MANTHAN INC,MUMBAI vs. ACIT- CIR 19(2), MUMBAI

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ITA 2942/MUM/2018Status: DisposedITAT Mumbai07 October 2021AY 2012-135 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the donation was made when the trust had valid registration, and the subsequent withdrawal of registration cannot be applied retrospectively. It also noted that the assessee was not provided with an opportunity to cross-examine the trustee whose statement was used to disallow the claim.

What were the facts?

The assessee claimed deduction for a donation made to Navjeevan Charitable Trust under Section 35AC. The trust's registration was later withdrawn, and the AO disallowed the deduction based on a trustee's statement alleging bogus donations. The assessee argued the donation was made when the trust had valid registration and was not given an opportunity to cross-examine.

What were the issues?

Whether a donation made to a charitable trust with valid registration at the time of donation can be disallowed retrospectively due to the trust's subsequent loss of registration. Whether disallowing a claim based on evidence not put to the assessee for cross-examination violates principles of natural justice.

Which sections of the Income-tax Act were involved?

Section 35AC

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY

Hearing: 20/07/2021Pronounced: 07/10/2021

ORDER PER VIKAS AWASTHY, J.M: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 19/03/2019 for the assessment year 2012-13.

1.

आअसं. 2942/मुं/2018 (िन.व.2012-13) (A.Y.2012-13) 2. Sh. Dilip Diwan appearing on behalf of the assessee submitted that the assessee is a dealer in pharmaceutical and surgical products. The assessment for AY 2012-13 was re-opened on the ground that the donation made by assessee to Navjeevan Charitable Trust during Financial Year (FY) 2011-12 was bogus. The assessee had made donation of Rs. 10,00,000/- to Navjeevan Charitable Trust vide separate cheques against the receipt issued by the said Trust. The cheques were duly encased as is evident from the bank statement at page no.37 of the Paper Book (PB). The assessee claimed deduction of the donation made under section 35AC of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. Navjeevan Charitable Trust was having valid registration at the time when donation was made by the assessee to the Trust. The registration was withdrawn from the Trust much after the donations were made by the assessee. The ld. Authorized Representative (AR) submitted that the donation made by assessee in AY 2012-13 cannot be disallowed by retrospectively cancelling registration certificate of the Trust. The ld. AR submitted that in re-assessment proceedings, the AO has placed reliance on the statement of Subhash Kadam, one of the Trustee of Navjeevan Charitable Trust wherein he has ostensible admitted that the cash was given back to the donors after deducting commission of 3% of the donations. The assessee was neither given copy of the statement nor opportunity to cross-examine the person on whose statement, the assessee’s claim of the deduction under section 35AC of the Act is withdrawn. The ld. AR placed reliance on the decisions in the case of Rajkaran Dasani Vs. ITO in to contend that the claim of deduction under section 35AC of the Act cannot be disallowed retrospectively.

आअसं. 2942/मुं/2018 (िन.व.2012-13) (A.Y.2012-13) 3. On the other hand, Ms. Smita Verma representing the Department vehemently defended the impugned order. The ld. DR submitted that Navjeevan Charitable Trust was engaged in providing accommodation entries, the modus operandai as explained by one of the Trustee in statement recorded during the search action was that the donations were taken by way of cheque and the same amount was returned to the donors in cash after deducting commission of 3% of the donations. The donation made by assessee to Navjeevan Charitable Trust was bogus and hence, the claim made by the assessee under section 35AC of the Act was disallowed by the AO and the CIT(A).

4.

Both sides heard, orders of the authorities below examined. It is an undisputed fact that when the donation was made by the assessee to Navjeevan Charitable Trust in F.Y. 2011-12, the said trust was holding valid registration. It was much thereafter the registration granted to Navjeevan Charitable Trust was withdrawn.

5. I find that on identical set of facts, the Co-ordinate Bench in the case of Bhavita Chemicals Pvt. Ltd. Vs. ITO in for AY 2010-11 decided on 01.12.2020 held as under: “4. Both sides heard, orders of authorities below perused. The assessee made donation of Rs.5,00,000/- to NCT in March, 2010 and claimed the benefit of deduction under section 35AC of the Act in its return of income for assessment year 2010-11. Subsequently, search action was carried out in the case of NCT and it was found that the Trust was issuing bogus donation receipts. On the basis of search action, the assessee’s claim of deduction in assessment year 2010-11 was disallowed in reassessment proceedings. The contention of the Revenue is that the donation amount paid by the assessee to NCT has flown आअसं. 2942/मुं/2018 (िन.व.2012-13) (A.Y.2012-13) back to the assessee. I find that no positive evidence is brought on record by the Revenue to show that on the date of donation made by the assessee, NCT was not holding valid registration certificate. On the contrary, the assessee has filed evidence to show that NCT was holding valid registration certificate from the Department on the date of donation and the same was subsequently renewed in 2011. This fact is evident from notification issued by Ministry of Finance dated 30/11/2010 at page 70 to 72 of the Paper Book. It is further observed that on the basis of statement/evidence collected at the back of assessee, the claim of deduction under section 35AC of the Act has been disallowed in proceedings under section 147 r.w.s. 148 of the Act. It is a well settled law that any evidence collected at the back of assessee if not put to the assessee for crossexamination would result in violation of principles of natural justice. In the instant case the assessee asked for cross-examination of the trustee, however, the same was rejected by the Assessing Officer. The Hon'ble Supreme Court of India in the case of Andman Timber Industries vs. CCE, 62 taxmann.com 3 has held that not providing opportunity to cross- examine the witness is a serious flaw which renders the order nullity. The impugned order is liable to be quashed on this ground alone. It is further observed that no cogent evidence has been brought on record by the Revenue to substantiate that the donation made by assessee through banking channel has been received back by assessee in cash. The assessment order and the impugned order has been passed purely on assumptions and presumptions.

5.

The Co-ordinate Bench in the case of Jadstone Trading Pvt. Ltd., (supra), deleted the addition made for similar reasons in respect of donation made to NCT, holding that in the absence of any evidence on record that the amount has been received back by the assessee from the Charitable Trust, the addition is solely based on surmises and conjectures and, hence, is आअसं. 2942/मुं/2018 (िन.व.2012-13) (A.Y.2012-13) unsustainable. I find merit in the submissions of the assessee, hence, same are accepted and the impugned order is quashed.” 6. In view of the fact of the case and decision discussed above, I find merit in the appeal of assessee. The impugned order is set-aside and appeal is allowed.

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