ABHISHEK JAYKETU JOSHI,MUMBAI vs. AC CIR-42(2)(1), MUMBAI

On the basis of the said information, proceedings under section 148A were initiated. A notice under section 148A(b) was Abhishek Jayketu Joshi issued to the assessee, calling upon him to explain why proceedings under section 148 should not be initiated. The assessee submitted a reply stating that the donation was made through account payee cheque, that the recipient political party was duly registered under section 29A, and that the requisite documentary evidences such as donation receipt and bank statement had been furnished.

The Assessing Officer was not satisfied with the explanation furnished and, after obtaining approval of the specified authority, passed an order under section 148A(d), followed by issuance of notice under section 148 on 19.04.2023. In response, the assessee filed a return of income on 18.05.2023, declaring the same income as originally returned and again claiming deduction under section 80GGC of Rs. 5,00,000/-.

During the reassessment proceedings, the Assessing Officer raised specific queries regarding the genuineness of the donation, including the circumstances in which the assessee came to know about the political party, the rationale for making a donation to a party allegedly having no political presence in Mumbai, the mode of delivery of the cheque and receipt of the donation acknowledgment, and the identity of intermediaries, if any.The Assessing Officer noted that the assessee was unable to furnish satisfactory explanations with regard to the surrounding circumstances of the donation and merely relied on the fact that the payment was made through banking channels and supported by a donation receipt. The Assessing Officer relied upon Abhishek Jayketu Joshi statements recorded under section 132(4) of certain persons during search proceedings, wherein it was allegedly admitted that Kisan Party of India was being used to provide bogus donation entries and that donation amounts were returned to donors after deducting commission. The Assessing Officer observed that the assessee’s name appeared in the list of beneficiaries identified by the Investigation Wing. The Assessing Officer rejected the assessee’s request for cross-examination of the persons whose statements were relied upon, holding that such cross- examination was not necessary in the facts of the case.

The AO erred in resorting to Section 147 on “borrowed satisfaction”.

The AO has failed to duly consider the evidence and documents submitted by the Appellant, including the bank statements and the receipts issued by the political parties.

The AO failed to lead any positive evidence that the donation was bogus and that money in any form was returned to the appellant.

The AO erred in not granting credit for TDS amounting to Rs.5151547/- inspite of same appearing in form 26AS, and inspite of CPC granting the said credit in the intimation under section 143(1).

The AO erred in not granting credit for advance tax paid of Rs.15000/- although the same was granted in intimation under section 143(1).

The AO erred in not granting credit of TCS of Rs.19090/- in spite of same appearing in form 26AS. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal

It was further submitted that this factual error was specifically pointed out by the assessee in paragraph 6 of his reply to the notice under section 148A(b), wherein it was categorically clarified that no payment whatsoever was made to Aadhar Foundation. The learned Authorised Representative then drew our attention to paragraph 5.1 of the order passed under section 148A(d), wherein the Assessing Officer himself recorded that the mention of Aadhar Foundation in the show cause notice was inadvertent and that the donation was in fact made to Kisan Party of India. It was argued that once the Assessing Officer admits that the notice was issued on an incorrect factual premise, the assumption of jurisdiction under section 147 stands vitiated, as the very basis for forming satisfaction regarding escapement of income was flawed.

The learned Authorised Representative submitted that such an error cannot be brushed aside as a mere clerical lapse, since the jurisdiction under section 147 hinges on the correctness and specificity of the information forming the basis of the notice under section 148A(b). It was contended that issuance of a jurisdictional notice on incorrect identification of the donee entity reflects non-application of mind and renders the entire proceedings unsustainable in law.

The learned Authorised Representative further contended that the Assessing Officer failed to follow the procedure prescribed under section 148A, inasmuch as no material or evidence, on the basis of which the notice under section 148A(b) was issued, was ever furnished to the assessee. In this regard, attention was invited to paragraph 5.5 of the order passed under section 148A(d), wherein the Assessing Officer took the stand that there is no statutory mandate to provide the statements or other material relied upon along with the show cause notice. It was submitted that such an approach defeats the very object of section 148A, which contemplates a meaningful opportunity of Abhishek Jayketu Joshi being heard. According to the learned Authorised Representative, merely stating that statements under section 132(4) exist, without furnishing even the relevant extracts thereof, renders the opportunity illusory and ineffective.

It was further argued that while the Assessing Officer placed heavy reliance on third-party statements recorded under section 132(4), the assessee was neither furnished copies of such statements nor granted an opportunity to cross-examine the persons whose statements were relied upon, despite a specific request made in this regard. It was submitted that selective reliance on adverse material, coupled with denial of access to such material, amounts to gross violation of the principles of natural justice and vitiates the proceedings at the threshold.

On merits, the learned Authorised Representative submitted that the assessee had fully complied with the statutory conditions prescribed under section 80GGC of the Act. In support, reliance was placed on the donation receipt issued by Kisan Party of India, which clearly records the name and PAN of the assessee, the amount of donation of Rs. 5,00,000/-, the mode of payment by cheque, and the express mention that the donation is eligible for deduction under section 80GGC. The learned Authorised Representative also produced the letter issued by the Election Commission of India evidencing that Kisan Party of India is duly registered under section 29A of the Representation of the People Act, 1951, with effect from 24.09.2015, and submitted that such registration has never been disputed by the Assessing Officer.

The learned Authorised Representative submitted that the disallowance has been made solely on the basis of generalised allegations, investigation inputs and third-party statements, without any tangible material establishing that the assessee received any benefit in return for the donation. It was contended that once the assessee has discharged the initial onus by furnishing primary evidences, the burden shifts to the Department, which has not been discharged in the present case.

In support of the jurisdictional challenge, the learned Authorised Representative placed reliance on the judgment of the Hon’ble Bombay High Court in Anurag Gupta v. Income-tax Officer [2023] 150 taxmann.com 99 / 454 ITR 326, and submitted that the ratio laid down therein squarely applies to the facts of the present case. It was contended that the Hon’ble High Court has categorically held that furnishing of information without supplying the material relied upon renders the proceedings under section 148A(b) unsustainable, as it deprives the assessee of an Abhishek Jayketu Joshi effective opportunity to respond. Relying on the said decision, it was submitted that the notice under section 148A(b), the subsequent notice under section 148, and all consequential proceedings deserve to be quashed on jurisdictional grounds alone, without entering into the merits of the disallowance under section 80GGC.

The Departmental Representative on the other hand relied on the order of lower authorities.

We have carefully considered the rival submissions, perused the material placed on record, and examined the notices issued under section 148A(b), the assessee’s reply thereto, the order passed under section 148A(d), and the consequential reassessment order. The primary issue which arises for our consideration is whether the jurisdiction assumed by the Assessing Officer under section 147, pursuant to the procedure prescribed under section 148A, is in accordance with law.

At the outset, we find considerable force in the contention of the assessee that the notice issued under section 148A(b) suffers from fundamental infirmities. A perusal of the annexure to the said notice reveals that the Assessing Officer repeatedly alleged that the assessee had undertaken non-genuine transactions with Aadhar Foundation, along with Kisan Party of India. Paragraphs 1, 3 and 4 of the annexure specifically proceed on the premise that the assessee made donation to Aadhar Foundation and claimed deduction under section 80GGC on that basis. It is an Abhishek Jayketu Joshi undisputed fact on record that the assessee had never made any donation to Aadhar Foundation, and the donation of Rs. 5,00,000/- was made only to Kisan Party of India.

Significantly, this factual error was not only pointed out by the assessee in his reply to the notice under section 148A(b), but the Assessing Officer himself, in paragraph 5.1 of the order passed under section 148A(d), admitted that the reference to Aadhar Foundation in the show cause notice was an inadvertent error and that the donation was actually made to Kisan Party of India. In our considered view, once it is admitted that the jurisdictional notice under section 148A(b) was issued on an incorrect factual premise, the very foundation for formation of satisfaction regarding escapement of income stands vitiated. Such an error cannot be treated as a mere clerical lapse, as the assumption of jurisdiction under section 147 is contingent upon correct and specific information suggesting escapement of income in the case of the assessee.

We also find merit in the contention of the assessee that the notice under section 148A(b) is vague and generalised in nature and does not enclose or disclose any material or evidence forming the basis of the allegations. The Assessing Officer has relied upon statements recorded under section 132(4) of certain third parties and general investigation findings, but no such statements or relevant extracts thereof were ever furnished to the assessee, despite a specific request. On the contrary, in paragraph 5.5 of the order under section 148A(d), the Assessing Officer has taken Abhishek Jayketu Joshi a categorical stand that there is no statutory mandate to provide the material relied upon along with the show cause notice.

This approach, in our view, is contrary to the scheme and object of section 148A. The provision contemplates a meaningful and effective opportunity of being heard, which necessarily presupposes that the assessee is made aware of the material on the basis of which the Assessing Officer proposes to initiate reassessment proceedings. Mere reference to the existence of information or statements, without furnishing the underlying material, renders the opportunity illusory.

On this aspect, the issue is no longer res integra. The Hon’ble Bombay High Court, in Anurag Gupta v. Income-tax Officer [2023] 150 taxmann.com 99 / 454 ITR 326, has categorically held that failure to furnish the material relied upon vitiates the proceedings under section 148A. The relevant observations of the Hon’ble High Court are reproduced as under:

We also note an inherent contradiction in the reasoning adopted by the Assessing Officer. While alleging that Kisan Party of India was not engaged in any political activity, reliance has simultaneously been placed on the answer to Question No. 13 in the statement recorded under section 132(4), which records that the party had contested elections in Bihar. Such mutually inconsistent positions further demonstrate non-application of mind at the stage of initiation of proceedings.

In view of the above cumulative facts and respectfully following the binding judgment of the Hon’ble Bombay High Court, we hold that the proceedings initiated under section 148, being founded on a defective notice under section 148A(b) and in violation of the mandatory procedure prescribed under section 148A, are unsustainable in law and liable to be quashed.

Even otherwise, and without prejudice to our finding on the jurisdictional issue, we find that the disallowance of deduction Abhishek Jayketu Joshi under section 80GGC cannot be sustained on merits. The assessee has placed on record the donation receipt issued by Kisan Party of India, which clearly mentions the name and PAN of the assessee, the amount of donation of Rs. 5,00,000/-, the mode of payment by cheque, and the specific reference to section 80GGC. The assessee has also furnished the bank statement evidencing payment of the donation through normal banking channels. Further, the registration certificate issued by the Election Commission of India establishes that Kisan Party of India is duly registered under section 29A of the Representation of the People Act, 1951. These facts have not been disputed by the lower authorities. The Assessing Officer has not brought on record any tangible evidence to demonstrate that the donation amount was returned to the assessee, either in cash or through any other mode. The disallowance has been made solely on the basis of generalised investigation inputs and third-party statements, without any direct material linking the assessee to any alleged accommodation entry arrangement. Once the assessee has discharged the primary onus by furnishing documentary evidences, the burden shifts to the Revenue, which has not been discharged in the present case.

Mere suspicion, conjectures, or application of human probabilities, in the absence of any corroborative material, cannot be a ground to deny a statutory deduction expressly provided under the Act.

In the result, the appeal of the assessee is allowed.