examined by the Assessing Officer and it was a conscious call of the Assessing Officer to accept the plea of the assessee, such a situation would not take the matter outside the ambit of Section 263 as the view adopted by the Assessing Officer was clearly unsustainable in law. Having said that, we must add that there can be other legal reasons for grant of relief on merits, and that area is not yet explored by, or before, us. In any case, all that the learned Commissioner has directed is examination of the clans on merits and, for the above reason, we see no infirmity in that direction. In view of these discussions, as also bearing in mind entirety of the case we uphold the impugned revision order and decline to interfere in the matter. As we do so, we make it clear that our expression of view on merits of the case is only a prima facie impression, and it must not, therefore, influence the decision of the Assessing Officer on merits Uninfluenced with these observations, the Assessing Officer will take a call on merits of the matter 7. In the result, the appeal is dismissed. Pronounced in the open court today on the 4th day of March, 2019 As we have noted above that there is no enquiry on the part of the assessing officer, therefore order passed by the assessing officer is erroneous as well as prejudicial to the interest of revenue and therefore, we uphold the order passed by ld PCIT under section 263 of the Act, dated 16.03.2023.

Now, we shall also adjudicate the other arguments advanced by ld. DR for the revenue to the effect that "fraud vitiates everything". In this connection, at the cost of repetition, we reiterate the findings of Id PCIT. which are as follows: (i)Rashtriya Samajwadi Party (Secular) is a Registered Unrecognized Political Party and it is one of the 23 RUPPs covered in the RUPPS Group of Ahmedabad. This party was established on 21 10.2008 and its registered address as per its website is Samruddhi Complex, Opp- Sakar-3. Income Tax Circle, Ahmedabad However, during pre-search enquiry, no party office is found at the aforesaid address. (11) The modus-operandi of this political party is that the donation is received through cheque in the bank account of the party and then Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 17– routed through intermediary(ies) (which is generally shell entity(ies) controlled by either the persons running the party or by any other person) in the garb of various purchases or other payments, which are found to be bogus in nature. It is pertinent to mention here that the political party doesn't pay any tax since it is exempt u/s 13A of the Act. (11) During the search proceedings, on 07.09.2022, statement on oath u/s 132(4) of the I.T. Act, was recorded of Smt. Sandhya Singh, National Party President of the Rashtriya Samajwadi Party (Secular). As evident from the declaration made on oath by Smt. Sandhya Singh that although she is national party president of the party, however, all the work related with party is being looked-after by her husband Shri Bishwajeet Singh. She was not aware about any activity of the party. Further, vide Q. No. 18 and 19, she was categorically asked regarding details of bank accounts, books of accounts, nature and quantum of the expenditures of the Rashtriya. Samajwadi Party. In reply to the same, she again stated that she is not aware of any details regarding these subjects. She stated that all these things are being handled by her husband Shri Bishwajeet Singh. (iv) It is on record that statement of Shri Bishwajeet Singh, on oath u/s 132(4) of the 1.T. Act, was recorded on 07.09.2022. During the statement proceedings. Shri Bishwajeet Singh admitted thefact that on his instance, his wife Smt. Sandhya Singh joined RSP, as president. During the statement proceedings. Shri Bishwajeet Singh revealed that the party i.e. RSP is involved in bogus donations scam across India and founder of party i.e. Shri Surya, Nath Chaturvedi carried out bogus donations scam since inception of the party. He further stated that after deducting certain commission donations are being returned to the donors. (v) Furthermore, Shri Bishwajeet Singh stated that these affairs are also being handled by the Shri Ritesh Shah. Siri Bishwajit Singh submitted list of some bogus entities used for cash generation, which is reproduced by Id PCIT on page number 13 of his order. (vi) During the post search inquiries, statement of Shri Amitkumar Chaturvedi (AHLPC7736R), past president of political party was also recorded, he categorically admitted that the party was engaged in bogus donations scam (vii). It is relevant to refer to the fact that on verification with the website of regional Chief Electoral Officer where the party is registered ie. CEO. Gujarat State, it has been found that Rashtriya Samajwadi Party (Secular) has not filed any contribution report, since F.Y. 2013-14 onward. Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 18– (viii). The party been claiming wrong and invalid exemption, over the years under section 13A of the IT. Act but it has also been, mentioning in its Income Tax Return of F.Y. 2018-19 that no contribution report has been filed u/s 29C of the R.P. Act, 1951. (ix)Rashtriya Samajwadi Party (Secular) is not registered, as of today, as informed by Id Counsel for the assessee, with Election Commission of India/R.P. Act, 1951. (x) There is no retraction of statements given by Smt. Sandhay Singh, Shri Bishwajeet Singh and Shri Amit Kumar, hence their statements are correct and valid 23 From the above facts, it is abundantly clear that donation received by "Rashtriya Samajwadi Party" is bogus. The assessee has claimed deduction under Section 80GGC of the Act and 80G(5) of the Act, which is also bogus and to that extent Assessment Order passed by assessing officer is erroneous and prejudicial to the interest of Revenue. There is a saying that The "tail" cannot wag the 'dog'. When there is a fraud, then the details and documents submitted by the assessee, before the assessing officer, during the assessment proceedings, do not assist the assessee in any manner, that is, the assessee cannot take the plea that he has submitted enough documents and details before the assessing officer and assessing officer has taken the plausible view. For that reliance can be placed on the judgment of the Coordinate Bench of ITAT Pune, in the case of Abhishek Ashok Lohade in order dated 22.11.2022. the findings of the Coordinate Bench of ITAT Pune, are reproduced below: 9. There is yet one more reason ax to why we are inclined to confirm the addition made by Assessing Officer, in view of the well settled principle of law that fraud vitiare everything and even principle of natural justice have no application and such transaction is void ab initio. The Hon'ble Supreme Court in the case of Friends Trading Co vs Union of India in Civil Appeal No.5608 of 2011 vide order dated 23.09.2022 held in the context of availment of alleged forged DEPB under the Customs Act, wherein, it was found DEPB licenses were forged and it was held that the exemption benefit availed on such forged DEPB are void ab initio on the principle that fraud vitiate everything and the period of limitation was held to have no application and the Department was held to be justified in invoking the extended period of limitation and the fact that whether the beneficiary had no knowledge of about the fraud/forged and fake DEPB licenses have no bearing the imposition of custom duty. The ratio of judgement is squarely applicable to the transaction under consideration before us. Further, the application of principle of the fraud under judicial Acts was Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 19– considered by the Hon ble Supreme Court in the case of Smt. Badami (Deceased) By her L.R. vs. Bhals in Civil Appeal No 1723 of 2008 dated 22.05.2012, wherein, the Hon ble Apex Court held as follows 20. In S P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and others (AIR 1994 SC 853) this court commenced the verdict with the following words- Fraud-avoids alt judicial acts, ecclesiastical or temporal observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing frand on the court is a nullity and non ess in the eves of law. Such a judgment/decree be the first court or by the highest cours has to be treated as a mallet by every court whether superior or inferior Ih can be challenged in any court even in collateral proceedings 21. In the said case it was clearly stated that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands A person whose cate is based on falsehood has no right to approach the Court. A litigant who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If a vital document is withheld in order to gain advantage on the other side he would be guilty of playing fraud on court as well as on the opposite party.

In the result, the appeal filed by the assessee is dismissed.

The facts of case Milind Pankajbhai Shroff are identical with that of the assessee’s case. Thus, we do not find any infirmity in the revision order passed by the Ld.PCIT. Thus, the grounds raised by the assessee are devoid of merits and liable to be dismissed. Rakesh Bhikhabhai(HUF) vs. PCIT Asst.Year –2018-19 - 21–

In the result, the appeal filed by the assessee is dismissed.