BHAVITA CHEMICALS PVT. LTD,MUMBAI vs. ITO - 6(1)(3), MUMBAI

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.

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

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.