ASST CIT CIR 4, THANE vs. RAJ ENTERPRISES, THANE

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ITA 6379/MUM/2014Status: DisposedITAT Mumbai27 July 2016AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, finding that the assessee had fulfilled the conditions for deduction under Section 35AC. The Tribunal noted that the Chairperson of MUS later confirmed the donation, and any discrepancies or alleged forgery by the donee institution did not negate the assessee's claim.

What were the facts?

The assessee claimed a deduction of Rs. 1,00,00,000/- under Section 35AC for donations made to Mahila Utkarsh Sansthan (MUS). The Assessing Officer (AO) disallowed the claim after MUS initially denied receiving the donation. However, the CIT(A) allowed the deduction, which was challenged by the Revenue.

What were the issues?

Whether the deduction under Section 35AC for donation is allowable when the donee institution initially denies receipt but later confirms it, and if the donee institution faces allegations of forgery.

Which sections of the Income-tax Act were involved?

Section 35AC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH “D”, MUMBAI

Before: SHRI B.R.BASKARAN & SHRI PAWAN SINGH

For Appellant: Shri Subodh Ratnaparkhi
For Respondent: Shri Nitin Waghmode (DR), Shri Subodh Ratnaparkhi
Hearing: 12.07.2016Pronounced: 27.07.2016

O R D E R

PER PAWAN SINGH, JM:

1.

The present appeal filed by the Revenue against the order of CIT(A)-II, Thane dated 16.07.2014 for AY 2010 -11 on the following Grounds of appeal:

1. On the facts and circumstances of the case and in law, the Ld. CIT (A)-I, Thane has erred in allowing the deduction u/s 35AC of Rs. 1,00,00,000/- on the ground that the assessee has paid donation to Mahila Utkarsh Sansthan, Indore ignoring the fact that the Mahila Utkarsh Sansthan, Indore had categorically denied receiving donation from the M/s Raj Enterprises vide letter dated 10.01.2013 and 04.02.2013 duly signed by the Chairperson Dr. Sonia Sharma during the assessment proceedings.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A)-I, Thane has erred in accepting the sudden changed version of Dr. Sonia Sharma, Chairperson regarding receipt of donation from the assessee disregarding the specific denial of receipt of donation vide letter dated 10.01.2013 and 04.02.2013 wherein she has categorically stated that there is a bogus account being run in the name of president & treasurer of Mahila Utkarsh Sansthan, Indore by some people from which bogus certificates u/s 35AC are being issued to claim Income Tax relaxation. It has further been stated in the letter dated 10.01.2013 that the Mahila Utkarsh Sansthan was not in possession of bank pass book or cheque book of bank account with Kotak Mahindra Bank, Kolkata.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A)-I, Thane has erred in not appreciating the contradiction in the statements of Dr. Sonia Sharma wherein she has denied the receipts of donations vide letter dated 10.01.2013 and 04.01.2013 and disregarding the fact of filling writ petition No. 8690/2010 in the Hon'ble HC of Madhya Pradesh, Bench at Indore in which she has alleged that a fraud has been committed by some persons from the said bank account with Kotak Mahindra Bank and a complaint letter dated 19.05.2010 was also filed with the bank in this regard.

4. The appellant prays the order of the Ld. CIT(A)-I, Thane, may be vacated and that of the Assessing Officer be restored.

5. The appellant craves leave to add, amend or alter any ground/grounds, which may be necessary.

2. The brief facts of the case are that the assessee, who is engaged in the business of land development, filed its return of income for relevant AY on 25.09.2010 showing total income of Rs. 8,08,00,450/-. The return of income as selected for scrutiny. While framing assessment order, the Assessing Officer (AO) observed that assessee claimed donation of Rs.1,00,00,000/- u/s 35AC to Mahila Utkarsh Sansthan (for short ‘MUS’) Indore and claimed deduction u/s 80G. The Assessing Officer (AO) called for copy of receipt of donation from the assessee. No reply was furnished by assessee. The AO issued notice u/s 133(6) of I.T. Act to the MUS. The MUS denied to have received any donation from assessee vide its reply dated 10.01.2013 and 04.02.2013. The was show caused as to why the claim of donation be not treated as non-genuine and added to the total income. Assessee submitted its reply dated 15.03.2013. The reply of assessee was not considered satisfactory and the AO rejected the claim of deduction u/s 35AC of the Act and added Rs. 1,00,00,000/- to the total income of assessee in the assessment order dated 18.03.2013. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) after considering the contention of assessee allowed the appeal of the assessee in the impugned order dated 16.07.2013. Aggrieved by which the Revenue has filed the present appeal before us.

3.

We have heard Ld Departmental Representative (DR) for revenue and Ld Authorised Representative (AR) for assessee and perused the material available on record. Ld. DR for Revenue argued that the assessee made a bogus claim of donation. The AO when issued notice to the MUF u/s 133(6) about the genuineness of donation. The MUS vide their reply dated 10.01.2013 and 04.02.2013 denied about the receipt of such donation. DR for Revenue further argued that from the contents of reply of MUS, it was clear that the MUS have no knowledge of donation to them by the assessee. The reply filed by Dr. Sonia Sharma on 26.02.2013 was nothing to but an afterthought and procured story of the assessee in order to claim donation as genuine and strongly supported the order of AO. Ld. AR for assessee argued that assessee made the payment of donation through pay orders. The pay order No. 781890 dated 26.03.2010 for Rs. 35,00,000/-, Rs. 7,81,892/- dated 26.03.2010 for Rs. 35,00,000/- and pay order No. 781891 dated 26.03.2010 for Rs. 30,00,000/- was paid to the MUS. The assessee furnished evidence in support of the payment made to MUS , their acknowledgement of payment, the originals of which were produced for verification to AO. Ld AR further argued that the provisions of section 35AC lays down the condition that, if assessee incurred expenditure by way of payment to Institution approved for carrying out any eligible project or scheme and such payment is supported by a certificate under Form No. 58A, then their deduction is to be granted to the assessee. AR of assessee further argued that for valid deduction u/s 35AC, two conditions are required to be furnished , (i) the payment must be to an approved Institution (ii) such payment is certified by a certificate in Form No. 58A. The assessee complied both the conditions. AR of assessee further argued that initially when notice was issued to MUS, they filed reply dated 04.02.2013. The AO selected only one sentence of their reply and not considered the other conditions of that reply. The Chairperson of MUS namely Dr. Sonia Sharma personally attended the proceeding before the AO and confirmed the factum of payment by assessee to their organisation. There was some discrepancy occurred in the reply of the MUS letter dated 04.02.2013 . The AO has not given any finding about the personal appearance of Chairperson of MUS during assessment proceedings . Ld. AR further argued that the CIT(A) correctly appreciated the fact of the present case and deleted the addition. Ld. AR of assessee has further drawn our attention to Notification No. SO 121(E) dated 12.01.2009 isued by the Central Government on the recommendation of National Committee for Promotion of Social and Economic Welfare, notifying the Institution approved by the National Committee, wherein the name of MUS is mentioned as Sl. No. 16, the receipt of donations along with copy of Form No. 58A, Resolution of MUS for accepting donation and the letter/confirmation of MUS dated 26.02.2013 ( available at page No. 8 to 22 of PB).

4.

We have considered the rival contentions of the parties and perused the material available on record. The AO while considering the claim of assessee issued notice to the MUS u/s 133(6) which were duly reply by them vide their reply dated 10.01.2013 & 04.02.2013. Initially the MUS denied to have received the donation from the assessee. The assessee was show caused by AO as to why the donation should not be treated as non-genuine. Assessee submitted its reply and contended therein that assessee made payment to the Institution which are duly eligible and availed the certificate under Form No. 58A as per the provisions of Section 35AC(2)(a) of the Act. The information initially provided by MUS were subsequently corrected/ by Dr. Sonia Sharma by appearing personally before AO. The AO disallowed the claim of donation on two Grounds – (i) that MUS has no knowledge of donation till 15.02.2012 and the reply was filed by third party on 26.02.2013 is an afterthought and procured one, (ii) The Audit Report submitted by MUS on 26.02.2013 revealed that they have claimed loss for forgery to the tune of Rs. 8,63,26,000/-. It was urged before the CIT(A) that while considering the Grounds of appeal observed that the provision of section 55AC laid down that where assessee incurred expenditure by way of payment to Institution approved for carrying out any eligible product or scheme and such payment is supported by certificate (F No. 58A) as per requirement of the provision, then deduction is to be granted to the assessee. The assessee complied the twin condition. Ld. CIT(A) considered the contention of the assessee and

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