DCIT Vs P.R. Rolling Mills Pvt. Ltd. (ITAT Jaipur)
ITAT Jaipur held that benefit of deduction under section 35(1)(ii) of the Income Tax Act unavailable on bogus donation on adoption of unfair means.
Facts-
AO has passed a detailed order wherein he has concluded that the approval u/s. 35(1)(ii) of the act granted to M/s. School of Human Genetics & Population Health was being misused and the assessee was part of the such racket. It was observed that the assessee took benefit of such racket by claiming a 175% of deduction on payment of a meagre 3 % Commission of the so-called donation amount.
It was alleged that the assessee also took accommodation entry of donation u/s 35 with the help of a broker and reduced his taxable income and ultimately reduced legitimate tax liability. This entire manoeuvre was a colourable device to give this sham transaction a colour of genuineness. The deduction was disallowed by the AO and Rs 1,75,00,000/- is added back to the total income of the assessee.
Aggrieved from the said order of the assessing officer, the assessee company has filed an appeal. The appeal was disposed by the National Faceless Appeal Center ( NFAC).
Being aggrieved, the present appeal is filed.
Conclusion-
Held that during the course of survey proceedings conducted in the case of the School of Human Genetics and Population Health (Research Organisation), it came to the light that the donors in connivance with various brokers, entry operators, donees etc. misused the benefit conferred u/s 35(1)(ii) of the Act by undertaking bogus donations.
Held that the assessee has adopted the unfair means to take the benefit under the garb of Section 35(1)(ii).
FULL TEXT OF THE ORDER OF ITAT JAIPUR
Both these appeals by the Revenue are directed against two different orders both dated 12-03-2022 passed by the National Faceless Appeal Centre, New Delhi [ hereinafter referred to as (NFAC) ] for the assessment years 2012-13 and 2013-14 which in turn arise from the order of the Assistant Commissioner of Income Tax, Circle-3, Jaipur passed under section 143(3) r.w.s. 147 dated 18.12.2017 & 29.12.2017 respectively.
2. As the issues involved in the present appeals are common and inextricably interlinked or in fact interwoven and of the same assessee. Therefore, the parties argued them together and are disposed off by this common order. As it is seen that for both these appeals grounds are similar, facts are similar and arguments were similar and were heard on the same day. Therefore, we consider the facts and ground taken by the revenue from the folder in ITA No. 170/JPR/ 2022 for assessment year 2012-13 and this case is taken as lead case.
3. The revenue has marched the appeal in ITA No. 170/JPR/ 2022 for assessment year 2012-13 :
(i) Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in allowing the assessee’s claim of deduction of Rs.1,75,00,000/- u/s 35(1)(ii) of the I.T. Act despite the fact that was established to be an accommodation entry taken from one M/s School of Human Genetics and Population Health which was confirmed during the survey action conducted u/s 133A by Investigation Wing of Kolkata.?
(ii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in allowing deduction of Rs.1,75,00,000/- made u/s 35 of the I.T. Act ignoring the fact that authorized signatories of M/s. SHG & PH is unequivocal terms admitted that this institute was used for providing accommodation entries on commission basis.
4. The fact as culled out from the record is that the assessee company is incorporated in the year 1997. The assessee company since inception engaged in manufacturing of Angles Shapes & Sections of Alloy and non Alloy Steel, mainly profile section for use in Automotive Industry, Angies TLT sector and general engineering purpose. In this case a notice under section 148 was issued on 09.03.2017 after recording the reasons with the prior approval of the competent authority. The reasons for issuing notice u/s. 148 are as extracted as under:-
“In this case, assessment for A.Y. 2012-13 was completed u/s 143(3) of the I.T. Act on 31.03.2014 at total income of Rs. 5,93,16,890/-.
It has been observed that during the year under consideration the assessee had given a donation of Rs. 1,00,00,000/- to School of Human Genetics and Population Health, 7, Nilamber Mukherjee Street, Kolkata and claimed weighted deduction u/s 35 to the tune of Rs. 1,75,00,000/- out of which Rs. 1,00,00,000/-had been debited to the P&L Account and the balance of Rs. 75,00,000/- had been claimed in the computation of income.
A report was received from Investigation Wing, Kolkata that a survey action 133A was conducted in the following research organization which had approval u/s 35(1)(ii) of the Act-
