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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-Addl/JCIT(A), Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 19.12.2023 for the AY 2014-15.
Issue raised in ground no.1 is against the reopening of assessment u/s 147 of the Act without any incriminating material or independent application of mind which was simply based on borrowed satisfaction and therefore is illegal and liable to be quashed.
Assessment Year: 2014-15 M/s Gassin Pierre Pvt. Ltd.
Facts in brief are that the assessee filed return of income on 26.09.2014 declaring total income of Rs. 1,37,45,813/-. An information was received from JCIT, Range-8, Kolkata vide letter dated 15.10.2015 stating that the assessee has claimed bogus donation expenses u/s 35(1)(ii) of the Act and accordingly the case of the assessee was reopened by issuing notice u/s 148 of the Act on 27.03.2017 after recording a reasons as mandatory in section 148(2) of the Act and after obtaining approval of the competent authority. The said notice was duly replied by the assessee vide letter dated 05.04.2017 requesting to consider the original return filed as a return of income in response to notice issued under section 148 of the Act. During the course of assessment proceedings, the AO observed that the assessee has given donation of Rs. 25,00,000/- to School of Human Genetics and Population Health and claimed weighted deduction of Rs. 43,75,000/- during the year. Accordingly, a show cause notice was issued as to why the donation claimed u/s 35(1)(ii) of Rs. 43,75,000/- should not be disallowed and added back to the income of the assessee. Pertinent to state that a survey operation u/s 133A of the Act was conducted on 27.01.2015 by Directorate of Investigation, Kolkata at the premises of School of Human Genetics and Population Health and it was found that the said institution, in connivance with the donors, brokers and accommodation entry providers was engaged in accommodation entries in the form of bogus donations. The documents impounded from the premises of the said institution revealed that the assessee has paid an amount of Rs. 25,00,000/-. The AO noted that the amount of Rs. 25,00,000/- was donated u/s 35(1)(ii) of the Act and finally Rs. 43,75,000/- was added to the income of the assessee in the assessment framed u/s 147/143(3) of the Act vide order dated 21.12.2017.
In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee on legal issue as well as on merit for the same reason that the School of Human Genetics and Population Health has been provided bogus accommodation entry and thus justify the dismissal of appeal.
The Ld. A.R vehemently submitted before us that the reopening has been made without there being any incriminating material and without any independent application Assessment Year: 2014-15 M/s Gassin Pierre Pvt. Ltd. of mind to the information received from the DDIT(inv) and also on borrowed satisfaction which is not permissible under the Act and as a result the reopening of assessment as well as assessment framed by the AO are void-ab-initio, invalid and deserves to be quashed. The Ld. A.R while referring to the reasons recorded u/s 148 of the Act submitted that in para 2, the AO has simply observed from the information received that School of Human Genetics and Population Health is engaged in the bogus donations u/s 35(1)(ii) in lieu of commission and further noted that as per information, the assessee has given bogus donation to the said institution u/s 35(1)(ii) of the Act of Rs. 25,00,000/- which was also claimed as deduction u/s 35(1)(ii) of the Act. The AR further submitted that in the last para the AO has stated that he has reasons to believe that Rs. 25,00,000/- chargeable to tax has escaped assessment. The Ld. A.R vehemently submitted that letter received from JCIT, Range-8, Kolkata dated 15.10.2015 to the effect that the assessee has claimed bogus donation u/s 35(1)(ii) is a triggering point and not the reasons for opening the assessment. The AO on the basis of said letter has to come to the objective formation of reasons to believe that the assessee’s income has in fact escape assessment. The Ld. A.R stated that the said letter was a general letter stating that following a survey u/s 133A on the School of Human Genetics and Population Health it was found that the said institution was engaged in providing accommodation entries in the form of donation u/s 35(1)(ii) for which the assessee is beneficiary. Thereafter the AO has to enquire into the issue and arrive at a conclusion as to how it has led to escapement of income. The ld AR argued by referring reasons recorded that the AO has not done any such exercise and thus it is a case of non- application of mind and borrowed satisfaction by the AO without any tangible material and therefore the reassessment proceedings may kindly be quashed. In defense of arguments the ld. A.R relied on the series of decisions namely DCIT-2, Kolkata vs. M/s Kakrania Properties Pvt. Ltd. in for AY 2009-10 dated 04.06.2019, PCIT vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 0677, CIT vs. SFIL Stock Broking Ltd. (2010) 325 ITR 0285. The Ld. A.R submitted that in all the above decisions it has been held that the reopening of assessment on borrowed satisfaction
The Ld. A.R also submitted that the said trust, School of Human Genetics and Population Health went into settlement before the Settlement Commission and Hon’ble Settlement Commission vide order dated 22.07.2016 has decided the case of the said trust by assessing the income at 2%. The Ld. AR drew our attention to page 19 of the order of Settlement Commission wherein the settlement Commission has appended the statement for three assessment years including the current year where in the heading it was stated as “genuine/non-genuine donation”. Therefore to conclude that all the donations made are non-genuine is without any valid basis and sans substantive evidences and cannot be accepted. The Ld. AR also relied on the order passed by the Ld. CIT(A) in assessee’s own case in AY 2013-14 wherein similar donation was accepted by the Ld. CIT(A). The ld AR stated that the Ld. CIT(A) has accepted the donation as genuine by giving finding that the assessee’s donation were genuine and related to the research work in which the assessee was engaged at page 31,32 and 33 of the appellate order and it was further stated that the donations were given during four connective assessment years. The ld. A.R therefore submitted that in the earlier assessment years , when the department itself accepted the donation as genuine how the same can be treated as non-genuine in the current assessment year even when the Settlement Commission has treated the donations in the hands of the School of Human Genetics and Population Health as genuine as well as non-genuine.
The Ld. D.R relied on the order of authorities below by submitting that the a racket was unearthed after a survey was conducted on School of Human Genetics and Population Health which revealed that the said institution was engaged in providing accommodation entries in the form of bogus donations in lieu of commission. The ld DR therefore submitted that the case of the assessee was re-opened on the basis of the said information supplied by the investigation wing and could not be said to be without any basis or on borrowed satisfaction. The ld DR therefore prayed that the reopening Assessment Year: 2014-15 M/s Gassin Pierre Pvt. Ltd. was made validly as per the provisions of the Act and on substantive information from the wing and consequently the appeal of the assessee deserved to be dismissed.
After hearing the rival contentions and perusing the material on record, we find that undisputedly the assessee has given donation of Rs. 25,00,000/- during the year and claimed deduction u/s 35(1)(ii) of the Act of Rs. 43,75,000/-. The said donation was given to School of Human Genetics and Population Health. Following a survey carried out u/s 133A on the said Trust, it was found that the said trust was engaged in providing accommodation entries in the form of bogus donations in lieu of commission. We note that the said exemption granted to the said institution to accept such donations was withdrawn on 15.09.2016 retrospectively. The AO received letter from JCIT, Range-8, Kolkata that the assessee’s beneficiary of accommodation entry in the form of bogus donation. The AO recorded reasons on the basis of said letter u/s 148(2) of the Act. We note that the AO reproduced the facts qua the said institution in the first para and in the second para the AO noted that the School of Human Genetics and Population Health was engaged in the bogus donation in lieu of commission and assessee is beneficiary of the same and then came to conclusion that he has reasons to believe that an amount of Rs. 25,00,000/- has escaped assessment. For the sake of ready reference the reasons recorded are reproduced as under:
Assessment Year: 2014-15 M/s Gassin Pierre Pvt. Ltd. 8.1. A perusal of the reasons recorded indicates that the AO has simply reopened the case on the basis of said letter without any independent application of mind as to how the income has escaped and that too on borrowed satisfaction of the officer who sent the information. In our opinion, the information received by the assessee is a triggering point and only after ascertaining and enquiring all the facts, the AO has to record reasons as mandated in Section 148 of the Act which was not done. Accordingly, the reopening of assessment is bad in law. The case of the assessee finds support from the decision of Hon’ble Delhi High Court in the case of PCIT vs. Meenakshi Overseas Pvt. Ltd. (supra) wherein the Hon’ble Court has held that for reopening of assessment the AO has to record reasons to believe but the reason to believe recorded by the AO did not contain the findings of AO and were at best reproduced the conclusion of the Investigation Wing and that amounted to borrowed satisfaction. The Court has held that since there was no independent application of mind in forming the reasons to believe that income had escaped assessment and therefore re-opening was invalid. In the case of CIT vs. SFIL Stock Broking Ltd. (supra) the Court has held that the reopening of assessment without any independent application of mind and recording a belief on the basis of material before him that income has escaped assessment and consequently Tribunal has arrived at concrete conclusion on facts that such a reopening is bad in law on account of lack of independent application of mind was correct. We have also perused the order passed by the Ld. CIT(A) in the preceding assessment year 2013-14 in assessee’s own case in which the detailed findings have given by the Ld. CIT(A) that the assessee has agreed to give donation for four continuous assessment years and the donation was accepted to be genuine and related to the business of the assessee. The Ld. CIT(A) has given a detailed finding from page 31 to 39 in preceding assessment year. Therefore, considering the above facts and circumstances and ratio laid down by the various Courts and the decision of Ld. CIT(A), in assessee’s own case, we are inclined to quash the reopening of assessment u/s 147 as well as consequent order passed u/s 147 read with Section 148 of the Act. Accordingly, the appeal of the assessee is allowed on legal issue.
Order is pronounced in the open court on 9th October, 2024 Sd/- Sd/- (Pradip Kumar Choubey /�द�प कुमार चौबे) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य Dated: 9th October, 2024 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- M/s Gassin Pierre Pvt. Ltd., 46B, Raji Ahmed Kidwai Road, Park Street, Kolkata-700016 2. Respondent – DCIT, Circle-7(1), Kolkata 3. Ld. CIT(A)- NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)