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Income Tax Appellate Tribunal, KOLKATA BENCH ‘B(SMC
Before: SHRI MANISH BORAD, HON’BLE & SHRI SONJOY SARMA, HON’BLE]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘B(SMC)’ AT KOLKATA [BEFORE SHRI MANISH BORAD, HON’BLE ACCOUNTANT MEMBER & SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER] Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd..........................................................................................................Appellant 12C, Chakraberia Road (North), Kolkata – 700 020. [PAN: AAACL4476A] Vs DCIT, CIRCLE-10(1), Kolkata ..................………………………………………..........................Respondent Appearances by: Shri Anil Kochar, Advocate & Shri Aryan Kochar, Advocate appearing on behalf of the Assessee Shri B.S. Anand, JCIT, Sr. DR appearing on behalf of the Revenue: Date of concluding the hearing : April 27, 2022 Date of pronouncing the order : May 10, 2022 ORDER PER SONJOY SARMA, JM:
This is an appeal filed by the assessee pertaining to the assessment year (in short ‘A.Y.’) 2014-15 is directed against the order of Ld. CIT(A)-4, Kolkata dated 22.05.2019 which is arising out of the assessment order passed u/s 147/143(3) of the Income Tax Act, 1961(in short ‘the Act’) dated 18.01.2016 passed by the DCIT, Circle-10(1), Kolkata.
The registry has informed that the present appeal is time barred by 601 days. The ld. counsel for the assessee prayed for condonation of the delay by submitting the affidavit placed on record. We after perusing the affidavit as well as material available on record found that merit in the contention of the affidavit given by the assessee and keeping Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd. the larger interest of justice, we condone the delay and admit the appeal for adjudication.
The assessee is in appeal before the Tribunal raising the following grounds: “i. For that the orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad in law, to the extent to which they are prejudicial to the interests of the appellant. ii. For that the Ld. CIT(A) erred in dismissing the appeal of the appellant on alleged grounds. iii. For that the Ld. CIT(A) ought to have treated the assessment so framed u/s 143(3)/147 as bas in law, since no notice u/s 142(1) or any show cause with regard to disallowance of claim of Rs. 4,87,500/- was issued and liable to be quashed. iv. For that the Ld. CIT(A) ought to have held that the appellant having made donation of Rs. 4,50,000/- eligible for deduction u/s 35(1)(ii) of the Act the same was an allowable one. v. For that the appellant had adduced all supporting documentary evidences in respect of claim made u/s 35(1)(ii) of the Act which ought to have been properly considered by the lower authorities who rejected the same without any reasons and accordingly the claim made by the appellant ought to have been allowed. vi. For that there has been delay in submission of this appeal before the Hon’ble Tribunal which may kindly be condoned and the appeal may kindly be taken up for hearing and adjudication. vii. For that the appellant craves leave to amend, alter, modify, substitute, add to , abridge and/or rescind any or all of the above grounds.”
Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd.
The brief facts of the case is that the assessee filed its return of income on 27.09.2014 declaring a total income of Rs. 5,77,818/- for the Assessment Year 2014-15. The case was assessed u/s 143(1) of the Act on a total income of Rs. 5,77,818/- on 15.06.2015. Subsequently, the Principal Director of Income Tax (Inv.), Kolkata had received information regarding dissemination of beneficiary/bogus donors u/s 35(1)(ii) in the case of School of Human Genetics & Population Health (SGHPH), Matrivani Institute of Experimental Research & Education (MIER&E) & Herbicure Healthcare Bio Herbal Research Foundation (HHBRF) that a survey operation was carried on the above three institutions on the issue of facilitating bogus donation u/s 35(1)(ii) of the Act. It was found that the donor/beneficiaries in connivance with these institutes with the active help of brokers/entry operator/bogus billers were engaged in bogus donation syndicate and the donations were returned back to the donors in different forms like direct cash, in the name of various shell companies to get back such cash through them in lieu of commission. One of the institutes, the School of Human Genetics and Population Health have gone to settlement commission admitting that in lieu of service charge they have provided accommodation entries of bogus donation to the donors and has accepted that they have refunded the amounts after deduction service charges in lieu of commission. The AO find that the assessee company is one of the donors as per list provided of office of the Principal Director of Income Tax (Inv.), Kolkata and it is seen that the Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd. assessee claimed deduction u/s 35(1)(ii) of Rs. 7,87,500/- @ 175% for the payment of donation of Rs. 4,50,000/- to School of Human Genetics & Population Health (SHGPH). The case was reopened by issuing notice u/s 148 vide letter dated 17.12.2015 after recording the reason for reopening.
In response to the notice u/s 148 vide letter dated 07.01.2016 requested the AO to treat the original return filed by the assessee on 27.09.2014. Again a letter was issued on 25.01.2016 to the assessee along with the reasons recorded for the reopening u/s 148 of the Act. The notice u/s 143(2) has been issued on 29.06.2016 fixing the case for hearing. In response to that the assessee has filed a written submission on 05.07.2016 stating that the donation was made after examining the credentials and activities and different certificates. Further, in the submission stated that the organisation to whom the donation was paid total (Rs. 4,50,000/-) is still having such registration u/s 35(1)(ii) of the Act. However, the AO found that the School of Human Genetics & Population Health (SHGPH) has filed application before Income Tax Settlement commission, Kolkata admitting that the accommodation entries of donations have been provided to the various donors in lieu of meagre amount of service charges from time to time and pass an assessment order stating that assessee has escaped assessment of Rs. 7,87,500/- due to incorrect reflection of income for the relevant year and assessee is involved in bogus trade and showing bogus donation to turn black money and therefore, Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd. amount of Rs. 7,87,500/- is added back as concealed income for the said assessment year in question. Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) which was dismissed by the Ld. CIT(A) on 22.05.2019.
At the time of hearing, the ld. counsel for the assessee submitted that the only dispute in this appeal relates to the deduction claimed u/s 35(1)(ii) of the Act in respect of donation of Rs. 4,50,000/- made by the appellant to the School of Human Genetics & Population Health (SHGPH) and consequent deduction claimed at Rs. 7,87,500/- being 175% of the amount of donation made. The other grounds of appeal are general and consequential in nature. This issue goes roots of the case and accordingly we are going to decide the same.
At the time of hearing the ld. AR relied on various judicial pronouncements given by coordinate bench in respect of present issues in question and submitted the same as follows: “i. DCIT, Circle-12(1), Kolkata vs M/s. Maco Corporation (India) Pvt. Ltd. (ITA No. 16/Kol/2017 dated 14.03.2018). ii. Tushar Chawda, Kolkata vs ITO, Ward-31(4), Kolkata (ITA No. 2362/Kol/2017 dated 21.03.2018). iii. Narbheram Vishram vs DCIT, Central Circle-4(2), Kolkata (ITA No. 42 & 43/Kol/2018 dated 27.07.2018). iv. Extent D services vs ACIT, Circle-24(1), Kolkata (ITA No. 2668/Kol/2018 dated 21.02.2020). v. Raj Karan Dassani vs ITO, Ward-36(1), Kolkata (ITA No. 2346/Kol/2018 dated 08.05.2019).”
Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd.
We have heard rival submission and perused the material available on record on the identical facts, the Kolkata bench of the Tribunal in the case of DCIT, Circle- 12(1), Kolkata vs M/s. Maco Corporation (India) Pvt. Ltd. (ITA No. 16/Kol/2017) had held that withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of payee organisation would not affect the right and interest of the assessee for claim of deduction u/s 35(1)(ii) of the Act. The relevant finding of the ITAT in the case of M/s. Maco Corporation (India) Pvt. Ltd. (supra) reads as follows: 8.3. We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision of the Hon’ble Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018) 90 taxmann.com 281 (SC) wherein it was held that :- 21. In our considered opinion, the CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second, the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so. In this case there was no such express power.
Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi judicial in nature.
Third, an order of the CIT passed under Section 12A does not fall in the category of "orders" mentioned in Section 21 of the General Clauses Act. The expression "order" employed in Section 21 would show that such "order" must be in the nature of a "notification", "rules" and "bye laws" etc. (see - Indian National Congress(I) v. Institute of Social Welfare [2002] 5 SCC 685.
In other words, the order, which can be modified or rescinded by applying Section 21, has to be either executive or legislative in nature Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd. whereas the order, which the CIT is required to pass under Section 12A of the Act, is neither legislative nor an executive order but it is a "quasi judicial order". It is for this reason, Section 21 has no application in this case.
The general power, under Section 21 of the General Clauses Act, to rescind a notification or order has to be understood in the light of the subject matter, context and the effect of the relevant provisions of the statute under which the notification or order is issued and the power is not available after an enforceable right has accrued under the notification or order. Moreover, Section 21 has no application to vary or amend or review a quasi judicial order. A quasi judicial order can be generally varied or reviewed when obtained by fraud or when such power is conferred by the Act or Rules under which it is made. (See Interpretation of Statutes, Ninth Edition by G.P. Singh page 893). 26. ………… 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No.2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004-2005) because the amendment in question was not retrospective but was prospective in nature.
The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of DIT (Exemptions) v. Mool Chand Khairati Ram Trust [2011] 11 taxmann.com 42/199 Taxman 1/339 ITR 622, Uttaranchal High Court in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74/[2007] 158 Taxman 199 and Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [2009] 315 ITR 382.
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 till 01.10.2004; and lastly, Section 21of the General Clauses Act has no 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 12AA(3) 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. Infact 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 ld CIT w.e.f. 1.10.2004 and the Hon’ble Apex Court held that prior to Assessment Year: 2014-15 Lord Real Estate Pvt. Ltd. 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(1)(ii) of the Act . Hence we hold that the withdrawal of recognition u/s 35(1)(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)(ii) of the Act. 8.4. We also find that the co-ordinate bench of this tribunal in exactly similar facts had decided the issue in favour of the assessee in the following cases:- a) Rajda Polymers vs DCIT in for Asst Year 2013-14 dated 8.11.2017. b) Saimed Innovation vs ITO in ITA No. 2231/Kol/2016 for Asst Year 2013-14 dated 13.9.2017. The findings of those decisions are not reiterated herein for the sake of brevity. 8.5. 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 hold that the ld CITA had rightly deleted the disallowance u/s 35(1)(ii) of the Act in the sum of Rs 3,06,25,000/- made by the ld AO. Accordingly, the Grounds raised by the revenue are dismissed.”
In view of the aforesaid findings of the facts and circumstances of the case, we respectfully follow the various judicial precedents, we decide this issue in favour of the assessee and the disallowance made by the AO is deleted. Accordingly grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 10th May, 2022.