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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
आदेश/ ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-12, Mumbai (in short ‘the CIT(A)’) dated 22/02/2019 for the assessment year 2010-11.
Shri Manoj Pandit, appearing on behalf of the assessee submitted that the assessee is engaged in business of manufacturing chemicals. The (A.Y.2010-11) assessee had made donation of Rs.5,00,000/- through cheque to Navjeevan Charitable Trust (in short ‘NCT’) on 10/03/2010. In the return of income for assessment year 2010-11, the assessee claimed the amount of donation as deduction under section 35AC of the Income Tax Act, 1961( ( in short ‘the Act’). The ld. Authorized Representative of the assessee referred to the bank statement and receipt from NCT at page 33 to 35 of the Paper Book. The ld.Authorized Representative of the assessee submitted that a search action was carried out on NCT wherein it was allegedly found that the Trust is engaged in issuing bogus donation receipts. On the basis of the said information, the assessment for assessment year 2010-11 was reopened in the case of assessee. In the proceedings under section 143(3) r.w.s. 147 of the Act, the assessee’s claim of deduction under section 35AC was disallowed. Against the assessment order dated 19/12/2016 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order dismissed the appeal of assessee.
The ld.Authorized Representative of the assessee submitted that the authorities below have failed to appreciate that on the date of donation in the financial year 2009-10, NCT was holding valid certificate of registration, which was subsequently renewed by the Department in 2011. The assessee had no reason to doubt the donation receipt issued by the Trust. The ld.Authorized Representative of the assessee further contended that the statement and the documents recorded/found on the basis of which the assessment for assessment year 2010-11 has been reopened and the benefit of donation has been withdrawn, was never provided to the assessee. The opportunity to cross examine the person on whose statement the benefit of deduction under section 35AC has been withdrawn was not provided to the assessee. The (A.Y.2010-11) ld.Authorized Representative of the assessee submitted that in identical state of facts addition was made in the hands of Jadstone Trading Pvt. Ltd. The Tribunal in & 6628/Mum/2018 for assessment years 2013-14 and 2014-15 decided on 12/06/2019 deleted the addition and allowed assessee’s claim of deduction. The case of the assessee is on similar footing.
Shri Sanjay J. Sethi, representing the Department vehemently defended the impugned order. The ld.Departmental Representative submitted that it was only after the search action in the case of NCT that it transpired that the Trust is engaged in issuing bogus donation certificate by charging nominal commission from donors. The ld.Departmental Representative submitted that the modus operandi of the Trust was to receive cheque and after deducting commission, return the balance amount in cash. The ld.Departmental Representative placed heavy reliance on the order of CIT(A) and prayed for dismissing the appeal of assessee.
Both sides heard, orders of authorities below perused. The assessee made donation of Rs.5,00,000/- to NCT in March, 2010 and claimed the benefit of deduction under section 35AC of the Act in its return of income for assessment year 2010-11. Subsequently, search action was carried out in the case of NCT and it was found that the Trust was issuing bogus donation receipts. On the basis of search action, the assessee’s claim of deduction in assessment year 2010-11 was disallowed in reassessment proceedings. The contention of the Revenue is that the donation amount paid by the assessee to NCT has flown back to the assessee. I find that no positive evidence is brought on record by the Revenue to show that on the date of donation made by the assessee, NCT was not holding valid registration certificate. On the contrary, the assessee has filed evidence to show that NCT was holding valid
(A.Y.2010-11) registration certificate from the Department on the date of donation and the same was subsequently renewed in 2011. This fact is evident from notification issued by Ministry of Finance dated 30/11/2010 at page 70 to 72 of the Paper Book. It is further observed that on the basis of statement/evidence collected at the back of assessee, the claim of deduction under section 35AC of the Act has been disallowed in proceedings under section 147 r.w.s. 148 of the Act. It is a well settled law that any evidence collected at the back of assessee if not put to the assessee for cross- examination would result in violation of principles of natural justice. In the instant case the assessee asked for cross-examination of the trustee , however, the same was rejected by the Assessing Officer.The Hon'ble Supreme Court of India in the case of Andman Timber Industries vs. CCE, 62 taxmann.com 3 has held that not providing opportunity to cross-examine the witness is a serious flaw which renders the order nullity. The impugned order is liable to be quashed on this ground alone. It is further observed that no cogent evidence has been brought on record by the Revenue to substantiate that the donation made by assessee through banking channel has been received back by assessee in cash. The assessment order and the impugned order has been passed purely on assumptions and presumptions.
The Co-ordinate Bench in the case of Jadstone Trading Pvt. Ltd., (supra), deleted the addition made for similar reasons in respect of donation made to NCT, holding that in the absence of any evidence on record that the amount has been received back by the assessee from the Charitable Trust, the addition is solely based on surmises and conjectures and, hence, is (A.Y.2010-11) unsustainable. I find merit in the submissions of the assessee, hence, same are accepted and the impugned order is quashed.
In the result, appeal by the assessee is allowed.
Order pronounced in the open court on Tuesday the 1st day of December, 2020.