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Facts
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 3,75,00,000/- made by the Assessing Officer. The AO had treated donations received by the assessee trust as bogus, alleging it was the assessee's own unaccounted income. The AO's conclusion was based on statements from third parties, which were later retracted.
Held
The Tribunal held that the reassessment proceedings were initiated beyond the prescribed time limit and lacked proper jurisdiction due to the failure to demonstrate any non-disclosure of material facts by the assessee during the original assessment. Furthermore, the Tribunal noted that the donations were treated as bogus based on retracted statements, without any corroborative evidence.
Key Issues
Whether the reassessment proceedings initiated beyond the four-year period were valid without establishing the assessee's failure to disclose material facts. Whether donations treated as bogus based solely on retracted statements without corroborative evidence are sustainable.
Sections Cited
147, 148, 133(6), 143(3), 133A, 132, 151, 68, 115BBE, 11, 13, 10(23C), 2(24), 234A, 234B, 139, 142, 153A, 80G
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
The facts of the case, in brief, are that the assessment order dated 26/03/2022 was passed by the Assessing Officer wherein the income of the assessee was assessed at Rs.3,75,00,000/- as against returned income of Page 1 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 nil. In the aforesaid assessment order, an addition of Rs.3,75,00,000/- was made by the Assessing Officer holding that the assessee trust had received its own unaccounted and undisclosed income by way of donations. The aforesaid amount of Rs.3,75,00,000/- consisted of Rs.75,00,000/- from Anandilal & Ganesh Podar Society, Rs.50,00,000/- from Podar Education & Sports Trust, a further amount of Rs.1,50,00,000/- from Podar Education & Sports Trust and Rs.1,00,00,000/- from Podar Education Trust. The Assessing Officer had conducted inquiry u/s 133(6) of the Act with aforesaid three entities. All the three entities furnished their reply and confirmed having paid donations to the assessee. The aforesaid three entities have also provided copies of bank account to the Assessing Officer. The Assessing Officer disbelieved the confirmations from the aforesaid three entities, on the ground that the entities could not provide any substantive evidence for their claim. The Assessing Officer further took the view that the assessee trust and the aforesaid three entities had failed to prove the authenticity of the transactions. However, there is no mention in the assessment order showing what further substantive evidences were required from the end of the aforesaid three entities and the assessment order is also silent as to on what basis the conclusion was arrived that the assessee trust and the aforesaid four entities had failed to prove authenticity of the transactions. The Assessing Officer’s conclusion that the assessee trust had accepted its own unaccounted and unexplained money in the garb of donation is based on her finding that the aforesaid Anandilal & Ganesh Podar Society was also running educational institutions and according to the Assessing Officer, the aforesaid Anandilal & Ganesh Podar Society should have rather spent the fund to develop the infrastructure of its own institute. There is no adverse comment in the assessment order in respect of other
Page 2 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 remaining entities. The assessee’s explanation, reproduced below, was rejected by the Assessing Officer:-
Page 3 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Page 4 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Page 5 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Page 6 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17
3. Aggrieved, the assessee filed appeal in the office of the learned CIT(A). Vide impugned appellate order dated 20/08/2024 for assessment year 2015-16, the learned CIT(A) deleted the aforesaid addition of Rs.3,75,00,000/-. The relevant portion of the impugned order of the learned CIT(A) is reproduced as under:
Page 7 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 “FACTS OF THE CASE”
1. The Assessee is a public charitable trust registered u/s 12AA of the I.T. Act 1961 w.e.f 17.10.2012.
2. The notice u/s 148 was issued to the assessee for the year under consideration on 30.03.2021.
The return in compliance of notice u/s 148 was filed and the copy of reasons recorded was served to the assessee on which, the objections were filed by the assessee. However, the objections of the assessee were removed summarily by Ld. A.O. vide letter No. ITBA/AST/F/17/2021-22/1037022701(1) dated 17.11.2021 without passing speaking order.
The original assessment was completed u/s 153C/143(3) and there was no failure on part of the assessee to disclose fully and truly all the facts about the donations received by it during the year under consideration. Still notice u/s 148 was issued beyond 4 years from the end of relevant assessment year i.e. notice under section 148 is issued on 30.03.2021 while the period of four years expired on 31.03.2020. Vide notice u/s 142(1), Ld. A.O. proposed the following addition to the income of the assessee alleging the same to be bogus:
M/s Anandilal & Ganesh Podar Society Rs.75,00,000 Podar Education & Sports Trust Rs.50,00,000 Podar Education & Sports Trust Rs.1,50,00,000 Podar Education Trust Rs.1,00,00,000 -------------------- Total Rs.3,75,00,000/-
5. The assessee filed detailed submission along with necessary evidences and proofs explain the fact that the donations were received though banking channel and all the records were duly maintained. The amount of donations so received was utilised for charitable purpose. The enquiries about the donations were made under section 133(6) also during original assessment proceedings and proceedings under section Page 8 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 148. The confirmations about were obtained directly by the Ld. AO. However, Ld. A.O. rejected all the evidences and explanations of the assessee and also ignored the fact that the proper enquiries were made during the original assessment proceedings. Only on the basis of assumptions and presumptions, without providing information available with the department Ld. A.O. passed the order u/s 147 and treated the donations received of Rs. 3,75,00,000/- as bogus donation. Aggrieved by the order of Ld. A.O. this appeal is preferred.
Grounds of Appeal Ground No 1:- 1 On the facts and circumstances of the case, the notice issued under section 148 by the learned AO is without jurisdiction, bad both in the eye of law and on facts.
1.1 The assessee trust was formed on 17.10.2012 and it was constructing hospital building for charitable purpose at rural area of Dist. Shahjahapur. Since inception of the trust and during financial year 2013-14 relevant to Assessment year 2014-15, the trust was not having any source of income other than donation to its corpus and interest on the funds lying deposited with banks. The copies of said bank accounts were duly filed during the course of assessment proceeding u/s 143(2) before Assistant Commissioner of Income Tax, Lucknow. Proceeding u/s 153C were initiated against the assessee trust. Thereafter the case was transferred to the Central Circle. Detailed show cause notice about all the donations received by the trust was issued to it again by Ld. AO of central circle. The same was complied and order u/s 143(3) dt. 26.12.2017 was passed accepting the donations. The copy of the same is enclosed herewith for your kind perusal. The order so passed carried the statutory approval of Ld. Addl. Commissioner of Income Tax (Central) u/s 153D of The Income Tax Act. The relevant paragraph of said order is reproduced here- “During the course of assessment proceedings it was noticed that the assessee has received corpus donation of Page 9 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Rs. 24,60,54,000/-. In order to verify the genuineness of this corpus donation amounting to Rs.24,60,54,000/- verification letters were issued to all the donors u/s 133 (6) of the I.T. Act, 1961. In response, all the donors accepted to have given the corpus donation to the trust. From the verification of the replies of the donors it was observed that all the donors are assessed to tax with different assessing officers as well as the donations were given through account payee cheques. Since all the donations are verifiable and have been given through banking channel therefore the donations stand verified in the absence of any adverse material available on record.”
On perusal of the above it may be seen that the department accepted the donations after direct confirmation from donors.
The assessee again submitted the confirmation of the following donors that were given by them at the time of granting donations for charitable purpose, as these are the alleged bogus transactions- M/s Anandilal & Ganesh Podar Society Rs.75,00,000 Podar Education & Sports Trust Rs.50,00,000 Podar Education & Sports Trust Rs.1,50,00,000 Podar Education Trust Rs.1,00,00,000 -------------------- Total Rs.3,75,00,000/- The assessee has discharged its onus of proving the donations during the course of original assessment proceedings u/s 143(3)/153C. During re-assessment proceedings Ld. AO issued fresh notices to the donors mentioned above and all the donors have confirmed the donation, all these donations are deemed to be bogus.
It may be seen that the re-assessment proceedings are initiated merely on the basis of statement of consultant of podar group and key person of DAG group without any specific information about the assessee from any of these persons or any incriminating material. Page 10 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Under the above circumstances, the assessee cannot be expected to get the things verified again & again that too after a gap of about 8 years. Further neither the Trust had any source where from it could even hypothetically generate cash for alleged payment to donors against the donation received by it nor any documentary evidence in this regard provided to the assessee.
1.2 There is no information in the reasons recorded by Ld. predecessor of the Ld. AO that there was any failure on the part of the assessee to disclose all the materials fully and truly for the purposes of assessment. No tangible material for the formation of belief that income have escaped assessment has been provided to the assessee that were requested vide submission filed on 25.05.2021 before the Ld. AO.
1.3 It is a case of change of opinion by initiating reassessment proceeding for A.Y. 2014-15, as a different analysis is being one on the basis of documents already on the record of the department. 1.4 It is impermissible under the power of Ld.AO that is available to the department u/s 147 of the Act to initiate reassessment proceedings in an assessment that is completed U/s 143 (3) as there is no failure on the part of the assessee to disclose any material fact. The power of reassessment can only be exercised where there was a failure on the part of the assessee to make the true return disclosing fully and truly all material facts necessary for assessment and were such reopening would be permissible after enquiry of 4 years, as provided under Proviso to Section 147 of the Act.
The assessee is supported by authority of various case laws on the issue. Some of the said case laws are as under:
New Delhi Television Ltd. V. DCIT 314CTR(SC)17 wherein Hon’ble Supreme Court held:
We accordingly allow the appeal by holding that the notice issued to the assessee shows sufficient reasons to believe on Page 11 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 the part of the Assessing Officer to reopen the assessment but since the Revenue has failed to show nondisclosure of facts the notice having been issued after a period of 4 years is required to be quashed….
Deputy Commissioner of Income Tax V. Simplex Concrete Piles (India) Ltd. 254CTR221(SC) wherein Hon’ble Supreme Court decided reopening in favour of assessee observed:
Conclusion :
Once limitation period of four years provided under s. 147/149(1)(a) expires then the question of reopening by the Department does not arise; subsequent reversal of the legal position by the judgment of the Supreme Court does not authorise the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time.
ACIT V. ICICI Securities Primary Dealership Ltd. 253 CTR (SC) 305 wherein the reopening beyond four years from the end of relevant assessment year is held to be invalid by Hon’ble Supreme Court: Conclusion :
Assessee having disclosed full details of its dealings in stocks and shares in its return while claiming that the loss incurred by it was a business loss, reopening of the assessment by the AO on the basis that the loss was a speculative loss is clearly based on change of opinion and, therefore, the same is not valid.
The jurisdictional High Court in Noida Power Co. Ltd. V. CIT (2017) 154DTR10 (All) also favoured assessee on the issue of reopening beyond four years:
Besides, the assessee also relies on the following case laws- DRS Industries Pvt. Ltd. V. DCIT (2021) 322CTR (Mad.) 289 First Source Solution Ltd. V. ACIT (2021) 323CTR (Bom.) 18 Ananta Landmarks Pvt. Ltd. V. DCIT (2021) 323CTR (Bom.) 138 Page 12 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 SaurabhNatvarlalSoparkar V. ACIT (2021) 5NYPCTR 131 (Guj.)
On the basis of the above facts and circumstances the notice issued u/s 148 is without jurisdiction and needs to be quashed.
GROUND NO :- 2
1. On the facts and circumstances of the case, the order passed by the learned AO is bad both in the eye of law and on facts. The order passed by Ld. AO needs be annulled.
The order has been passed ignoring the various provisions of the Act, without complying with the statutory conditions and ignoring the facts of the case. The order has been passed arbitrarily rejecting the explanation and evidences and by indulging into surmises and conjecture as is evident from the facts stated herein above. Accordingly, the assessment order is bad both in the eyes of law and on facts and hence, liable to be annulled. GROUND NO 3:-
(i) On the facts and circumstances of the case, the learned Assessing Officer has erred, both on facts and in law, in making assessment at an income of Rs.3,75,00,000/- as against ‘ NIL’ income declared by the assessee.
(ii) On the facts and circumstances of the case, the learned Assessing Officer has erred, both on facts and in law, in treating the donation as income u/s 2(24) of the Income Tax Act, 1961 and adding Rs.3,75,00,000/- u/s 68 of the Act as cash credits r.w.s 115BBE on the basis of search at some other assessee holding the same to be bogus donation.
(iii) On the facts and circumstances of the case, the learned Assessing Officer has erred, both on facts and in law, in holding that the ultimate beneficiary of these donations are the trustees and thus as mentioned in section 13 (1) of the Act nothing contained in section 11 section 12 shall operate so as to exclude the same from total income. Page 13 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 3.1.1 The Ld. AO has treated the corpus donations, that were duly credited in its books of account as bogus and assessed the income of the appellant at Rs. 3,75,00,000/- while all the donations as received by the assessee were corpus donations.
3.1.2 Reference of your good self is invited to the fact that the trust is registered u/s 12A. Its registration is valid Ld. AO has not denied its registration. In first para of the assessment order Ld. AO has duly mentioned “Assessee is a trust registered u/s 12AA(1)(b)(i) of the Act granted by the Commissioner of Income tax-1, Lucknow vide order dated 30-04-2013 w.e.f. 17.10.2012” Thus even in case of addition unless misutilisationof trust fund is there, no tax can be levied. However, Ld. AO has levied tax at normal rate on the addition of Rs.3,75,00,000/-.
3.1.3 Even in case of an assessee where addition u/s 68 is made, the tax is not to be charged at normal rate. However, even though the assessee is registered u/s 12AA, the normal tax is charged from assessee on the said addition particularly when it was donation to corpus. Reference of your honour is invited to ACIT Vs M/s Financial Inclusion Trust in [A.Y. 2009-10] Wherein it is held that donation to corpus is capital receipt and cannot be taxed. Copy of the order of Hon’ble ITAT is enclosed for ready reference purposes.
3.1.4 On merits also there is no dispute on utilization of donation received for charitable purposes. It is held that if application for charitable purposes is proved, source is not to be seen. We are also supported by-Director of Income Tax V. MotiBaghMutual Aid Education (2008) 298 ITR 190 (Delhi). Para 6,7,8 are reproduced hereunder-
“6. Reference has been made by learned Counsel for the assessed to a decision of a Division Bench of this Court In Director of IT(Exemption) v. Keshav Social & Charitable Foundation (2005) 278 ITR 152 (Del), wherein the allegation made against the assessed was that through some donations, it was in introducing unaccounted money into its corpus. It was held, even though it was a case Page 14 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 under section 11 of the Act, that the list of donors had been submitted and even if that list was not submitted or the donors were not produced, it would not necessarily lead to an inference that the assessed was trying to introduce unaccounted money by way of donation receipts.
7. Insofar as the present case is concerned, we find that there is no dispute about the fact that the donations totaling Rs. 509760 were utilized for construction of the building of the school, which is clearly an educational purpose. By no stretch of imagination can it be said that the donations were received with some profit motive.
8. Moreover as we have already indicated earlier with regard to the amount concerning Mr. Bhatia, the amount in question is not an outflow from the corpus of the assessed but an inflow into its corpus for the purposes of construction of a building. That is relevant in this case also, and it cannot be said that the receipts were with a profit motive, more particularly when the donations were utilized for educational purposes.”
Vide above order Hon’ble High Court upheld the decision of Hon’ble ITAT in IT(SS)A No. 652/Del/2000.
3.2.1 Assessee is also supported by decision of Hon’ble ITAT in I. T. Act No. 2876/Del/2010 vide order dt. 04.11.2015 wherein the order of Ld. CIT (Appeals) was upheld by Hon’ble ITAT even though the genuineness of corpus donation could not be explained by the assessee. Once there can be no addition, there remains no case for cancellation of registration, as this is the case of receipt of donation and not that of misutilisation of Trust Funds.
3.2.2 The additions have been made by the Ld. AO without any material or evidence against the assessee. During the course of reassessment proceedings necessary information being bank account, identity of donors their PAN and other information was provided to Ld. AO. When all the evidences and supportive documents were submitted to substantiate the facts then it is Page 15 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 duty of the assessing office to make proper enquiry and in depth investigation and to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain the addition. No such step was taken by the Ld. AO and purely on the basis of the illusionary and imaginary story; the Ld. AO invoked the provisions of section 68.
3.2.3 Even the notice u/s 148 was given to assessee trust merely on the basis of information from DDIT(Inv.) Unit 2(4), New Delhi, without carrying out independent enquiry. Further, even the copy of the report of investigation wing, panchnama of Shri Joginder Pal Gupta, his statement recorded u/s 132(4) that gave rise to reason to suspect, copy of post search assessment order, copy of relevant seized material, his bank accounts showing transactions relating to assessee and other evidence obtained in the matter are not given.
3.2.4 Opportunity to cross examine Mr. Joginder Pal Gupta was also not given to the assessee, even though the assessee requested for the same.
3.2.5 The Ld. AO has not appreciated the submissions and explanations of the assessee trust submitted vide replies and has restricted his reliance only to the information received on the basis of search carried out on other persons, even without considering the contentions of the assessee trust. Therefore, in view of the said circumstances of the present case, the order passed by the Ld. AO is bad in the eyes of law, without any application of mind, based on whims and fancies and thus should be quashed.
3.2.6 The Ld. AO made the addition u/s 68 levied of tax under section 115BBE, even though this is a case of trust and the assessee has shown its complete income and expenses details and no additional income is proposed to be added. The Ld. AO has treated the genuine donations received for the noble cause of the trust, as bogus donations and which were duly shown by the assessee in its ITR filed under section 139(1) of the I.T. Act 1961. Be it so, the assessee submits as under:- Page 16 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Section 68 of the I.T. Act 1961 is reproduced herein below:- Cash credits.
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. The above section comes into play only in case where any sum credited in the books of account and not shown as income. As the assessee has received the donations with the specific direction for corpus, the assessee has credited such donations as corpus fund u/s 11(1)(d) of the Income Tax Act 1961. As submitted herein above, the corpus donations are held to be capital receipt. As such section 68 or tax u/s 115BBE are not applicable here.
Page 17 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Cash credit represents only and only those accounts where the assessee offers no explanation about its nature or source or the explanation of assessee is not satisfactory and accordingly the assessing officer wants to treat the same as income. Once the assessee has accepted the same and explained its source and usage of funds for charitable purpose, there is no applicability of section 68 particularly when the explanations and supportive documents were submitted by the assessee to substantiate its position and donation being to the corpus of the trust are capital receipt. Accordingly, section 115BBE is not applicable on the assessee.
On the basis of the above submissions, it is very clear that the Ld. Assessing Officer has erred both on the facts as well as in law in treating the corpus donation as income u/s 2(24) and making the addition u/s 68 . The order passed is not tenable in law and needs to be filed. As a cumulative effect of addition u/s 68 and application of section 115BBE, as above, the tax is once charged as per the normal provisions of the Act and again u/s 115BBE. Thus, the same income is taxed twice which is not permissible under law.
3.3.1 Even if hypothetically it is assumed that the donations to the corpus were received against payment of cash to the donor, it is not the case of allegation of misutilisation of trust fund this being the fact even hypothetically it cannot be said to be a case where the ultimate beneficiary of the donations are the trustees as alleged. GROUND NO 4:-
(i) That the exemption under section 11 of the Act has been disallowed despite the assessee having been engaged in the education activities, duly registered under section 12A of he Act. (ii) That the above exemption has been denied invoking the provisions of section 13(3) of the Act, without giving any specific findings in this regard.
Page 18 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 4.1 Section 11 is the exemption provision on the basis of which the assessee is exempted from the income if it is registered under section 12A of the Act. Registration u/s 12A is given by Ld. Commissioner of Income Tax on the basis of which the AO gives exemption to the assessee. It is also to be appreciated that section 11 exemption is a yearly process whereby the AO has to grant exemption under section 11 while satisfying himself in the assessment proceedings for each assessment year separately. Your honour will appreciate that section 13 is a provision providing for non- applicability of section 11 exemptions. The provisions of this section are under the jurisdiction of the AO to be carried on during the assessment proceedings. In a specific year if the conditions of the section 13 are not applied with the exemption under section 11may not be available to the assessee in that particular assessment year. In this way the condition provided under section 13 are to be checked by the AO every year. In his order, the AO has alleged that the assessee received the bogus donations and the ultimate beneficiaries of the alleged donations are trustees. There is no evidence or material brought on record by the AO that during the year under consideration, the conditions prescribed under section 13 were violated by the assessee trust. In fact there is no case of violation of section 13 even as per Ld. AO.
4.2 Ld. AO in his order u/s 147 has not made any allegation regarding activities of the assessee trust and assessing officer has been satisfied that assessee is an charitable institute and its activities are charitable activities within the ambit of provisions of section 2(15) of Income Tax Act, 1961.
4.3 As regards the allegation of Ld. AO. that assessee has made contravention of provisions of section 13 of Income Tax Act 961, therefore exemption u/s 11 has been denied, relevant extract of section 13 of Income Tax Act 1961 is as under:-
13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt there of— (a) any part of the income from the property held under a trust for Page 19 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (bb) [***] (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof— (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) 95-96[, such part of income as referred to in sub-clauses (i) and (ii)] :
Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in subsection (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970; Page 20 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 (d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year— (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in subsection (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or (iii) any shares in a company, other than— (A) shares in a public sector company; (B) shares prescribed as a form or mode of investment under clause (xii) of sub-section (5) of section 11, are held by the trust or institution after the 30th day of November, 1983 95-96[, to the extent of such deposits or investments referred to in sub-clauses (i), (ii) and (iii)]: Provided that nothing in this clause shall apply in relation to— (i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973; (ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983; (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year
Page 21 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 in which such asset is acquired or the 31st day of March, 1993, whichever is later; (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.—Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business. Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.
(2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub- section (3),— (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub- section (3) for any period during the previous year without either adequate security or adequate interest or both; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; (c) if any amount is paid by way of salary, allowance or otherwise Page 22 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; (d) if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation; (e) if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3)during the previous year for consideration which is more than adequate; (f) if any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate; (g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3):
Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees; (h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern in which any person referred to in sub-section (3) has a substantial interest.
As per simple reading of the provisions of section 13, it is very clear the exemption u/s 11 can be denied only if assessee trust has provided any of the following benefits to the persons covered in section 13(3):-
Page 23 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 a. Funds of the trust has been given on loan without adequate security or interest or both; b. Any property of the trust has been given on rent without adequate consideration; c. Salary/remuneration has been paid in excess of reasonably payable; d. Services of the trust has been provided without adequate consideration; e. Any property is purchased by trust from persons covered u/s 13(3) for more than adequate consideration; f. Any property is sold by trust to persons covered u/s 13(3) for consideration less than adequate; g. Funds of the trust exceeding 1000/- has been diverted; h. Funds of the trust have been invested in the institutions wherein persons covered u/s 13(3) has substantial interest.
4.4 That in the case of assessee trusts no such instances have been discovered during assessment proceedings. It is alleged on the assessee that the trust received bogus donations and the ultimate beneficiary of the alleged donations are trustees merely on the basis of search carried out on other persons.
4.5 The Ld. AO has failed to appreciate the fact that funds have been used by the trustees for trust purposes and donations being receipt side is tried to be treated as income of the trust. The allegation is on account of usage of the funds of trust for personal purposes is there for the sake of allegation, but the fact is Ld. AO has not provided any single document which can prove that the funds were actually utilize for the personal purpose of the trustees.
4.6 In view of the above submission, your good self will find that funds of the trust were utilised for the purpose of the trust Page 24 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 only. Therefore the allegation is totally based on the whims and fancies and there being no supporting evidence based on which Ld. AO has made allegation that funds were being used for the benefit of the assessee.
GROUND NO 5:-
(i) On the facts and circumstances of the case, the learned Assessing Officer has erred, both on facts and in law, in making the addition rejecting the explanation given by the assessee.
(ii) That the addition has been made ignoring the fact that assessee having given the explanation, it is the duty of the department to prove that the amounts stated therein are income of the assessee. (iii) That the addition has been made without bringing any adverse material or evidence on record merely on the basis of action under section 132 on some other assessee.
(iv) That the addition has been made without any further investigation merely on the basis of presumption.
5.1 From the very beginning, it is clear that the re-assessment proceedings were initiated against the assessee merely on the basis of search on the other assessee. However, there is no incriminating material was taken on record. This is to bring attention of your honour that the pillar of re-assessment on the basis of which the proceedings has been framed is the “Search on the other person”. There were no other documents or adverse material was taken on record.
5.2 The Ld. AO has made the addition ignoring the fact that the assessee has given the explanation with regard to the alleged donations; it is the duty of the department to prove that the amounts stated therein are income of the assessee. The Ld. AO has made addition without considering the facts of the case and ignoring the replied submitted during the reassessment proceedings.
Page 25 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 5.3 The Ld. AO in his own imagination believes that on the basis of search on other person, the alleged donation received by the trust are bogus donations, without going in depth and verifying the facts of the assessee, and on his own whims and fancies, the addition was made by the AO.
5.4 Your honour would appreciate the fact that a person can be fastened with the tax liability only if it has earned some taxable income. Liability to tax cannot be imposed on the basis of surmises or conjuncture. Merely some information received on the basis of search on another person without any corroborative evidence which was explained by the assessee to be not in any case related to the year under consideration. Further, to treat the donations as bogus on the basis of some information found during search on other person, is and on the part of the AO totally on the basis of conjuncture. Also no further investigation was carried out by the Ld. AO which can prove that the assessee received the bogus donation.
5.5 It is a matter of record that ever since its inception/ registration, the Trust is carrying on the activities related to “providing educational medical relief” and such other activities as are incidental to the said object and other laudable objects only as mentioned in the object clause.
5.6 On the basis of the similar information in case of the assessee earlier during FY 2014-15 relevant to AY 2015-16, a show cause notice was issued F.No.CIT(Exemptions)/Showcase/2015- 16/8596 dt 29.01.2016 for cancellation of registration U/S 12AA(3) was received from the CIT ( Exemptions), Lucknow in respect of a donation of Rs.23,20,000/- received through RTGS from M/s School of human genetics & population health Kolkata with an averment that the same amount was returned in cash to it.
5.7 Ld. CIT thereafter cancelled registration of the Trust u/s 12AA(3) vide order dated 15.02.2016 which was received by the trust on 04.03.2016. The order of cancellation of recognition u/s 80G(5)(vi) was also sent simultaneously. Both the orders were effective from 01.04.2014. However, Hon’ble ITAT restored the Page 26 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 registration and the assessment for AY 2015-16 was completed under section 143(3) at NIL income.
Hence on the basis of above facts and circumstances, it is crystal clear that no further investigation was carried out by the Ld. AO. The Ld. Assessing Officer opened the re-assessment roceedings merely on the basis of borrowed information and the order was passed only on the basis of presumption.
GROUND NO 6:-
On the basis of facts and circumstances of the case, Ld. AO has erred both in law as well as on facts in charging interest under section 234A and 234B of the of the I.T. Act 1961. 6.1 Your honour Ld. AO has charged interest u/s 234A and 234B of the Income Tax Act. Interest has been charged ignoring the provisions of the Income Tax Act 1961.
6.2 Interest u/s 234 is chargeable for delay in filing of income Tax return, however, the assessee has filed income tax return within due date of filing of ITR. Therefore no interest u/s 234A is chargeable to the assessee.
6.3 Interest u/s 234B is chargeable for default in payment of advance tax. On the basis of the submissions above, your honour will find that the addition made by the AO is not sustainable. Hence no interest is chargeable u/s 234B of the Act. GROUND NO:- 7 The order passed by the Ld. A.O. is against principles of natural justice.
7.1 The order passed by the Ld. AO is invalid and without jurisdiction. The order has been passed ignoring the various provisions of the Act, without complying with the statutory Page 27 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 conditions and ignoring the facts of the case. The order has been passed arbitrarily rejecting the explanation and evidences and by indulging into surmises and conjecture as is evident from the facts stated hereinabove. Accordingly, the assessment order is bad both in the eyes of law and on facts and hence, liable to be annulled. If in case the AO was not satisfied with the explanation or the documentary evidences submitted in support of the same, he could made further investigations in this regard. It is the clear case whereby the explanation and evidences filed by the assessee were rejected arbitrarily by the AO without giving another opportunity to explain the same to the assessee.
7.2 In the present case, the notice u/s 148 was issued to the assessee merely on the basis of search on other person. The objections were raised by the assessee and in its objection the assessee requested to cross examine to Mr. Joginder pal Gupta (the person on whom the search was carried out). But no such opportunity was given to the assessee. Thus the order passed without providing the reasonable opportunity is against principle of natural justice. Prayer Considering above, it is prayed that the addition should be deleted in full and order passed should be quashed.” 4.2 During the appellate proceeding, the appellant has made another written submission which is reproduced hereunder:-
“Further to our submissions already made during the course of appeal proceedings before your Honour, the assessee most humbly submits as under-
The assessment in the case was completed by the Ld Deputy Commissioner of Income Tax Central Circle Bareilly at an income of Rs.3,75,00,000/- against returned income of Rs.Nil . An addition of Rs.3,75,00,000/ was made in the hands of the assessee trust on the allegation that the assessee trust had received bogus donations from Poddar Group of trusts to the tune of Rs.37500000 during the Page 28 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 relevant year. This information was received by the Assessing officer from Investigation wing Mumbai and on the basis of the same, reassessment proceedings were initiated in the hands of the assessee.
Grounds 1 and 2 challenge the legality of Reassessment proceedings initiated by the Assessing officer. The assessee further wishes to state as under-
The assessing officer selected this case of the appellant under normal reassessment proceedings and failed to invoke proviso to section 148 which mandate the AO to record reasons as to reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The original assessment in the case was completed u/s section 143(3) of the Income Tax Act 1961 and an order dated 26.12.2017 was passed by the Assessing officer. The Assessment order is a detailed order wherein the Assessing officer has also categorically mentioned the fact of independently verifying the corpus donations received by the Assessee during the year, which formed the basis of addition in the reassessment proceedings by the Assessing officer. A Copy of the Assessment order is annexed herewith. Kindly Refer Annexure 1.
The Reassessment notice under section 148 was issued on 30.03.2021 which is beyond 4 from the end of the relevant assessment year. Thus proviso is applicable as order U/s 143(3) was originally passed in the case of the assessee. The AO apparently in his reasons recorded did not record failure on the part of the appellant to disclose fully and truly all material facts necessary for his assessment. The Assessee filed objections to the reasons recorded and clearly pointed out that there is no failure on the part of the appellate to disclose fully and truly all material facts necessary for his assessment. Further appellant submitted that AO did not invoke proviso to Section 148 and recorded reasons on the assumption that case of Page 29 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 appellant was never selected for scrutiny proceedings. Thus it a clear non application of mind by an AO and reasons are fallacious. The case of the appellant was selected for scrutiny proceedings and enquiries were conducted from the appellant about land purchased during the year at AwasVikas, Civil Lines, Bareilly. The AO after making due enquiries accepted the transaction of the appellant in the original assessment proceedings. The appellant recorded and fully and truly disclose all material facts necessary for his assessment. However AO in his reasons recorded as reproduced above grossly erred in law and on facts in issuing notice without considering the original scrutiny assessment order. This issue goes to the root of the matter and made re-assessment notice void ab-initio. The AO has grossly erred in law in not taking cognizance of assessment order and issued notice against the mandate of law. In Phool Chand Bajrang Lal and another Vs. Income Tax Officer and another, 203 ITR 456 the Supreme Court held:-
"From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Page 30 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment."
In view of the aforesaid, the Tribunal was justified in holding that the initiation of proceedings under Section 148 was barred by limitation. We do not find any manifest error in the order passed by the Tribunal. The answer to the substantial question of law is in favour of the assessee and against the Department. In the result, the appeal filed by the Department is dismissed." Hon'ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. 2 Income-Tax Officer and others, 1981 Vol.130 ITR 1, the Supreme Court held:
"It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped Page 31 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid." Hon'ble Jurisdictional Allahabad High Court in the case of CIT vs. Mirza International Ltd ITA 749 and 750/ Lkw/2010.
The findings of Hon'ble court are reproduced below:
"Heard Shri Shambhu Chopra, the learned counsel for the appellant and Shri Shakeel Ahmad, the learned counsel for the respondent. On 05.05.2014, a coordinate Bench has admitted the present appeal on the following substantial question of law: Page 32 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17
"Whether the Tribunal is legally justified in quashing the initiation of proceeding under section 147 on the ground that the notices were issued beyond four years without mentioning in the reason recorded by the assessing authority that there was failure on the part of the asessee to disclose fully and truly all material facts necessary for the assessment, as such the notice under section 148 is not valid?"
We find that the return of income was furnished by the assessee on 31.10.2001 and the assessment was framed by the Assessing Officer under Section 143(3) of the Income Tax Act on 18.03.2004. The notice under Section 148 of the Income Tax Act, was issued by the Assessing Officer on 31.03.2007 after a period of four years from the end of the relevant assessment year. In the said notice, the Assessing Officer nowhere disclosed that the assessee had failed to disclose truly and fully all material facts necessary for his assessment. This is an essential requirement….”
Universal Subscription Agency Vs. JCIT Jurisdictional Allahabad High Court 293 ITR 244 held that: “….it cannot be said that the petitioner had not made full and true disclosure of all material facts in the assessment years 1992-93, 1993-94 and 1994-95. In the reasons recorded by the respondent for forming the belief that the petitioner was not entitled to get deduction, the respondent has not found that the basis on which the deduction has been allowed, viz. specialising in marketing scientific and technical knowledge and developing several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients was false. In this view of the matter, the principles laid down by the Bombay High Court in the case of Parikh Petrol Chemical Agencies P. Ltd.(supra) is squarely Page 33 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 applicable and, therefore, the notices dated 25.10.2006 issued under Section 148 in respect of the assessment year 1992-93 to 1994-95 appear to have been issued only on the basis of mere change of opinion and are wholly illegal and without jurisdiction.
37. The principles laid down by the Apex Court in the case of Phool Chand Bajrang Lal (supra) would, therefore, not apply in the present case as there is no information on record to show that the claim made by the petitioner was false.
38. So far as the notice dated 4.9.2000 issued under Section 148 of the Act for the assessment year 1997-98 is concerned, it is within four years from the end of the relevant assessment year. In this case, the assessment has not been made under Section 143(3) of the Act and only an intimation under Section 143(1)(a) of the Act has been sent to the petitioner. The claim of deduction under Section 80-O of the Act had only been processed without there being any application of mind. The reasons recorded by the respondent, in so far as the assessment year 1997- 98 is concerned, cannot be said to be based on mere change of opinion. The principles laid down by this Court in the case of Pradeep Kumar Har Saran Lal (supra) is squarely applicable in the present case. They are based on relevant consideration and, therefore, it cannot be said that the notice 4.9.2000 is without jurisdiction.
In view of the foregoing discussions, the writ petition succeeds and is allowed in part. The notices dated 25.10.2000 issued under Section 148 of the Act and consequential proceedings taken in pursuance thereof respect of the assessment years 1992-93 to 1994-95 are hereby quashed.” Principal Commissioner Of Income Tax vs. M/S Light Carts Pvt. Ltd INCOME TAX APPEAL No. - 117 of 2016 Jurisdictional Allahabad High Court held that:
Page 34 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 “A plain reading of the first proviso reveals that for the purposes of initiating re-assessment proceedings, the authorities have to be satisfied that the income chargeable to tax has escaped assessment for the relevant assessment year by reason of:-
1. Failure on the part of the assessee to make a return under section 139 of the Act;
2. Failure on the part of the assessee to make a return in response to a notice issued under sub-section (1) of Section 142 or Section 148 of the Act; or
3. To disclose fully and truly all material facts necessary for his assessment of the relevant year.
In this way, the authorities have to be satisfied that the income of the assessee has escaped assessment inter-alia for the reason of non disclosure of true and full material facts necessary for assessment. Thus the authority competent to initiate re-assessment proceedings must record his satisfaction that the income of the assessee had escaped assessment by reason of non disclosure of full and true material facts necessary for assessment.
We have gone through the order of the Tribunal as well as reasons recorded for forming the opinion that the income had escaped assessment as quoted in the order of the Tribunal.
A perusal of the reasons to believe as supplied by the department reveals that though it has been contended that on the information received from the Investigation Wing, New Delhi, the income of the assessee had escaped assessment but it no where states that the assessee had failed to disclose the true and full particulars necessary for the assessment of income tax for the relevant year.
Page 35 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 The Tribunal in the impugned order has returned a categorical finding that the assessing officer was legally required to record satisfaction that the income of the assessee had escaped assessment for non disclosure of true and full material facts necessary for assessment but the reasons to believe recorded reveals that it contains no whisper or any allegation that the assessee had failed to disclose full and true material facts necessary for assessment and that its income had escaped assessment for want of such disclosure.
The aforesaid finding rendered by the Tribunal is a pure finding of fact. ….
In view of the aforesaid facts and circumstances of the case, the question of law as formulated above is answered in favour of the assessee and against the department and it is held that in the absence of the averment that the assessee has failed to disclose fully and truly all material facts necessary for the assessment, the proceedings for re-assessment could not have been initiated under Section 147 of the Act in the extended period of limitation.”
M/S Noida Power Company Limited vs. Commissioner Of Income Tax And 2 Ors WRIT TAX No. - 139 of 2016 Jurisdictional Allahabad High Court held that:
“In view of the above, the second condition as laid down in the proviso to Section 147 of the Act regarding non disclosure of full and true particulars necessary for assessment was not satisfied for issuing the notice under Section 148 of the Act after the expiry of four years from the end of the relevant assessment year. Admittedly, notice under Section 148 of the Act was issued after the expiry of four years from the end of the relevant assessment year and actually on the last date of extended period of limitation of six years.
Thus, in view of the proviso to Section 147 of the Act, no notice under Section 148 of the Act could have been issued Page 36 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 to the petitioner as the second condition mentioned therein was not satisfied. The view taken by us aforesaid finds support by the Division Bench decision of this Court in the case of Commissioner of Income Tax-2 Kanpur Vs. Mirza International Limited (2015) 4 Taxman.com 217 (Allahabad). The Division Bench therein categorically held that as the revenue failed to make out a case that the assessee had failed to disclose fully and truly the material facts necessary for assessment, the reassessment proceedings started after the expiry of initial period are not maintainable and deserves to be set aside. Sri Gaurav Mahajan has tried to place the finding of the order dated 4.2.2016, wherein it has been recorded that non deduction of TDS was failure on part of the petitioner to disclose truly and fully material facts but we are afraid that the order rejecting objections of the petitioner is not part of the reasoning for initiating proceedings under Section 147 of the Act as the said order had come in existence after the issuance of the notice. The said reasoning for issuing notice under Section 148 of the Act can not be supplemented by any other extraneous material videMohinder Singh Gill and another Vs. The Chief Election Commissioner, New Delhi and others AIR 1978 SC 851. Moreover, the reason if any contained the order dated 4.2.2016 is not material and relevant. Therefore, non deduction of TDS can not held to be non disclosure of the full particulars. In view of the aforesaid facts and circumstances, we find that the notice under Section 147 of the Act to the petitioner stands vitiated in non compliance or fulfilment of the second condition as laid down in the proviso to Section 147 of the Act.”
Shri Anil Kumar Tiwari Vs. ACIT-II, Kanpur Jurisdictional ITAT Lucknow ITA 222 & 223/ Lkw/ 2017 held that:
6. We have heard the rival parties and have gone through the material placed on record. First we take appeal in for assessment year 2009-10. In this case it is an undisputed fact Page 37 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 that the assessment was completed u/s 143(3) of the Act vide order dated 27/12/2011 which is placed at pages 10 to 17 of the paper book. It is also an admitted fact that the assessment year involved is 2009-10 and therefore, as per the first proviso to section 147 the reassessment proceedings in this case can be initiated after the expiry of four years only if there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment or failure on the part of the assessee to make a return u/s 139 or failure on the part of the assessee to respond to notice issued under sub section (1) of section 142 or section 148. Out of these three conditions i.e. the failure on account of non filing of return u/s 139 and no response to notice u/s 142 and 148 is not applicable. Therefore, we have to only examine the third exception that whether there was a failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment for that assessment year as admittedly a period of four years had passed since the end of the relevant assessment year i.e. assessment year 2009- 10. The relevant period of four years expired on 31/03/2014 and notice u/s 148 has been issued on 27/03/2015. From the reasons recorded, as placed in pages 6 to 8 of the paper book, the Assessing Officer has not brought out anything to substantiate that there was a failure on the part of the assessee to disclose truly and fully all the material facts required for completion of assessment. In fact during original assessment proceedings the Assessing Officer vide query letter dated 21/10/2011, placed in paper book pages 72 & 73, required the assessee vide para 7 to file complete details of bank accounts along with the relevant statement of bank accounts. The assessee in his reply vide letter dated 09/11/2011 placed at pages 18 to 19 of the paper book, submitted the required information vide para 7 and submitted the details of bank accounts as per Annexure-6 placed at page No. 20 of the paper book. The examination of details of bank account submitted by the assessee as per page No. 20 of the paper book and examination of reasons recorded, reveals that assessee had submitted details of bank account number which the Assessing Officer mentioned in the reasons recorded. For example, the bank account No.62205129846 belonging to M/s IshanImpex noted by Assessing Officer finds mention in the details of bank Page 38 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 account submitted by the assessee at Sr.No. 5 of the paper book page 20. Similarly bank account No.62205129781 mentioned by Assessing Officer in his reasons recorded finds mention in the detail of bank account submitted by the assessee at Sr.No. 4 available at page 20 of the paper book. Therefore, in this case the assessee had even supplied the whole information as required by the Assessing Officer and there was no failure on the part of the assessee to disclose truly and fully all material facts for making the assessment. The examination of reasons recorded along with the query letter raised by Assessing Officer and its reply, we come to conclusion that the reasons recorded do not mention even a word about the failure on the part of the assessee to file truly and fully all material facts and in fact during assessment proceedings on a specific query from the Assessing Officer, the assessee had filed all the details of bank accounts and the same bank accounts have been used by the Assessing Officer to reopen the completed assessment of the assessee which is not permitted under the law as decided by various Hon'ble courts including Hon'ble Delhi High Court in the case of Unitech Ltd. (supra), Hon'ble Bombay High Court in the case of Nirmal Bang Securities Pvt. Ltd. and by various other decisions as relied on by Learned A. R., the copies of which are placed in pages 1 to 203 of the paper book. For the sake of completeness, the findings of……………………………………………………………………… A bare reading of the reasons would ex-facie show that there was not even an allegation in the said reasons that there was any failure on the part of the petitioner to disclose any material fact, let alone the details thereof, which led to any income escaping assessment. Moreover, even on a holistic reading of the reasons recorded it cannot be said that it suggests any failure on the part of the petitioner to disclose truly and fully all material facts necessary for assessment.
6.1 Keeping in view the facts and circumstances of the case and judicial precedents, as relied on by Learned A. R., we quash the assessment order passed by Assessing Officer u/s 148 of the Act
Page 39 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 as this reassessment is void ab initio and had not been done in accordance with the provisions of law.” Hon'ble Delhi High Court in the case of Unitech Limited vs. DCIT [2017] 397 ITR 547 (Del).Are reproduced below: "12. There are a large number of cases that have been decided by this court with respect to reopening of assessments under section 147/148 of the Act. After a period of four years under the first proviso to section 147 of the Act, for reassessment proceedings to be initiated, the following pre-conditions have to be satisfied:
The original assessment had to be completed under section 143(3) of the Act. More than four years have lapsed from the end of the relevant assessment year. The income chargeable to tax has escaped assessment. Due to failure of the assessee to make a return under section 139, or In response to a notice under sub- section (1) of section 142, or Due to a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the relevant assessment order."
The wording of this provision makes it clear that reopening of assessments after a period of four years, ought to be an exception and not the rule. The purpose of this provision is to ensure that there is some finality which is attached after the period of four years, for assessments which have been completed under section 143(3) of the Act. The Assessing Officer has to necessarily record that there has been a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, failing which the reopening of the assessment cannot be triggered."
Similarly Hon'ble Bombay High Court in the case of Nirmal Bang Securities Pvt. Ltd vs. ACIT 382 ITR 93 (Bom) has held as under:
"21. In the present case, admittedly, the assessment had been made under section 143(3) of the Act for the assessment year Page 40 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 2000-01. It is also admitted that the reassessment proceedings initiated for the assessment year 2000-01 was after the expiry of four years from the end of the said assessment year. In such a scenario, as per the first proviso to section 147 of the Act, no action for initiation of reassessment proceedings for the assessment year 2000-01 could have been taken unless the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment by reason of a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment. As rightly submitted by Mr. Murlidharan, learned counsel appearing on behalf of the petitioner, there is not even an allegation in the said reasons that there was any failure on the part of the petitioner to disclose truly and fully any material fact, let alone the details thereof. In fact, on a perusal of the said reasons and as reproduced above, it is clear that the reason given for initiating reassessment proceedings under section 148 of the Act was that the exemption under section 10(33) of the Act, and which was amended retrospectively by the Finance Act, 2001 with effect from April 1, 2000, would not apply to any income arising from the transfer of units of a mutual fund. Since the assessee had earned dividend income from transfer of units of mutual funds, it was not entitled to exemption under section 10(33) of the Act. It was further mentioned in the said reasons that since the petitioner was trading in shares, the dividend income received was an integral part of trading goods and could not be segregated from the acquisition of the shares. It was for these reasons and these reasons only that respondent No. 1 opined that the dividend income so earned should have been charged to tax as a short- term capital gain and therefore he had reason to believe that income to the tune of Rs. 3,31,15,313.49 had escaped assessment for the assessment year 2000-01. In Haryana Acrylic Manufacturing Co. v. CIT [2008] 175 Taxman 262 (Delhi) it was held by the Hon’ble Delhi High Court as under: 19. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years
Page 41 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 from the end of the relevant assessment year if the following conditions are satisfied: -an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: •to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or •to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts 20.In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the Page 42 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in WelIntertrade (P.) Ltd.'s (supra) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3- 2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. Thus it can be seen from the above decision of the Hon’ble High Court that AO has failed to record and reasoned the failure on the part of the appellant to disclose truly and fully all material facts necessary for his assessment.
CIT vs Purolator India Ltd. 19 taxmann.com 167 (Delhi) 10. In the present case, there is no indication that the assessee had failed or omitted to disclose the material or primary facts. These were available on record. The assessing officer, it is stated, had failed to draw correct legal inferences at the time of original assessment from the said primary facts. This is not an error or omission on the part of the respondent-assessee. It is not alleged that the assessee had suppressed, misrepresented or falsified the record/facts. It is not alleged that there was any subsequent factual information on the Page 43 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 basis of which it was found that the assessee had not fully disclosed the primary facts or had falsified or disclosed incorrect primary facts.
CIT v.Suren International (P.)Ltd[2013] 35 taxmann.com 398 (Delhi) 16. In the reasons as furnished by the Assessing Officer, we find that there is neither any allegation that the assessee had failed to truly disclose any material facts at the time of assessment, nor can we readily infer the same in view of the fact that a detailed enquiry had been conducted by the Assessing Officer with regard to the identity and creditworthiness of the share-applicants and genuineness of the transactions in relation to the share application money received by the assessee. Further the mere statement that the DRI has seized certain goods of the assessee and levied a penalty also cannot be stated to be a reason for reopening of assessment of the assessee as the said statement made is neither followed by the recording of a belief that the income escaped on that count or that the assessee has failed to disclose all relevant material, fully and truly, at the stage of the first assessment. CIT vs Viniyas Finance & Investment P Ltd 33 taxmann.com 86 (Delhi)
On going through the decision of the Tribunal we find that the Tribunal was impressed by the fact that in the reasons there should have been recorded that there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. The Tribunal followed the decisions of this Court in Wel Inter Trade (P.) Ltd. v. ITO[2009] 308 ITR 22/178 Taxman 27 and Haryana Acrylic Mfg. Co v. CIT[2009] 308 ITR 38/175 Taxman 262 wherein this Court held that in situations where the reasons did not even contain and allegations that the escapement of the income had been occasioned by failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the assessing officer would be barred from re- Page 44 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 opening of the assessment already done at an earlier stage. In Wel Inter Trade (P.) Ltd. (supra) this Court has observed as under:-
"A plain reading of the said proviso makes it more than clear that where the provisions of section 147 are being invoked after the periodof four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee falling to make a return under section 139 etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Insofar as this pre-condition is concerned, there is not a whisper of it in the reasons recorded by the Assessing Officer. In fact, as indicated above, the Assessing Officer could not have made this a ground because the Assessing Officer had required the petitioner to furnish details with regard to loss occasioned by foreign exchange fluctuation which the petitioner did not by virtue of the reply dated 5.2.2002. Since the petitioner had fully and truly disclosed all the material facts necessary for the assessment, the pre-condition for invoking the proviso to section 147 of the said Act had not been satisfied.
In this connection, it may be relevant to note one decision, although there are several others. The said decision is that of the Punjab and Haryana High Court in the case of Duli Chand Singhania v. Asstt. CIT [2004] 264 ITR 192. In the said decision, the High Court of Punjab and Haryana was faced with a similar situation. The court noted that there was not even a whisper of an allegation that the escapement in income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The court observed that absence of this find, which is the sine qua non for Page 45 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 assuming jurisdiction under section 147 of the Act in a case falling under the proviso thereto, makes the action taken by the Assessing Officer wholly without jurisdiction. We agree with these observations of the Punjab and Haryana High Court and are of the view that in the present case also, the Assessing Officer has acted wholly without jurisdiction. The invocation of section 147, the issuance of the notice under section 148 and the subsequent order on the objections are all without jurisdiction. The impugned notice as well as the proceedings pursuant thereto are quashed...."
5. We have considered these submissions and we are inclined to agree with the learned counsel for the petitioner. The proviso to section 147 reads as under:
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessment to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for the assessment year.
6. In the present case the purported reasons to believe that income had escaped assessment were as under:-
"Reasons of the belief that income has escaped Assessment.
In this case the assessment for the asstt. Year 2002-03 was made u/s 14(3) on 22.12.2004. A special information has been received from Director of Income Tax (investigation)- I, New Delhi vide letter dated 05.02.2007 that the assessee company has received a sum of Rs.77,00,000/- from the companies as detailed below:- ………………………………………………………………………
Page 46 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 According to the special information received, the entries are in the nature of accommodation entries and in the reality it is the assessee's own unaccounted money which has been shown in the books of accounts as a receipt from aforesaid companies.
In view of the above, I have reason to believe that income to the extent of Rs.77,00,000/- has escaped assessment."
7. On going through the purported reasons we find that there is no mention of the respondent-assessee not having made a full and true disclosure of the material facts necessary for assessment. On the contrary the purported reasons indicate that the amounts mentioned therein had been shown in the books of accounts as receipts from the companies mentioned therein. We also note that at serial No.5 of the list of companies from which amounts have been allegedly received, the name of the assessee has been shown. This means that the assessee received the received money from itself, which can hardly be an allegation in this case.
Other Reliance:
Hon’ble High Court of Bombay in case of Hindustan Lever ltd. Vs. R.B. Wadkar (writ petn. No. 1505 of 2003) dated Feb 25, 2004; 268 ITR 0332 has held that reasons recorded by AO nowhere stating that there was failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, reopening of assessment made under s. 143(3) after expiry of four years from the end of the relevant assessment year was invalid. Hon’ble Supreme Court of India in case of New Delhi Television Ltd. Vs. DCIT, Civil Appeal no. 1008 of 202, Apr 3, 2020 has held that the revenue cannot take benefit of the extended period of limitation of 6 years if it is found that the assessee had fully and truly disclosed all material facts necessary for its assessment. Hon’ble Bombay High Court in case of Bhor Industries Ltd. Vs. ACIT & ORS., Writ Petn. No. 1909 of 2002, Feb 26, 2003 (264 Page 47 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 ITR 0180) has held that assessee having filed its annual report before the Assessing Officer indicating spread over of the expenditure incurred on voluntary retirement scheme over a period of 60 months and the AO having granted deduction to the extent of amount written off during the relevant year acting on that report, there was no failure on the part of the assessee to disclose fully and truly the material facts and, therefore, reopening of assessment after expiry of four years was not valid. Hon’ble High Court of Calcutta in case of Amiya Sales & Industries & ANR. vs. ACIT & ORS., Writ Petn. No. 291 of 2000, Sep 14, 2004; 274 ITR 0025 has held that in the absence of any omission or failure on the part of the assessee to disclose fully and truly all material facts, AO could not assume jurisdiction to reopen the assessment after expiry of four years from the end of relevant assessment years merely on the basis of incorrect interpretation of accounts by him at the time of original assessment under s. 143(3). Hon’ble High Court of Madras in case of CIT vs. Elgi Finance Ltd., (Appeal) Nos. 65 & 66 of 2003, Mar 14, 2006; 286 ITR 0674 has held that assessee-company having fully and truly disclosed all material facts necessary for working out the quantum of depreciation, notices under s. 148 issued after expiry of four years from the end of the relevant assessment years to withdraw the excess depreciation allowed to the assessee were barred by limitation and illegal. Delhi ITAT Bench in case of Richa Industries Ltd. Vs. ACIT, Mar 14, 2017 has held that reassessment proceedings u/s 147 r.w.s 148 of the Act cannot be initiated after expiry of 4 years from end of relevant assessment year unless there is failure on part of assessee to disclose fully and truly all material facts. Hon’ble Delhi High Court in case of WelIntertrade (P) Ltd. & Anr. vs. ITO (2009) 308 ITR 22 it was held that assessee having fully and truly disclosed all the material facts necessary for the assessment as required by the AO the precondition for invoking the proviso to S. 147 was not satisfied and therefore AO acted Page 48 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 wholly without jurisdiction in issuing notice u/s. 148 beyond four years period mentioned in S.
Hon’ble Delhi High Court in case of CIT vs. KapilDev (2009) 177 Taxman 6 (Del) has held that Tribunal having concluded that all the material facts were fully and truly disclosed by the assessee at the time of original assessment, invocation of provisions of S. 147 after the expiry of four years from the end of the relevant asst. year was not valid.
Hon’ble Delhi High Court in case of Sita World Travels (India) Ltd vs. CIT (2005) 274 ITR 186 (Del) has held that AO who allowed assessee is claim for deduction under S. 80HHD was well above of the primary facts and therefore assessments could not be reopened after the expiry of four years on the ground that income had escaped assessment on account of excessive relief u/s. 80HHD. Hon’ble Gujarat High Court in case of Gujarat Fluorochemicals Ltd. vs. DCIT (2008) 15 DTR (Guj) has held that assessee having made full disclosure of material facts in the return which was accompanied by several enclosures, assessment could not be reopened beyond four years from the end of the relevant asst. year for the reason that certain income has been wrongly assessed under the head ‘Capital gains’ instead of ‘Profits and gains’ of business or profession. In CIT vs. TirathramAhuja (HUF) (2008) 6 DTR (Del) 335 has held that there was no failure on the part of assessee to disclose a material fact where rateable value of the property was enhanced by the Municipal Corporation after assessment for assessment year 1991–92 to 1993-94 had been computed, hence reopening of assessment after expiry of four years from the end of relevant assessment year was barred by the proviso to S.
147. Thus in view of the fact that the proviso has not been invoked by the Assessing officer, a serious jurisdictional error has been committed by the Assessing officer which leads to the Assessment order being a nullity. Page 49 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Further to our submissions made in Grounds 3, 4 and 5 relating to the merits of the addition of Rs.37500000, the assessee would like to bring to light certain glaring facts before your Honour, which are as under- ADDITIONS HAVE BEEN DELETED BY CITA IN THE CASE OF DONOR TRUSTS AND THE APPEAL OF THE REVENUE IN CASE OF DONOR TRUSTS IS DISMISSED BY THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL The assessee had received the following amounts from the following trusts during the year as Donations:
M/s Anandilal & Ganesh Podar Society Rs.75,00,000 Podar Education & Sports Trust Rs.50,00,000 Podar Education & Sports Trust Rs.1,50,00,000 Podar Education Trust Rs.1,00,00,000 -------------------- Total Rs.3,75,00,000/- It is pertinent to mention that pursuant to Search u/s 132 on The Poddar group, on the basis of statements recorded of various persons who confirmed that the Trusts of the Poddar group were engaged in providing accommodation entries, the registration u/s 12A/10(23)(C) of the Act of these trusts were withdrawn by the department. Simultaneously remedial action u/s 148 was taken in the hands of donees, one of which happens to be the assessee. In the hands of the donee assessee, the amount received from the above trusts was added as unexplained cash credits during the course of the reassessment proceedings.
The case of the donors travelled to the Honourable Income Tax Tribunal as under-
DCIT Vs M/s Anandilal& Ganesh Podar Society and Group Concerns 1790, 1792 & 1889/MUM/2021& Other appeals- Refer Annexure 2 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 2. DCIT VS Podar Education and Sport Trust & 1890/Mum/2021 Refer Annexure 3 3. DCIT Vs Podar Education Trust ITA No s. 1876, 1877 to 1880, 1869/Mum/2021 (Heard vide consolidated order with (ii) above) Refer Annexure 3 In the case of DCIT Vs M/s Anandilal& Ganesh Podar Society and Group Concerns, the Mumbai Bench of ITAT held as under-
The Revenue in the case of Anandilal& Ganesh Podar Society had raised similar grounds of appeal for the A.Y 2013-14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19 in 1791, 1790,1792, 1866 and 1889/Mum/2021 respectively for the subsequent six assessment years.
16. The brief facts of the case are that the assessee is a public charitable trust hitherto enjoying exemption u/s 10(23C)(vi) of the Act. There was a search and seizure action u/s. 132 of the Act in the case of the Podar Education Group on 09.01.2018 wherein the assessee was also covered. A survey action u/s. 133A was also carried out on associated entities/ individuals on the same date and subsequent dates. As a result of the search, the case was centralized and the Assessing Officer initiated proceedings by issue of notice u/s. 153A of the Act. The main allegation against the Podar Group is that donations made to the extent of .96.90 crores to various entities are bogus in nature in as much as that the donations have found their way back to the coffers of the Trust in the form of cash. The Assessing Officer has treated the donations as bogus primarily on the basis of statements recorded u/s.131 of the Act during the course of survey proceedings u/s 133A of the Act from Shri Kiritkumar D Suba and Shri N K Sodhani who stated that the donations were returned back to the Group in cash, which though were subsequently retracted by them. The Assessing Officer has completed the assessment by treating the donations as bogus, denying exemption u/s 10(23C)(vi) of the Act and also making other additions such as the provision made towards leave encashment and gratuity. After considering the submissions made by the Page 51 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 assessee, the Ld. CIT(A) has accorded relief stating that there is no conclusive or corroborative material on record of the ld. AO to hold that the donations have been returned back by the done institutions in cash in exchange for commission. The claims made towards provisions for leave encashment and gratuity also were allowed by the Ld. CIT(A). Aggrieved, the revenue is in appeals before us…………………………………………………………..
We find that the aforesaid tribunal order had elaborately narrated the entire facts and the genesis of the controversy prevailing in the instant appeals before us. Though the aforesaid decision was rendered in the context of taxability of share capital and share premium by some companies by allegedly re-routing the cash received by Podar group in lieu of donations given by it to various outside trusts, the analogy could be drawn to the facts of the present appeals before us also in view of identical facts and the genesis of controversy involved therein. The very same allegations have been leveled by the Assessing Officer and by the Ld. DR before us in the instant appeals before us with regard to the siphoning off the funds of the trust and rerouting the same by way of share capital and share premium in some companies belonging to Podar group.
Further we find that there is no incriminating materials found during the course of search in the hands of the assessee herein. In fact we find that the Ld. CIT(A) in Page No. 37 Para No. 5 of his order had specifically asked the AO to produce the incriminating material, if any, to justify the additions made in the search assessments. The Assessing Officer in the remand report merely reiterated the statements recorded from the aforesaid persons during survey proceedings and the digital evidence found in the mobile of Shri NavinNishar. We find that these evidences had already been addressed in detail by this tribunal in the order passed in the case of Hemadri Machine Tools Pvt Ltd referred to supra.
In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the Ld.CIT(A) had rightly granted relief to the assessee trust in deleting the disallowance of donations Page 52 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 paid to various outside trusts. Hence we do not find any infirmity in the order passed by the Ld. CIT(A) in this regard. Accordingly, the Ground Nos. 1 to 5 raised by the revenue for all the assessment years are hereby dismissed.
DCIT VS Podar Education and Sport Trust & 1890/Mum/2021
Further, it was contended before the learned Assessing Officer that all these persons Mr. Kiritkumarsuba, Mr. NavinNishar, Mr. N.K. Sodhani all are outside chartered accountants and them explaining the modus operandi of Podar group. Further, Mr. JayeshZanani, who was manager accounts in some group company, stated that he has come to know this modus operandi from Mr. Kiritkumarsuba. It is to be noted that Mr. Kiritkumarsuba retracted his statement on 3 April 2018. Mr. NavinNishar retracted his statement on 4 June 2018 and Mr. Sodhani retracted his statement on 30 August 2018, Mr. JayeshZanani also retracted his statement on 2 April 2018. It is to be noted that at the time of issuance of notice under Section 153A of the Act i.e. of 16 August 2018 all those persons who originally gave statement were mostly retracted. Subsequently, during the course of assessment proceedings, these persons were cross-examined, who confirmed the retraction of the statement. Therefore, now these statements do not have any evidentiary value.
32. Even otherwise, in none of the statement recorded by the learned Assessing Officer reproduced shows that there is any evidence with respect to the donation by assessee being bogus i.e. the donation of 1 crores made by the assessee to RamraoAdik Education Society or any cash payment given by that trust to any of the Angadias.
33. learned Assessing Officer relied heavily on the statements of the chartered accounts, who held that donation given by the assessee has been applied for non-education purposes. In the statement of either Mr. Kiritkumarsuba, Mr. Sodhani or Mr. Navin, no reference of any donation by assessee to RamraoAdik Education Society was found. Therefore, these statements do Page 53 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 not give any evidence against the assessee with respect to above donation.
34. The statement of Mr. JayeshZanani clearly states that the modus operandi has come to his knowledge only through this person i.e. Mr. Kiritkumarsuba. When the original source o information is proved not reliable, naturally statement of Mr. JayeshZanani also cannot be held to be useful to Revenue.
35. There is no reason that original statement under Section 131 of the Act, are to be kept at higher reliable pedestal than the retraction of the same by those persons and further, the retraction confirmed by them before the learned Assessing Officer in cross examination. Therefore, donation given by assessee trust needs to be proved bogus independent of these statement or its retractions.
36. Donation was made of 1 crore to Mr. RamraoAdik Education Society by cheque no. 188152 of IDBI bank on 28th June, 2011 supported by the certificate of recognition under Section 80G of the Act issued on 16th August, 2010 by the Director general of Exemption, Mumbai. It is supported by receipt and confirmation along with bank statements, which clearly show that the cheque is issued and cleared in favour of the above trust.
37. This trust was also questioned under Section 133(6) of the Act, which has been replied to the learned Assessing Officer. Further, the learned Assessing Officer did not make any further enquiry from above done trust; therefore, there is no evidence available with the Assessing Officer that RamraoAdik Education Society has in turn returned cash back to the Podar group.
38. The learned Assessing Officer neither examined the trustees of Donee trust nor the Donor assessee trust to ask for the purpose of such donation. It would have been only the trustees of Ramrao Adik Education Society to explain whether they have returned the donation amount in cash. There is no such effort made by the learned Assessing Officer…………..
Page 54 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 043. Even otherwise, the disallowance under Section 10(23C) of the Act, made by the learned Assessing Officer is pursuant to search dated 9 January 2018. The impugned assessment year before us is 2012- 13. Only evidence based on which the ld AO held that Rs 1 Cr of Donation is not eligible for exemption u/s 10 (23C) of The Act are the statements of those persons. For this year, original assessment is already completed under Section 143(3) of the Act on 27 March 2014 therefore, it clearly shows that impugned assessment is a concluded assessment at the time of search. Such retracted statement also cannot be said to be incriminating material found during the course of search, which can be used to enhance the income of assessee u/s 153A of the Act. Thus , there is no incriminating material existing pursuant to search, which could have disturbed the concluded assessment in case of the assessee. Therefore, even on this ground, the exemption under Section 10(23C) of the Act, cannot be denied to the assessee. Accordingly, ground nos. 1 to 5 of the appeal of the learned Assessing Officer is dismissed and order of the learned CIT (A) is confirmed……………
We have carefully considered the rival contentions and also per use the orders of the lower authorities. The learned assessing officer has made identically worded assessment orders wherein deduction is denied u/s 10 (23C) of the act to the assessee to the extent of donations made. The learned CIT - A has also passed in identically worded appellate order rejecting the denial of benefit of Section 10 (23C) of the act with respect to the above donations. As the facts are identical in all these years with respect to above donations as facts in the case for assessment year 2012 - 13, wherein we have given our reasons upholding the order of the learned CIT - A, same applies mutatis mutandis for Ay 2014 - 15 to 2017 - 18. Accordingly, we direct the learned assessing officer to grant benefit of Section 10 (23C) of the act to the assessee trust on the above donation.
49. Accordingly ground number 1 - 5 in ITA number 1880/ M/ 2021 for assessment year 2017 - 18, ground number 1 - 5 for assessment year 2016-17 in ITA number 1879/M/2021, ground number 1 - 5 in I. T. A number 1878/M/2021 for assessment year 2015 - 16 and ground number 1 - 5 in ITA number 1877/M/2021 Page 55 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 for assessment year 2014-15 by the learned assessing officer for all these assessment years are dismissed. PRAYER The copies of the above judgments are annexed herewith before your Honour. Since the highest fact finding authority has upheld the orders of the Ld CITA and dismissed the appeals of the revenue stating that there is no evidence that the donor trusts have received any cash in return and the additions were made solely on the basis of statements recorded which were subsequently retracted, no disallowance was made in the hands of the donor trusts.
Once the Donations made by the donor trusts have been held to be genuine, there is no reason to treat the same as non genuine donations received by the donee trusts. In view of the same, the addition made may kindly be deleted in the hands of the assessee. THE CASE OF DISHA EDUCATION SOCIETY IS ONE OF THE RECIPIENT OF DONATIONS FROM PODDAR TRUSTS (JUST LIKE THE ASSESSEE). THE HONOURABLE BENCH OF ITAT RAIPUR HAS REINSTATED 12A IN THE HANDS OF THE RECIPIENT TRUST (DISHA EDUCATION SOCIETY VS CIT (E) BHOPALITA Nos. 32 & 60/RPR/19) ON THE BASIS OF FINDINGS IN THE JUDGMENTS OF HONOURABLE ITAT IN THE PODDAR TRUSTS REPRODUCED ABOVE On another allegation by the department with respect to the information received from Investigation Wing, Mumbai that a search and seizure operation carried out in the case of Poddar Group of Mumbai and the DDIT ( Inv.) has found that the assessee is into money laundering activities through bogus donations given by Poddar Group Trust, Mumbai. In this respect, it was the submission of the assessee that name of the assessee mentioned by Sh. K. D. Suba, CA and Sh. JayeshZanani, Manager Accounts, except for their statements, there is no other material implicating the assessee. Both these persons have retracted from their Page 56 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 statement subsequently and the retraction has become final and accepted by Hon'ble ITAT, Mumbai in 1877, 1880 and 1869/Mum/2021 vide order dated 28.09.2022. Effectively, department has no case against the assessee with respect to Poddar Education Trust as well. The same explanation has been offered by the assessee for Anandilal& Ganesh Podar Society also.
We have thoughtfully considered the submissions and referred to case laws relied upon by the assessee. The assessee's contention has got merit which is further substantiated by the department by granting them registration u/s 12A(1)(ac)((vi) & 80G(5)(iv) of the Income Tax Act on 10.03.2022. In view of the aforesaid observations, we do not see any substance in the contention of the department and therefore, are of the view that once the department itself has accepted that the assessee's activities are genuine, the cause for invoking provisions of section 10AA(3), effecting the cancellation of registration u/s 12A becomes nullified and therefore, considering the explanations and decisions in favour of various donors allegedly involved in the transactions of bogus donations who have granted donations to the assessee trust, we are of the opinion that the order of cancelation by ld. CIT(E) cannot survive, since the registration is granted to the assessee society having no change in its activities, byelaws and objects in a later year. We therefore, set aside the order of ld. CIT(E) and direct to restore registration u/s 12A of the society. In the result grounds raised
in the present appeal are allowed. In the result, appeal no.32/RPR/2019 of the assessee is allowed. For Copy of Judgment, Kindly Refer Annexure
4. STATEMENTS RETRACTED LATER DO NOT HAVE ANY CREDENCE AND EVIDENTIARY VALUE Your Honour’s kind attention to the instructions issued by Central Board of Direct Taxes in F.No.286/2/2003-IT(Inv), dated 23.03.2003 wherein the following is stated:
Page 57 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 “Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the income tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income.”
At this stage, it is pertinent to refer to the judgment of the Supreme Court in the case of Vinod Solanki (2009) (233) ELT 157 observed as under : “22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. [seePonAdithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] In case of Straptex India P Ltd. v DCIT [2003] 84 ITO 320 (Mum), Hon’ble ITAT Mumbai Bench has held inter alia as under: ………. It follows that, if a statement was taken merely confessing to some income without any information to support same, it will have no validity even according to Board Circular apart from general law…” Page 58 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 In the case of ACIT Vs JKD Pearl India Developers (P) Ltd (ITAT Jaipur) Appeal Number : ITA No. 324/JP/2017
From the totality of the facts and circumstances of the case as narrated and discussed, we are of the considered view that the mere admission is not conclusive as to the truth of the matter. It is only a piece of evidence, the weight to be attached to which must depend on the circumstances in which it is made. It can be shown to be erroneous or untrue. Therefore, addition made merely and solely on the basis of confession without any corroborative evidence was not sustainable in law and moreover the said confession made by the assessee was subsequently retracted and since the addition was not supported by any cogent, convincing independent documentary evidence, therefore, the same was correctly found to be not sustainable by the ld. CIT(A).
No new facts and circumstances have been brought before us in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we see no reason to interfere or deviate from the findings so recorded by the ld. CIT(A). Therefore, we uphold the order passed by the ld. CIT(A) qua this issue. The Statements on oath taken by the Department of officers/Concerned persons of Poddar group are vague and moreover the same have been retracted by them and thus become meaningless.
THERE IS NO EVIDENCE THAT CASH HAS EXCHANGED HANDS BETWEEN THE TRUSTS AND THE ACITIVITIES OF THE ASSESSEE TRUST HAVE NOT BEEN DOUBTED Vishwaroopa Charity Trust Vs. CIT(Ex) Kol. ITA no 106/kol/2017
15. We have given a very careful consideration to the rival submissions. From the answer to question no.22 given by Shri Swapan Ranjan Dasgupta, founder director of HHBHRF at the time of survey in the business premises of HHBHRF, it is possible to entertain a doubt with regard to genuineness of the Page 59 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 donations given by HHBHRF. It can be a money launderings indulged by a third party, who gave donations to the assessee by using the middlemen connected with HHBHRF. So far as the assessee is concerned it received donation from HHBHRF a sum of Rs.5 lakh duly accounted the same in profit and loss account as corpus donation. There is no evidence whatsoever brought on record to show that the cash was paid by the assessee which in turn reached the hands of HHBHRF which was returned in the form of donation to the assessee after retaining the commission. As we have already observed that the answer to question no.22 given by Shri Swapan Ranjan Dasgupta referred to donations given in the financial year 2011- 12 as bogus donations. With regard to the donations received/given prior to 31.03.2011 there is no reference to such donations given or received by HHBHRF being in the nature of bogus donations. The assessee had received the donation from HHBHRF on 03.03.2011. It is therefore not possible to place reliance on the statement recorded at the time of survey and come to a conclusion that the assessee has been indulging in money laundering………………… 17. Apart from the above, the grounds for cancellation for registration u/s 12AA(3) is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust. There is neither an allegation in the impugned order nor finding that any of the aforesaid conditions exist in the case of the assessee. We therefore are of the view that the cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed. The appeal of the assessee is accordingly allowed.
Jha Educational Trust Vs. CIT (Ex) Kol 933/Kol/2016 However on the perusal of the statement given by the managing trustee of the BERT we find that he admitted that the major bogus donation was received from various trust/ societies but the ldCIT(Exemption) has not provided any list Page 60 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 in its order where the name of the assessee trust is reflecting. We also find as per the statement of managing trustee of BERT that the bogus donation was received from the various trusts/ societies through Shri GulabPincha and he has not provided the names of the donors. Similarly, the bogus donation received was shown as incurred for the capital expenditure by issuing cheques in the name of several persons. The names of these persons were very much disclosed by the managing trustee of BERT but the name of the donors was not anywhere shown in the recorded statement.
8.1 In view of above, we find that there is no whisper about the name of the assessee that it has given bogus donation and the same has come back to the assessee in the form of cash through the channel of some persons. Admittedly, the assessee has given donation to BERT for Rs. 5 lacs. The same was treated as bogus donation on the basis of the statement of the managing trustee of BERT but we find that the statement of the managing trustee is not reflecting the name of the assessee rather it is saying that major donation received was bogus. The major donation does not mean hundred percent donation rather it refers major part of the donation. Now the question arises whether the name of the assessee is under the category of major donation. It is a question of fact which has to be ascertained from the available evidences. There is no evidence available on record suggesting the name of the assessee in the list of bogus donors. As per the order of ld CIT (Exemption) Shri GulabPincha was acting as the conduit in arranging the bogus donation but no statement was recorded of Shri GulabPincha by issuing notice u/s 131 of the Act. In our considered opinion, the statement Shri GulabPincha was very much important to unveil the facts of the bogus donation but the ld CIT (Exemptions) has miserably failed to do so. It is also important to note that the Revenue failed to prove with supporting evidence that the money has come back to the assessee……………………………….
8.4 We also find that ld. AR has given the detailed profile of the assessee and its activities which are placed in its Annual Magazine with the name 'Dawn'. The transaction for the donation was made through banking channel and the Page 61 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 department failed to bring anything on record that the donation given by the assessee has come back to it in the form of the cash. At the most, in our considered view, the Revenue could have brought the amount of donation to the tax. In the instant case Shree GulabPincha (SGP for short) Mob. No.9831015157 was acting as conduit in providing a large amount of bogus donation received which was immediately returned back to the different parties in the guise of payments towards capital expenditure in building. However, no statement was SGP was recorded by the Revenue authorities by issuing any notice/summon u/s 133(6) / 131 of the Act. The managing trustee of BERT has accepted in his statement that SGP was involved in the aforesaid bogus donation transaction. Therefore, it was necessary for the Revenue Authorities to cross examine SGP to establish / ascertain how the money has returned back to the assessee-trust. In the instant case, the managing trustee of BERT has highlighted the name of 7 intermediaries used for returning the money of the donation and the name of the assessee trust is not appearing in that list. Similarly, the managing trustee of BERT has not mentioned the name of the assessee that the bogus donation was received. The managing trustee of BERT has mentioned very vaguely that major part of the donation was bogus without bringing the name of the donors on record. But he mentioned the name of SGP as the middle man for arranging such bogus donation. Thus in our considered view, the statement of SGP was necessary for establishing the fact that how the money has returned to assessee and whether the money was actually returned to the assessee-trust. As the statement of the SGP has not been recorded, the question of confronting the same to the assessee does not arise. As per question no. 14 of the statement of the managing trustee of BERT, it is clear that SGP was the only party to arrange all the bogus donations but his statement is missing which was crucial to unveil the chain of bogus donation.
In view of above, we have no hesitation in reversing the order of ld. CIT(E) and accordingly the appeal of the assessee is allowed. Dr. B.G. Memoriala Trust Vs. CIT(Ex) Kol.
/Kol / 2017 Page 62 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 There is no evidence brought on record to show any connection between those brokers and the assessee. In the absence of such corroborative evidence, it is not possible to come to any conclusion that the assessee indulged in money laundering and that the donation received by it was a bogus donation. In fact on identical facts this Tribunal in the case of Sri MayapurDham Pilgrim and Visitors Trust (supra) came to the conclusion that cancellation of registration u/s 12AA cannot be sustained.
7. Apart from the above, the grounds for cancellation for registration u/s 12AA(3) of the Act is that the activities of the trust should not be genuine or the activities of the trust are not being carried out in accordance with the objects of the trust. There is neither an allegation in the impugned order nor finding that any of the aforesaid conditions exist in the case of the assessee. We therefore are of the view that the cancellation of registration granted to the assessee u/s 12A of the Act cannot be sustained and the impugned order is hereby quashed. The appeal of the assessee is accordingly allowed.
Without prejudice to the above even assuming that the donation to assessee is bogus then the amount of bogus donation will not be eligible for exemptions u/s 11 of the Act. Under such circumstances, the registration certificate issued u/s 12AA of the Act cannot be cancelled as long as the objects of the trust are within the provisions of law. The objects/ byelaws of the trust are placed on pages 1 to 12 of the paper book and on the basis of same objects the assessee was given registration certificate u/s 12AA of the Act. While holding so, we find support & guidance from the judgment of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Apeejay Education Society reported in 59 taxmann.com 102 wherein it was held as under …………………………………………………… In view of above precedent, we find that the activities of the trust in relation to its education activities have not been doubted and on the basis of same activities registration u/s 12AA of the Act was awarded to the assessee. Simply the assessee has received Page 63 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 donation from some parties which are involved in the bogus transactions cannot be the basis for the denial of the registration certificates as discussed above………………… Thus Your Honour will appreciate 1. That the Donations received by the Assessee were duly enquired into by the Assessing officer during the course of original assessment proceedings completed u/s 143(3) vide order dated 26.12.2017
2. That The failure to invoke the proviso to section 148 by the Assessing officer, is a serious infirmity, a jurisdictional error, an incurable defect and non invoking of the same makes the entire assessment a nullity in view of innumerable judicial pronouncements of the jurisdictional and other high courts relied upon above
3. That the Donations given by Anandilal& Ganesh Podar Society and Podar Education & Sports Trust have been held to be genuine by the Honourable Tribunal in their respective cases.
4. In the case of Disha Education Society, another recipient trust, just as the assessee, the Tribunal has held that once payment of Donations have been accepted by the department in the hands of donor trusts, department has no case against the assessee donee.
5. That the basis of Addition in the hands of the assessee, being statements recorded of some persons relating to Poddar Group, cease to exist as the said statements have subsequently been retracted by these individuals
No addition can be made in the hands of the assessee in absence of any corroborative evidence.
7. There is no evidence that cash has exchanged hands between the trusts and there is nothing in the possession of the department to support its claim
Page 64 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 8. The entire addition has been made solely on the basis of suspicion, gossip, surmises and conjectures.
The Assessee vehemently argues that the statements recorded by the Department of various employees of Poddar Group do not contain any concrete statement relating to the alleged Bogus donations to have been received by the assessee. There is no mention of the name of the Assessee trust in the statements and the Assessee has not been named at all. There is no evidence of exchange of cash. The statement is a general statement which has subsequently been retracted. All this clearly shows that these are nothing but concocted stories created for the reasons best known to the concerned persons who after realizing their mistake have retracted their statements as they were very clear that they have nothing to prove their contention and there is no evidence to support their stand. As a result of the same, the those persons retracted and backed out as it was a mere a baseless story narrated by them in their statement and subsequently retracted.
In view of the above facts and circumstances of the case, Your Honour will appreciate that the entire reasons for which the additions were made cease to exist and has been upheld by higher appellate forums. Moreover, Your Honour will appreciate the fact that even on jurisdictional ground in absence of invocation of the proviso to section 148 by the Assessing officer, the entire proceedings are a nullity.
In view of these facts, it is prayed that the addition made may kindly be deleted in the interest of justice.”
5. I have carefully considered the assessment order, written submission made by the appellant, statement of fact, grounds of appeal
and other relevant facts of the case. The ground wise discussion and decision are as under:- 6.1 Ground No. 1 : On the facts and circumstances of the case, the notice issued under section 148 by the learned AO is without jurisdiction, bad both in the eye of law and on facts. Page 65 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Ground No. 2 : On the facts and circumstances of the case, the order passed by the learned AO is bad both in the eye of law and on facts. The order passed by Ld. AO needs be annulled. 6.2 I have carefully considered the submission made by the appellant. On the basis of information received on insight portal about the bogus donation received by the appellant trust amounting to Rs.3,75,00,000/- during the year under consideration from M/s Anandilal & Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust, the reason has been recorded by the Assessing Officer for issuance of notice u/s 148 of the Act. The information available with the Assessing Officer was sufficient for recording of reason that income has escaped the assessment for issue of notice under Section 148 of the Act and did not require any independent inquiry and discretion was not exercised by the Assessing Officer under the direction or in compliance with some higher authorities’ instruction. The information available with the Assessing Officer has been thoroughly examined by him. The escapement of income being bogus donation, information has been marshaled properly. It is clear that the Assessing Officer has exercised his authority according to his own discretion. From the reason recorded for issue of notice u/s 148 of the Act, it is clear that the Assessing Officer has exercised his authority according to his own discretion and based on facts. The information available with the Assessing Officer was sufficient for recording the reason that income has escaped the assessment for issue of notice under Section 148 of the Act and did not require any independent inquiry and discretion was not exercised under the direction or in compliance with some higher authorities’ instruction.The reason clearly indicates that the Assessing Officer has applied his mind. 6.3 The facts of the case have been carefully examined. In this case the information was received on insight portal about the bogus donation received by the appellant trust amounting to Rs. 3,75,00,000/- during the year under consideration from M/s Anandilal & Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust. Thus, at the time of Page 66 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 reopening of case u/s 147 there was prima facie enough material on basis of which the Assessing Officer has reopened the case. This ratio has been held by the Hon’ble Supreme Court of India in the case of Raymond Woollen Mills Ltd. v. Income-tax Officer in Civil Appeal Nos. 1972 and 1973 of 1992, ORDER Dated December 17, 1997, [1999] 236 ITR
34. (SC). In this case it has been held that- Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Illustrations - In subsequent years' assessment proceedings Revenue found that assessee was charging to profit and loss account fiscal duties paid during year as well as labour charges, power, fuel, wages, chemicals etc. and while valuing its closing stock, elements of these expenses were not included, which resulted in undervaluation of inventories and understatement of profits - Accordingly, revenue respondent assessee's assessment under section 147(a) which was upheld by Tribunal as well as High Court - Whether Supreme Court could only see whether there was prima facie some material on basis of which Department could reopen case but sufficiency or correctness of such material could not be considered at stage of appeal before Supreme Court - Held, yes - Whether, therefore, on facts, re-opening of case under section 147(a) could not be struck down - Held, yes.
In this case the assessee-company was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included. This resulted in undervaluation of inventories and understatement of profits. The Revenue, therefore, reopened the assessment under section 147(a), which was upheld by the Tribunal as well as the High Court on reference. This information was obtained by revenue in a subsequent year's assessment proceeding.
On appeal to the Supreme Court:
Page 67 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 "The Supreme Court had only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material was not a thing to be considered at this stage. The Supreme Court Could not strike down the reopening of the case in the facts of the instant Case. It would be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee might also prove that no new facts came to the knowledge of the lTO after completion of the assessment proceeding. The Supreme Court was not expressing any opinion on the merits of the case. The questions of fact and law were left open to be investigated and decided by the assessing authority. The assessee would be entitled to take all the points before the assessing authority. The appeals were dismissed."
6.4 In the case of Commissioner of Income-tax Vs Kelvinator of India Ltd., AY- 1987-88 [320 ITR 561], the Hon’ble Apex Court affirmed the order of Hon’ble High Court of Delhi. In this case it has been held that- (i)Whether even after amendment of section 147 with effect from 1-4-1989, a mere change in opinion would not confer jurisdiction upon Assessing Officer to initiate a proceeding under section 147 - Held yes (ii)Whether by reason of section 147 if ITO exercises its jurisdiction for initiating a proceeding for reassessment only upon mere change of opinion, same may be held to be unconstitutional - Held, yes (iii)Whether, however, if ‘reason to believe’ of Assessing Officer is founded on an information which might have been received by Assessing Officer after completion of assessment, it may be a sound foundation for exercising power under section 147, read with section 148 - Held, yes In this case the assessee filed its return of income along with computation of income, annual report, tax audit report, etc. The assessee did not claim certain expenses relating to rent, Page 68 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 depreciation, etc. So it filed revised return with a claim of rent and depreciation to be allowed under sections 30 and 32. The Assessing Officer determined the taxable income making additions and disallowances. Subsequently, the Assessing Officer issued a notice under section 148 and reopened the assessment under section 147 on the basis of under assessment. The assessee objected to the reopening of assessment. Though the assessment was reopened on the alleged ground of various disallowable claims, but except for the disallowance of a sum claimed in the revised return neither any claim was disallowed nor any addition was made. The Hon’ble Court of Delhi held that – “To confer jurisdiction under section 147(a ) two conditions were required to be satisfied, viz., (1 ) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment; and (2) he must also have a reason to believe that such escapement occurred by reason of either (a) omission or failure on the part of the assessee to make a return of his income under section 139; or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. The aforementioned requirements of law must be held to be conditions precedent for invoking jurisdiction of the Assessing Officer to reopen the assessment under section 147. Both the conditions aforementioned are cumulative. It is also a well-settled principle of law that, in the event, it is found that any of the said two conditions is not fulfilled; the notice issued by the Assessing Officer would be wholly without jurisdiction. The expression ‘reason to believe’ mandates that before jurisdiction under section 147 is invoked by the Assessing Officer, he is to record his reasons for doing so or before issuing any notice under section 147. The formation of reason to believe and recording of reasons are imperative before the Assessing Officer can reopen a completed assessment. Since assessment had been reopened on 20-4-1990, section 147 as amended with effect from 1-4-1989 would apply.
Page 69 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 It is well-settled principle of interpretation of statute that entire statute should be read as a whole and the same has to be considered thereafter Chapter by Chapter and then section by section and ultimately word by word. It is not in dispute that the Assessing Officer does not have any jurisdiction to review its own order. His jurisdiction is confined only to rectification of mistake as contained in section 154. The power of rectification of mistake conferred upon the ITO is circumscribed by the provisions of section 154. The said power can be exercised when mistake is apparent. Even mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Tribunal has limited jurisdiction under section 254(2). Thus, when the Assessing Officer or the Tribunal has considered the matter in detail and the view taken is a possible view, the order cannot be changed by way of exercising the jurisdiction of rectification of mistake.
It is a well-settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake. In a case of this nature the revenue is not without remedy. Section 263 empowers the Commissioner to review an order which is prejudicial to the revenue.
A mere change in the opinion would not confer jurisdiction upon the Assessing Officer to initiate a proceeding under section 147.
The Board has power to issue circulars under section 119. The circulars which are issued by the Board are legally binding on the revenue. The Board in exercise of its jurisdiction under section 119 had issued the Circular on 31-10-1989. The said circular admittedly was binding on the revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular. From a perusal of clause 7.2 of the said circular, it would appear that, in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view to allay the fears that the omission of the expression ‘reason to believe’ from section 147 Page 70 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. It is, therefore, evident that even according to the Board, a mere change of opinion cannot form the basis for reopening a completed assessment. A statute conferring an arbitrary power may be held to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality, it is trite, should be favoured.
In the event it is held that by reason of section 147 if the ITO exercises its jurisdiction for initiating a proceeding for reassessment only upon mere change of opinion, the same may be held to be unconstitutional. Section 147 does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion.
If ‘reason to believe’ of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147, read with section 148.”
6.5 In the present case, it is fact that information received on insight portal about the bogus donation received by the appellant trust amounting to Rs. 3,75,00,000/- during the year under consideration from M/s Anandilal& Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust. Thus, the nature donation of Rs.3,75,00,000/- remained unexplained, therefore, there was no anomaly to reopen the case as income has escaped assessment. 6.6 Considering the above discussion and case laws, it is held that there is no lacuna in issuing of notice u/s 148 of the Act as due procedure of law has been followed by the Assessing Officer i.e. recording the reasons and prior approval of competent authority etc. There was some information before the Assessing Officer at the time of reopening of case u/s 147 on the basis of which the Assessing Officer has re-opened the case. Therefore, these grounds of appeal are dismissed.
Page 71 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 7. Since all the other grounds raised by the appellant are related to disallowances of donations received by the appellant firm amounting to Rs. 3,75,00,000/-, therefore, the adjudication is being made treating all the other grounds of appeal as single grounds of appeal as under:- 8.1 In the instant case, information was received by the Assessing Officer through Verification Module of Insight Portal of the Department that the assessee has taken bogus donation amounting to Rs.3,75,00,000/-. Therefore, reassessment proceeding u/s 147/148 was initiated after recording the reason and obtainingnecessary approval u/s 151(1) of the Act from the competent authority. Accordingly, notice u/s 148 of the Act was issued on 30.03.2021. The assessment proceeding u/s 147 of the Act was completed on 26.03.2022 by making disallowance of exemption claimed u/s 10(23C) of the Act amounting to Rs.3,75,00,000/- on account of donations received from M/s Anandilal & Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust. The reason for reopening of the assessment proceeding u/s 147 of the Act as recorded by the Assessing Officer is reproduced hereunder:-
“In the instant case return of income was filed on 29/09/2015 declaring income over expenditure of Rs. 5392,090/- which has been claimed exempted u/s 11 of the IT Act.
The trust is registered u/s 12A/12AA vide registration No. 210/73/Lko/12-13 dated 30/04/2013 granted by Ld. Commissioner of Income Tax (Exemption) Lucknow.
In the case of assessee, an information received through Verification Module of Insight Portal of the Income Tax Department that the assessee has taken bogus donation given by Anandilal& Ganesh Podar Society, AnujBuildcon Pvt. Ltd, Bell Indus Firecom Pvt Ltd, BijBuildcon Pvt. Ltd and AnupamBuildmart Pvt. Ltd.
2. On perusal of attached documents, it is found that a search/survey action u/s 132/133A of the I.T. Act, 1961 Page 72 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 was carried out on 09.01.2018 in case of M/s Anandilal& Ganesh Podar Society, M/sPodar Education Trust, M/s Podar Education & Sports Trust and other related group entities (together referred to as Podar group)
As per information given by Dy. Commissioner of Income Tax, Central Circle-1(4). Mumbai, modus operandi followed by Podar Group for evading tax was that Trusts belonging to Podar group (M/s Anandilal& Ganesh Podar Society, M/s Podar Education Trust, M/s Podar Education & Sports Trust) gave bogus donations to other Trusts. These other trusts in turn returned back cash to Podar group after deducting their commission which was then introduced into various entities of Podar Group by layering through maze of dubious companies and bogus transactions with the help of known entry providers.
Block assessment for A.Y. 2012-13 to A.Y. 2018-19 was completed in Podar group wherein certain donations given by M/s Anandilal& Ganesh Podar Society, M/s Podar Education Trust, M/s Podar Education & Sports Trust to various done trusts have been held to be bogus and against the objects of the trust.
As per information, the name of the assessee is in the list of the donee trusts/persons who have received bogus donations from Podar group of trusts i.e. M/s Anandilal& Ganesh Podar Society, M/s Podar Education Trust, M/s Podar Education & Sports Trust in various year. 3. Similarly, on perusal of other documents attached, it is found that a Search and Seizure operation was conducted on Shri Joginder Pal Gupta on 23.12.2019 in the case of DAG group.
As per information received from DDIT (Inv.), Unit-2(4), New Delhi and the documents provided by the investigation wing, Shri Joginder Pal Gupta (PAN: BRBPG8269C) has stated in his statement recorded u/s 132(4) of the IT Act on 23/12/2019 that he is an accommodation entry provider Page 73 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 through various paper companies, wherein he is the director of those companies. He provided a list of entities (including companies and firms) controlled by him. The Four Companies namely - (1) AnujBuildcon Pvt. Ltd., (2) AnupamBuilmart Pvt. Ltd., (3) Bell Indus Fibrecom Pvt. Ltd. & (4) BijBuildcon (India) Pvt. Ltd who have made accommodation transactions with the assessee are also in the said list. As per the documents & report of investigation, Bogus donation to M/s Varunarjun Trust was given by the following entities.
4. On perusal of the ITR filed by the assessee for A.Y. 2015-16 and as per data extracted from Insight Portal, it is found that the assessee received following donations:-
M/s Anandilal& Ganesh Podar Society Rs. 75,00,000/- Podar Education & Sports Trust Rs. 50,00,000/- Podar Education & Sports Trust Rs. 1,50,00,000/- Podar Education Trust Rs. 1,00,00,000/- Total Rs. 3,75,00,000/-
In view of the above facts of the case, the transactions as mentioned in Par-4 above amounting Rs. 375,00,000/- being bogus donation received by the assessee amounts to escapement of income within meaning of clause (c) of Explanation 2 to section 147.
Thus, I am satisfied that it is a fit case for initiation of proceedings u/s 148 of the I.T. Act, 1961 for AY-2016-17. As such, a proposal is being submitted for seeking necessary approval u/s 151(2) of the I.T. Act, 1961 before the Ld. Addl. Commissioner of Income Tax, Central Range, Lucknowalongwith prescribe proforma.”
8.2 In the assessment order, it has been noted by the Assessing officer that during the search/survey proceedings u/s 132/133A of the Act, in the case of M/s Anandilal&GanesanPodar Society, M/s Podar Education Trust, M/s PodarEducation & Sports Trust and other related group entities on 09.01.2018.The basic modus operandi of podar group was that Trusts belonging to Podar Page 74 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 group gave donations to other trusts who in turn returned back cash to Podar group after deducting commission which was then introduced into various entities of Podar group by layering through maze of dubious companies and bogus transactions with the help of known entry providers. 8.3 I have carefully considered the findings of the Assessing Officer in the assessment order, the submissions of the Appellant Trust and also perused the materials available on record on these grounds of appeal. The primary allegation against the assessee trust was that the donation amounting to Rs. 3,75,00,000/- received from M/s Anandilal& Ganesh Podar Society, M/s Podar Education Trust and M/s Podar Education & Sports Trust are bogusprimarily on the basis of statements recorded u/s 131 of the Act during the course of survey proceedings u/s 133A of the ActofShri KiritkumarDarsibhaiSuba, consultant charted accountant who stated that the donations were returned back to the Group in cash and statement of Shri Jogender Pal Gupta, the key person of DAG group recorded on oath u/s 132(4) of the Act who stated that he is an accommodation entry provider through various paper companies, wherein he is the director of those companies. A Search and Seizure operation was conducted on Shri Joginder Pal Gupta on 23.12.2019 in the case of DAG group. Shri Joginder Pal Gupta provided a list of entities (including companies and firms) controlled by him. The Four Companies namely M/s AnujBuildcon Pvt. Ltd. M/s AnupamBuilmart Pvt. Ltd., M/s Bell Indus Fibrecom Pvt. Ltd and M/s BijBuildcon (India) Pvt. Ltd are also in the said list who have made accommodation transactions with the appellant trust. During the year under consideration, the Assessing Officer has disallowed the exemption claimed u/s 10(23C) r.w.s. 2(24) in respect of donation received from Podar Group amounting to Rs.3,75,00,000/-. Thus, the statement of Shri Joginder Pal Gupta recorded u/s 132(4) of the Act is of no significance in the case of the appellant since no disallowance in respect of any donation received from the companies as stated by Shri Joginder Pal Gupta has been made in the assessment order for the year under consideration.
Page 75 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 8.4.1 In order to verify the donations made to appellant trust, notice u/s 133(6) of the Act was issued by the Assessing Officer to the entities from whom the appellant trust has received the donation during the year under consideration and all the entities have furnished their reply in response to the notices u/s 133(6) alongwith bank statement. The observation made by the Assessing Officer at page no. 15 of the assessment order on perusal of response of the entities in response to notice u./s 133(6) of the Act is reproduced hereunder:-
“On perusal of the bank statements as furnished by the entities, various accommodation entries have been observed. Many credit entries are received in the bank account just before the funds getting transferred to varunarjuntrustandhence,the mode/point of Generation of the income could not be substantiated by these entities. Thus, the contention of the entities as furnished in their submission that they have given the donation to the assessee trust is not acceptable and hence, hereby rejected.” 8.4.2 As is evident from the above that in response to the notices issued u/s 133(6) of the Act, the Assessing Officer had received replies from all the donors and the Assessing Officer had not been able to find any shortcomings on the documents submitted by them except stating that many credit entries are received in the bank account of donors just before the funds getting transferred to Varun Arjun Trust.There is absolutely no evidence placed on record by the Assessing Officer to show as to why the donation given to the appellant trust is not acceptable. The Assessing Officer merely on the basis of credit entries in the account of donors has not accepted the donations made by them without pointing out any adverse comment in respect of alleged credit entries. It is pertinent to mention here that the assessment proceeding in the case of the appellant trust for A.Y. 2015-16 was completed u/s 143(3) of the Act vide order dated 26.12.2017 wherein the following comments were made by the Assessing Officer:-
Page 76 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 “During the course of assessment proceedings it was noticed that the assessee has received corpus donation of Rs.24,60,54,000/-. In order to verify the genuineness of this corpus donation amounting to Rs.24,60,54,000/- verification letters were issued to all the donors u/s 133(6) of the I.T. Act, 1961. In response, all the donors accepted to have given the corpus donation to the trust. From the verification of the replies of the donors it was observed that all the donors are assessed to tax with different assessing officers as well as the donations were given through account payee cheques. Since all the donations are verifiable and have been given through banking channel therefore the donations stand verified in the absence of any adverse material available on record.” 8.4.3 Thus, during the assessment proceeding completed u/s 143(3) of the Act as well as during the reassessment proceeding u/s 147 of the Act, all the donors accepted to have given corpus donation to the appellant trust. In fact, the assessment proceeding u/s 143(3) of the Act was completed by accepting the return of income.
8.5 During the appellate proceeding, the appellant has furnished the copies of judgement of Hon’ble ITAT, Mumbai in the following cases. (i) DCIT Vs M/s Anandilal& Ganesh Podar Society and Group Concerns 1790, 1792 & 1889/MUM/2021& Other appeals.
(ii) DCIT VS Podar Education and Sport Trust & 1890/Mum/2021.
(iii) DCIT Vs Podar Education Trust ITA No s. 1876, 1877 to 1880, 1869/Mum/2021 (Heard vide consolidated order with (ii) above) 8.6.1 I have carefully gone through the judgment dated 10.03.2023 of Hon’ble ITAT, Mumbai in the case of DCIT Vs M/s Anandilal& Ganesh Podar Society and Group Concerns, in ITA Page 77 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 NOs. 1791, 1790, 1792 & 1889/MUM/2021& Other appeals. The brief facts of the case are as under: “There was a search and seizure action u/s. 132 of the Act in the case of M/s Anandilal& Ganesh Podar Society on 09.01.2018. A survey action under section 133A was also carried out on associated entities/individuals on the same date and subsequent dates. Later this assessment was reopened u/s 147 of the Act vide issuance of notice u/s 148 of the Act dated 26.03.2018. The return in response to notice u/s 148 of the Act was filed by the assessee on 22.11.2018 declaring total income of Nil after claiming exemption of Rs. 9,17,58,815/- u/s 10(23C)(vi) of the Act. The main allegation against the Podar Group is that donations made to the extent of 96.90 crores to various entities are bogus in nature in as much as that the donations have found their way back to the coffers of the Trust in the form of cash. The Assessing Officer has treated the donations as bogus primarily on the basis of statements recorded u/s 131 of the Act during the course of survey proceedings u/s 133A of the Act from Shri Kiritkumar D Suba and Shri N K Sodhani who stated that the donations were returned back to the Group in cash, which though were subsequently retracted by them. The Assessing Officer has completed the assessment by treating the donations as bogus denying exemption u/s 10(23C)(vi) of the Act. After considering the submissions made by the assessee, the Ld. CIT(A) has accorded relief stating that there is no conclusive or corroborative material on record of the Assessing Officer to hold that the donations have been returned back by those institutions in cash in exchange for commission. Aggrieved, the revenue is in appeal before us.”
8.6.2 In the case of DCIT Vs M/s Anandilal& Ganesh Podar Society and Group Concerns, the Mumbai Bench of ITAT held as under-
“15. The Revenue in the case of Anandilal& Ganesh Podar Society had raised similar grounds of appeal for the A.Y Page 78 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 2013-14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018- 19 in 1791, 1790, 1792, 1866 and 1889/Mum/2021 respectively for the subsequent six assessment years. ……………..
21. Considered the rival submissions and material placed on record. The primary facts narrated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the addition / disallowance in relation to the claim of donations made by the assessee primarily hinges on the statements made by third parties being Shri KiritkumarSuba, Shri NavinNishar, Shri ayeshZanani and Shri NareshSodhani. There is also no denial of the fact that said parties have retracted the statements recorded from them. We find that the retraction affidavits are enclosed in Page Nos.91 to 106 of the paper book filed before us. Once these parties had retracted their statements, no credence could be given either to them or to their statements. No presumption in law can be drawn against the assessee from such statements of unreliable parties……………………………. 26. We find that the aforesaid tribunal order had elaborately narrated the entire facts and the genesis of the controversy prevailing in the instant appeals before us. Though the aforesaid decision was rendered in the context of taxability of share capital and share premium by some companies by allegedly re-routing the cash received by Podar group in lieu of donations given by it to various outside trusts, the analogy could be drawn to the facts of the present appeals before us also in view of identical facts and the genesis of controversy involved therein. The very same allegations have been leveled by the Assessing Officer and by the Ld. DR before us in the instant appeals before us with regard to the siphoning off the funds of the trust and rerouting the same by way of share capital and share premium in some companies belonging to Podar group.
27. Further we find that there is no incriminating materials found during the course of search in the hands of the Page 79 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 assessee herein. In fact we find that the Ld. CIT(A) in Page No. 37 Para No. 5 of his order had specifically asked the AO to produce the incriminating material, if any, to justify the additions made in the search assessments. The Assessing Officer in the remand report merely reiterated the statements recorded from the aforesaid persons during survey proceedings and the digital evidence found in the mobile of Shri NavinNishar. We find that these evidences had already been addressed in detail by this tribunal in the order passed in the case of Hemadri Machine Tools Pvt Ltd referred to supra.
28. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the Ld.CIT(A) had rightly granted relief to the assessee trust in deleting the disallowance of donations paid to various outside trusts. Hence we do not find any infirmity in the order passed by the Ld. CIT(A) in this regard. Accordingly, the Ground Nos. 1 to 5 raised by the revenue for all the assessment years are hereby dismissed.”
8.7 I have carefully gone through the judgment of Hon’ble ITAT, Mumbai in the case of DCIT VS Podar Education and Sport Trust, in & 1890/Mum/2021 wherein the Hon’ble ITAT, Mumbai vide order dated 28.09.2022 has dismissed the appeal of the revenue by making observations as under:-
“031. Further, it was contended before the learned Assessing Officer that all these persons Mr. Kiritkumarsuba, Mr. NavinNishar, Mr. N.K. Sodhani all are outside chartered accountants and them explaining the modus operandi of Podar group. Further, Mr. JayeshZanani, who was manager accounts in some group company, stated that he has come to know this modus operandi from Mr. Kiritkumarsuba. It is to be noted that Mr. Kiritkumarsubaretracted his statement on 3 April 2018. Mr. NavinNishar retracted his statement on 4 June 2018 and Mr. Sodhani retracted his statement on 30 August 2018, Page 80 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Mr. JayeshZanani also retracted his statement on 2 April 2018. It is to be noted that at the time of issuance of notice under Section 153A of the Act i.e. of 16 August 2018 all those persons who originally gave statement were mostly retracted. Subsequently, during the course of assessment proceedings, these persons were cross-examined, who confirmed the retraction of the statement. Therefore, now these statements do not have any evidentiary value.
Even otherwise, in none of the statement recorded by the learned Assessing Officer reproduced shows that there is any evidence with respect to the donation by assessee being bogus i.e. the donation of 1 crores made by the assessee to RamraoAdik Education Society or any cash payment given by that trust to any of the Angadias.
learned Assessing Officer relied heavily on the statements of the chartered accounts, who held that donation given by the assessee has been applied for non- education purposes. In the statement of either Mr. Kiritkumarsuba, Mr. Sodhani or Mr. Navin, no reference of any donation by assessee to RamraoAdik Education Society was found. Therefore, these statements do not give any evidence against the assessee with respect to above donation.
The statement of Mr. JayeshZanani clearly states that the modus operandi has come to his knowledge only through this person i.e. Mr. Kiritkumarsuba. When the original source o information is proved not reliable, naturally statement of Mr. JayeshZanani also cannot be held to be useful to Revenue.
There is no reason that original statement under Section 131 of the Act, are to be kept at higher reliable pedestal than the retraction of the same by those persons and further, the retraction confirmed by them before the learned Assessing Officer in cross examination. Therefore, donation given by assessee trust needs to be proved bogus independent of these statement or its retractions. Page 81 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17
Donation was made of 1 crore to Mr. RamraoAdik Education Society by cheque no. 188152 of IDBI bank on 28th June, 2011 is supported by the certificate of recognition under Section 80G of the Act issued on 16th August, 2010 by the Director general of Exemption, Mumbai. It is supported by receipt and confirmation along with bank statements, which clearly show that the cheque is issued and cleared in favour of the above trust.
This trust was also questioned under Section 133(6) of the Act, which has been replied to the learned Assessing Officer. Further, the learned Assessing Officer did not make any further enquiry from above done trust; therefore, there is no evidence available with the Assessing Officer that RamraoAdik Education Society has in turn returned cash back to the Podar group.
The learned Assessing Officer neither examined the trustees of Donee trust nor the Donor assessee trust to ask for the purpose of such donation. It would have been only the trustees of RamraoAdik Education Society to explain whether they have returned the donation amount in cash. There is no such effort made by the learned Assessing Officer…………..
Even otherwise, the disallowance under Section 10(23C) of the Act, made by the learned Assessing Officer is pursuant to search dated 9 January 2018. The impugned assessment year before us is 2012- 13. Only evidence based on which the ld AO held that Rs 1 Cr of Donation is not eligible for exemption u/s 10 (23C) of The Act are the statements of those persons. For this year, original assessment is already completed under Section 143(3) of the Act on 27 March 2014 therefore, it clearly shows that impugned assessment is a concluded assessment at the time of search. Such retracted statement also cannot be said to be incriminating material found during the course of search, which can be used to enhance the income of assessee u/s 153A of the Act. Thus , there is no Page 82 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 incriminating material existing pursuant to search, which could have disturbed the concluded assessment in case of the assessee. Therefore, even on this ground, the exemption under Section 10(23C) of the Act, cannot be denied to the assessee. Accordingly, ground nos. 1 to 5 of the appeal of the learned Assessing Officer is dismissed and order of the learned CIT(A) is confirmed…………… 048. We have carefully considered the rival contentions and also per use the orders of the lower authorities. The learned assessing officer has made identically worded assessment orders wherein deduction is denied u/s 10 (23C) of the act to the assessee to the extent of donations made. The learned CIT - A has also passed in identically worded appellate order rejecting the denial of benefit of Section 10 (23C) of the act with respect to the above donations. As the facts are identical in all these years with respect to above donations as facts in the case for assessment year 2012 - 13, wherein we have given our reasons upholding the order of the learned CIT - A, same applies mutatis mutandis for Ay 2014 - 15 to 2017 - 18. Accordingly, we direct the learned assessing officer to grant benefit of Section 10 (23C) of the act to the assessee trust on the above donation.
Accordingly ground number 1 - 5 in ITA number 1880/M/2021 for assessment year 2017 - 18, ground number 1 - 5 for assessment year 2016-17 in ITA number 1879/M/2021, ground number 1 - 5 in I. T. Act number 1878/M/2021 for assessment year 2015 - 16 and ground number 1 - 5 in ITA number 1877/M/2021 for assessment year 2014-15 by the learned assessing officer for all these assessment years are dismissed.”
8.8 It is absolutely clear that the re-assessment proceeding in the instant case were initiated against the assessee primarily on the basis of search & seizure operation carried on 09.01.2018 on the Podar Group. In the instant case, during the year under consideration donations to the tune of Rs. 3,75,00,000/- have been received from M/s Anandilal& Ganesh Podar Society, M/s Page 83 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Podar Education & Sports Trust and M/s Podar Education Trust by the appellant trust which have been disallowed by the Assessing Officer by treating them as bogus donations. Considering the overall facts of the case, it is also clear that the donations were treated as bogus primarily based on the statements of third parties who have later on retracted. The highest fact finding authority i.e. Hon’ble ITAT, Mumbai in the cases of M/s Anandilal& Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust has upheld the orders of the Ld CIT(A) and dismissed the appeals of the revenue stating that there is no evidence that the donor trusts have received any cash in return and the additions were made solely on the basis of statements recorded which were subsequently retracted, thus, no disallowance in respect of donations were made in the hands of the donor trusts.Thus, vide the above mentioned judgment of Hon’ble ITAT, Mumbai has held the donations made by M/s Anandilal& Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education to various entities/trusts as genuine in absence of any corroboratory evidence. 8.9 In view of aforementioned discussion and judgment of Hon’ble ITAT, Mumbai in the cases of M/s Anandilal& Ganesh Podar Society, M/s Podar Education & Sports Trust and M/s Podar Education Trust from whom the donations were received by the appellant trust, I am of the considered view that Assessing Officer is not justified in bringing to tax the donation of Rs.3,75,00,000/- by treating the same as income 2(24) of the Act. Since the donations have been treated as genuine in the hands of the donor trusts by the Hon’ble ITAT, Mumbai, statement of Shri Kirit Kumar DarshibhaiSuba is a general third party statement which was subsequently retracted by him and no money trail or any corroboratory evidence has been identified by the Assessing Officer, thus, treating the donation received by the appellant trust as bogus donation is not justified. Therefore, the addition of Rs. 3,75,00,000/- made u/s 68 of the Act is hereby deleted. Thus, these grounds of appeal are hereby allowed.”
4. The present appeal for assessment year 2015-16 has been filed by Revenue against the aforesaid impugned appellate order dated 20/08/2024. Page 84 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 At the time of hearing, the learned D.R. placed reliance on the assessment order. The learned Counsel for the assessee relied on the impugned order of the learned CIT(A).
5. We have heard the representatives of both sides and have also gone through the material placed on record. In the case of the aforesaid entities namely Anandilal & Ganesh Podar Society, Podar Education & Sports Trust and Podar Education Trust, Bombay Bench of the Income Tax Appellate Tribunal has passed order, dismissing the appeals filed by Revenue, and holding that there was no evidence with the donor trust (i.e. the aforesaid three entities) have received any cash in return. The Bombay Bench of the Income Tax Appellate Tribunal has further held that the additions were made solely on the basis of statements recorded, which were subsequently retracted. The relevant discussion of the orders of Bombay Bench of the Income Tax Appellate Tribunal is contained in paragraphs 8.5 to 8.9 of the impugned order of learned CIT(A) (already reproduced in foregoing paragraph 3 of this order.
5.1 As discussed in foregoing paragraph (2) of this order, there is no mention in the assessment order as to what further substantive evidences were required from the aforesaid three entities. It is also mentioned that the assessment order is silent as to on what basis the conclusion was arrived that the assessee and the aforesaid three entities had failed to prove authenticity of transactions. The observation of the Assessing Officer that aforesaid Anandilal & Ganesh Podar Society should have spent the fund for developing infrastructure of its own educational institutes instead of giving donation to the assessee; is merely a suggestion and doubt and not binding on the parties. There is nothing in law against the act of M/s Anandilal & Page 85 of 87 & 620/Lkw/2024 Assessment year:2015-16 & 16-17 Ganesh Podar Society giving donation to the assessee. The aforesaid three entities have already furnished confirmations and bank statements in support of the donations given by them to the assessee.
5.2 In view of the foregoing discussion; and respectfully following the order of the Bombay Bench of the Tribunal, we hold that the donations received by the assessee trust from aforesaid entities namely Anandilal & Ganesh Podar Society, Podar Education & Sports Trust and Podar Education Trust are genuine. Accordingly, we direct the Assessing Officer to delete the aforesaid addition of Rs.3,50,00,000/-.
6. The issue raised by Revenue in appeal for assessment year 2016-17 is identical, except the amount. Further, facts in appeal for assessment year 2016-17 are similar and in para materia with the facts of assessment year 2015-16. Therefore, our findings given in foregoing part of this order for assessment year 2015-16, shall apply mutatis mutandis for A.Y. 2016-17 also. Accordingly, following our decision in foregoing paragraphs of this order, the appeal in for assessment year 2016-17 is also dismissed and the Assessing Officer is directed to delete the addition of Rs.6,00,00,000/-.
In the result, both the appeals are dismissed.
(Order pronounced in the open court on 07/08/2025)