MUDRA SHARE STOCK BROKERS LTD.,MUMBAI vs. ITO WARD 4(3)(3), MUMBAI

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ITA 2363/MUM/2019Status: DisposedITAT Mumbai01 December 2020AY 2013-145 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition was based on surmise and conjecture, as there was no evidence that the assessee received the donation back. Following its own precedent in similar cases involving the same trust, the Tribunal set aside the orders of the lower authorities.

What were the facts?

The assessee claimed a deduction of Rs. 50,00,000/- for a donation made to Navjeevan Charitable Trust. The Assessing Officer disallowed this deduction based on a survey action at the trust, which indicated it was accepting bogus donations, and a director's initial admission of receiving the donation back in cash. The CIT(A) confirmed this disallowance.

What were the issues?

Whether the donation made to a charitable trust, which was later found to be accepting bogus donations, is disallowable when the assessee has paid through banking channels and there's no evidence of receiving it back. The validity of the assessment order passed under Section 143(3) instead of Section 153C r.w.s 143(3).

Which sections of the Income-tax Act were involved?

Section 35AC,Section 143(3),Section 153C

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “D” Bench, Mumbai

For Appellant: Shri Prakash Jhunjhunwala
For Respondent: Shri Akhtar H. Ansari
Hearing: 13.10.2020Pronounced: 01.12.2020

O R D E R Per Shamim Yahya (AM) :-

This appeal by the assessee is directed against order of Learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 11/3/2019 and pertains to assessment year 2013-14.

2.

The grounds of appeal

read as under :-

1. Learned Commissioner of Income Tax (Appeals) erred in confirming the order of Learned Assessing Officer disallowing claim of donation made u/s 35AC of the Act to the tune of Rs. 50,00,000/-. Appellant submits that in view of the facts and circumstances of the case as well as in law, the said disallowance of claim by Learned Assessing Officer of Rs. 50,00,000/-which is confirmed by Learned CIT (Appeals) is bad in law and deserves to be deleted.

2. Learned Commissioner of Income Tax (Appeals) erred in confirming the action taken by Learned Assessing Officer in passing order u/s 143(3) as against section 153C r.w.s 143(3) of the Act as claimed by the Appellant. Appellant submits that Assessment Order of the Assessee ought to have be passed u/s 153C r.w.s. 143(3) of the Act.

2 Mudra Share and Stock Brokers Limited Appellant submits that in view of the facts and circumstances of the case as well as in law, the said order passed u/s 143(3) of the Act is bad in law and deserves to be quashed in as much as the Assessment ought to have been completed u/s 153C r.w.s 143(3) of the Act.

3.

Learned Commissioner of Income Tax (Appeals) erred in holding that the Assessment Order passed was a speaking order and hence not bad in law. Appellant submits that in view of the facts and circumstances of the case as well as in law, Assessment Order passed by Ld. AO is non-speaking in nature in as much as no reasons are given in the Assessment Order as to why Appellant's explanations should not be accepted.

4. Learned Commissioner of Income Tax (Appeals) erred in deciding appeal before him without considering the submissions made by Appellant on various issues in his Appellate Order. Appellant submits that in view of the facts and circumstances of the case as well as in law, the Order passed by Learned CIT (Appeals) is bad in law and deserves to be quashed. Appellant prays for appropriate relief. Each of the above grounds of appeal

are without prejudice to each other.

3. Brief facts of the case are as under :-

The assessee company is a registered stack broker on NSE and JBSE and OTCE and also involved in the activities of finance, In this case, the return of income was e-filed on. 16.09.2013 declaring total income at Rs, 14,53,259/. The assessee also filed a revised return on 25.03.2015 declaring total income at Rs.64,53,259/-.The assessment was completed u/s. 143(3) on 13/01/2016 by determining the total income at Rs.64,53,259/-, as per the revised return. In the course of assessment assessing officer observed the assessee company is a registered Stock Broker on NSE and BSE and OTCE and also involved in the activities of finance. The assessee has credited income of Rs.67,66,667/- which consists of Commission received of Rs.100,000/- and income from other sources i.e., Profit of Sale of Office Premises of Rs.64,89,636/-, Interest received of Rs.22,500/-, Interest received on fixed deposit of Rs. 154,531/-. Out of which deduction u/s 80GGA i.e. deduction in respect of certain donations of Scientific Research or Rural Development of Rs.50,00,000/- has been claimed and total income of Rs.14,53,259/-has been declared.

3 Mudra Share and Stock Brokers Limited

4.

The assessing officer further referred to the addition on survey by a assessee company director for having received back in cash the donation given by the assessee company to Navjeevan Charitable Trust. The Assessing Officer also referred to the departmental search in the case of the said trust that the said trust was accepting bogus donations. The assessing officer proposed to disallow the deduction for the said donation. The assessing officer reproduced the elaborate response and objection by the assessee. Thereafter without commenting anything on the response and objection by the assessee he disallowed the donation in the computation of income.

5.

Upon assessee’s appeal learned CIT(A)confirmed the addition.

6.

Against this order assessee is in appeal before us. We have heard both the Council and perused the records. Learned counsel of the assessee submitted that this issue is covered in favour of the assessee by several decisions of the ITAT including that of the assessee’s associate concern Jadstone Trading P. Limited. He submitted that the admission which is the basis of addition has been duly retracted. He placed reliance upon following case laws :-  Jadstone Trading Pvt Ltd vs. ITO  Saroj Plantations Pvt Ltd vs. ITO, ITA No.648/M/2018  Urnish Jewellers vs. ACIT 2019(5) TMI 1323 (Mum-ITAT)  Motilal Dahyabhai Jhaveri vs. ACIT 2019 (4) TMI 1615 (Mum-ITAT)  Gujarat Agrochem Pvt Ltd vs. ACIT 2019(6) TMI 1048 (Mum-ITAT)  Shyam Sunder Co. Jewellers vs. ACIT 2019(5) TMI 22 (Kol-ITAT)  National Leather Cloth Manufacturing Co. vs. Indian Council of Agricultural Research 241 ITR482(Bom-HC)  Avis Life Care Pvt Ltd vs. DCIT ITAN0.989/JP/2018 7. Per contra learned departmental representative relied upon the orders of authorities below.

8.

Upon careful consideration we find that in identical situations donation to the identical trust based upon same search has been held to be allowable by the ITAT in the above said decisions. We may refer to the decision in assessee’s

4 Mudra Share and Stock Brokers Limited associate concern in the case of Jadstone Trading Pvt. Ltd. (supra) wherein by the order dated 12.6.2019 in & ITA No. 6628/Mum/2018, the ITAT had held as under:- “Brief facts of the case are that there was a survey action under section 132 of the income tax act on Naujeevan Charitable Trust on 27/10/2014. In the search action it was found that the said trust was booking bogus expenditure. One of the trustees has also accepted the same. Assessee was found to have given donation to the said trust. Upon this information the assessing officer reopened the assessment of the assessee. It was held that assessee has given donation to the said concern which was not genuine. Initially one of the director’s of the firm accepted the same to be bogus. However later on the same was retracted. However the assessing officer relying upon the finding of the investigation wing in the case of the said charitable trust made the impugned addition of Rs. 500,000 each which was claimed by the assessee as donation.

Up on assessee’s appeal learned CIT-A confirmed the addition.

Against this order assessee is in appeal before the ITAT.

I have heard both the counsel and perused the records. Assessee has challenged the addition on various grounds. However the main issue remains that the challenge to the addition of Rs.500,000 being given to charitable trust as donation on the ground that on the search of the said charitable trust it has been found that it has been incurring only bogus expenditure. This led to the presumption of the assessing officer that the said sum of Rs.500,000 has actually come to the assessee clandestinely. In my considered opinion it is undisputed that assessee has submitted the receipt for the donation. The same has been paid by banking channel. There is no evidence on record that the same amount has been received back by the assessee from the said charitable trust. In these circumstances in my considered opinion this addition is solely based on surmise and conjecture and not sustainable in law. Accordingly I set aside the order’s of authorities below and delete the addition.”

9.

Since facts identical and it has not been brought to our notice that the ITAT decisions have been reversed by the honourable jurisdictional High Court, we follow the precedent. Accordingly, we set aside the orders of authorities below and direct that the impugned payment should not be disallowed.

10.

Since we have decided the issue on merits in favour of the assessee the adjudication on other aspects of the challenge by the assessee in the grounds 5 Mudra Share and Stock Brokers Limited of appeal is only of academic interest and hence we are not engaging into the same.

11.

In the result is appeal by the assessee stands partly allowed

Order pronounced under Rule 34(4) of the ITAT Rules by placing the result on notice board on 1.12.2020.

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