R.K.JEWELLERS PVT LTD.,CHENNAI vs. DCIT CORPORATE CIRCLE 5(2), CHENNAI

PDF · subscribers
ITA 2364/CHNY/2017Status: DisposedITAT Chennai03 September 2019AY 2013-20146 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee should have been provided with the investigation report relied upon by the Assessing Officer. Since this was not done, the matter was remitted back to the Assessing Officer for fresh adjudication after furnishing the relevant material to the assessee.

What were the facts?

The assessee claimed a deduction for donation made to a foundation. The Assessing Officer disallowed this claim based on an investigation report from Kolkata, which suggested the foundation was providing accommodation entries. The assessee argued they did not receive a copy of this report to offer an explanation.

What were the issues?

Whether the disallowance of donation was valid without providing the assessee with the investigation report on which the disallowance was based.

Which sections of the Income-tax Act were involved?

Section 35(1)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ SMC BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN

For Respondent: Shri AR.V. Sreenivasan, JCIT
Hearing: 17.07.2019Pronounced: 03.09.2019

आदेश /O R D E R

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -3, Chennai, dated 30.06.2017 and pertains to assessment year 2013-14.

2.

This appeal of the assessee was originally disposed of by an order dated 19.12.2017. On application by the assessee in M.P.

No.197/Chny/2018, the order of the Tribunal dated 19.12.2017 was recalled. Again, the appeal was disposed of by another order dated 07.08.2018. The assessee filed an MP for second time in M.P.

No.197/Chny/2018. This Tribunal by an order dated 16.11.2018 again recalled the order and restored the appeal on file.

Accordingly, it is posted for final disposal.

3.

Shri F.C. Jain, the Ld. representative for the assessee, submitted that the assessee-company gave donation to M/s Herbicure Healthcare Bio Herbal Research Foundation, Kolkata.

According to the Ld. representative, it appears there was a survey in the premises of M/s Herbicure Healthcare Bio Herbal Research Foundation, Kolkata. On the basis of material found during the course of survey operation, the Assessing Officer made addition by disallowing the claim of the assessee under Section 35(1)(ii) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. representative, donation made by the assessee is not disputed.

The entire transaction was made through banking channel, therefore, there is no question of any disallowance. According to the Ld. representative, the information gathered during the course of survey operation at Kolkata was not furnished to the assessee. therefore, the assessee is not in a position to offer its explanation.

4.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the investigation and enquiries conducted by the Investigation Wing of the Income-tax Department at Kolkata in the case of M/s Herbicure Healthcare Bio Herbal Research Foundation, disclose that they are not carrying out any research activity in the field of microbiology and analytical chemistry . According to the Ld. D.R., it was also found by the Investigation Wing that M/s Herbicure Healthcare Bio Herbal Research Foundation, Kolkata was providing only accommodation entries on commission basis. According to the Ld. D.R., investigation revealed that bogus donations were being taken by M/s Herbicure Healthcare Bio Herbal Research Foundation and after taking 12% to 18% commission, the balance amount was returned to the so-called donor. Therefore, according to the Ld. D.R., it is obvious that there was no donation given by the assessee. It is only accommodation entry or bogus transaction.

Hence, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the disallowance. On a query from the Bench whether the report of Investigation Wing was duly furnished to the assessee or not? The Ld. D.R. submitted that he could not ascertain it immediately.

5.

Having heard the Ld. representative for the assessee and the Ld. D.R., I have carefully gone through the material available on record. The main disallowance under Section 35(1)(ii) of the Act was made on the basis of the investigation and enquiries conducted at Kolkata. The Assessing Officer, on the basis of investigation conducted at Kolkata, found that the so-called transaction of donation was made on the basis of commission at the rate of 12% to 18%. There is no material available on record to suggest that the investigation details / report was furnished to the assessee.

Therefore, the assessee claims before this Tribunal that it was not able to explain its case before the lower authorities properly. This Tribunal is of the considered opinion that when the Assessing Officer is placing his reliance on the investigation report / enquiries conducted at Kolkata, a copy of the same shall be furnished to the assessee so that the assessee would be in a position to explain what was actually transpired. Since no material available on record or no reference was made about furnishing copies in the orders of both the authorities below, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer after furnishing the necessary material to the assessee. In other words, a copy of the investigation report / enquiries conducted at Kolkata by the Investigation Wing of the Income-tax Department at Kolkata, has to be furnished to the assessee. Accordingly, the orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and furnish copies of Investigation report said to be received from the Investigation Wing at Kolkata and other materials that may have any relevance to the issue and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

6.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the court on 3rd September, 2019 at Chennai.

More judgments on Section 35(1)(ii)

All 329 judgments and leading authorities on Section 35(1)(ii) →

Recent GST High Court judgments

Search GST case law →