Case Law Details
Ravindra K. Reshamwala Vs DCIT (ITAT Mumbai)
It could be seen that the assessee had given donation on 21/06/2004 against valid receipt issued by the Trust. The donation was made through cheque which got cleared from assessee’s bank account. The assessee was issued requisite Form No.58A by the trust. The trust had valid registration at the time of making of donation. The approval was withdrawn only subsequently vide notification dated 30/11/2016. Further, it is evident from the assessment order that the deduction has been denied to the assessee only in the basis of allegations that the donations were bogus donations and the amount so donated has flown back to the assessee. However, except for statement of trustee of the society, we find that there is no positive evidence on record to substantiate the same. There is nothing on record which would show that on the date of donation, the trust did not have valid registration or its registration stood withdrawn. It was only subsequently that the approval was withdrawn. This being so, the deduction could not be denied to the assessee since Ld. AO failed to conduct any inquiry before making disallowance and except for mere allegations, he did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash. The assessee, in our opinion, has duly discharged the onus casted upon him and it was incumbent upon Ld. AO to refute the same. However, no such inquiry has been conducted and the deduction has been denied more on mere allegations. Therefore, the deduction could not be denied to the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 20.09.2022 for the A.Y.2009-10.
2. Brief facts of the case are, assessee filed its Return of Income on 25.09.2009 declaring total income of ₹.1,25,43,176/-. The return was processed u/s 143(1) of Income-tax Act, 1961 (in short “Act”). The case was re-opened u/s 147 of the Act by issue of notice u/s 148 dated 18.03.2016 after recording the reasons and with the prior approval. Notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for.
3. Assessee vide letter dated 04.04.2016, requested to provide reasons for reopening and the same was provided vide letter dated 16.06.2016. The relevant reasons recorded are reproduced below: –
“In this case, information has been received from Pr.DIT (Investigation)-1. vide letter dated Mum/Pr.DIT(Inv)-1/Navjeeran/63/2015-16/838 dated 30.10.2015 stating that a search action under section 132 of the Income Tax 1961, was conducted on Navjeevan Charitable Trust on 27.10.2014. During the search action, it was found by the investigation wing that all the expenses of the Trust were mere book entries and no genuine expenses were made by the trust for the purpose of Section 35AC The Trustee accepted that all the expenses were bogus and the donations received in cheques were returned in cash to all the donors after deducting nominal commission. Consequently, Survey Action conducted by the Investigation wing on some of the donors have conclusively proved that the Trust indeed returned by donations in cash,”
4. During scrutiny proceedings, authorised representative of the assessee submitted a letter dated 01.07.2016 which is the copy of receipt dated 30.01.2009 issued by M/s Navjeevan Charitable Trust towards receipt of donation amounting to ₹.15,00,000/- along with the Copy of Certificate in Form No.58A of the Act certifying that a sum of ₹.15,00,000/- has been received u/s 35A(1) and a copy of the bank statements containing the details of payments to the trust.
5. After considering the above submissions, Assessing Officer rejected the same and he gave reasons for rejecting the submissions of the assessee in his order at Para No. 6. In summary, the findings of the Assessing Officer is that during search action at the office of the M/s.Navjeevan charitable trust, not even a single purchase bill could be found at the office premise and it was stated that they were not maintained by the trust. When the details of the parties from whom expenses were booked, their addresses were booked and their addresses were asked, it was stated that they were entry providers and details were not known. Based on the findings unearthed by the search parties he has treated that donation made by the assessee as non-genuine accordingly, he disallowed the same.
6. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and after considering the detailed submissions Ld.CIT(A) also treated the above donation as non-genuine and dismissed the ground raised by the assessee.
7. Aggrieved assessee is in appeal before us, raising following grounds in its appeal: –
“1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (A) erred in confirming the assessing officer’s action of issuing Notice a/s 148 without obtaining requisite satisfaction as required u/s 151(2) of the Income Tax Act and therefore the said Notice is void ab initio and bad in law.
2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (A) erred in confirming the assessing officer’s action of not disposing of the complete objections raised by the assessee during the course of reassessment proceedings as required u/s 147 as laid down by Honorable Supreme Court in case of GKN Driveshaft’s (India) Ltd, 251 ITR 19.
3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in passing the order without appreciating the reopening reasons are without bringing out any tangible material on the basis of which the reason to believe that income has escaped assessment was formed.
4. On the facts and circumstances of the case, the learned Commissioner of Income Tax (A) erred in sustaining the disallowance of donation made amounting to Rs. 15,00,000/- u/s35AC of the Income Tax Act, 1961 on the basis of certain statements recorded of the Donee Trust without giving any opportunity to the assessee to cross-examine the said persons.
5. On the facts and in the circumstances of the case, the ld. Commissioner of Income Tax (A) failed to appreciate that at the time when the donation of Rs.15,00,000/- was made by the appellant, the proper Approvals/Exemptions were in force and in favour of the said Trust i.e. Navjeevan Charitable Trust
6. On the facts and in the circumstances of the case, the Ld.Commissioner of income tax (A) erred in confirming the order of assessing officer without appreciating that the cancellation of approval in the subsequent year which was earlier granted to the trust u/s.35AC to avail exemption of donation made by the appellant does not affect the availability and genuineness of the claim made by the appellant company as held by Hon supreme court in case of Chotatingrai Tea & Ors Etc., 258 ITR 529.
The appellant craves leaves to add, to delete or amend any of the above grounds of appeal at the time of hearing. ”
8. At the time of hearing Ld. AR of the assessee submitted that the assessment was reopened relating to A.Y: 2009-10 and it is fact on record that it is beyond four years. Therefore, Assessing Officer has not recorded requisite satisfaction as required u/s. 151(2) of the Act. Further, he brought to our notice Page No. 46 of the Paper Book and he brought to our notice that this donation was made on 30.01.2009 and assessee has declared the same in its Books of Accounts. Further, he brought to our notice Page No. 33 of the Paper Book wherein bank statement which contained the details of payment of donation to the trust. He submitted that the trust under consideration was searched and seized only on 01.04.2016. Therefore, the assessee has paid the donation in good faith and the same donation cannot be treated as bogus. In this regard he relied on the following case laws: –
a. The ITAT Ahmedabad Bench ‘C’in Bhimani Chemicals Pvt. Ltd. ITA No. 1246/AHD/2018
b. The ITAT Ahmedabad Bench ‘SMC’ in P M Bhimani Orgochem Pvt. Ltd. ITA No. 2586, 2587, 2588/AHD/2017
c. The ITAT Mumbai Bench ‘D’ in Shri Mrunal H. Shah I.T.A No.4878/Mum/2016
d. The ITAT Mumbai Bench ‘D’ in Shri Devajyoti N. Bhattacharya ITA No. 5874, 5875, 5876/MUM/2018
e. The ITAT Mumbai Bench ‘SMC’ in M/s Saroj Plantations Pvt. Ltd. ITA No. 648/M/2018
9. On the other hand, Ld.DR relied on the orders of the lower authorities and he argued that the funds given to the Trust is only a bogus and it is found that trust was never carried any charitable activities.
10. Considered the rival submissions and material placed on record, we observe from the record that assessee has raised grounds challenging the reopening as well as on merit. Since the issue involved is covered in favour of the assessee on merits, we do not intend to go into jurisdictional issue at this stage. We kept open this ground open.
11. Coming on merits, we observe that assessee has made the donation on 30.01.2009 and assessee has submitted all the relevant information with regard to payment of donation and all these donations were made through banking channels. It is fact on record that the trust was searched on 27.10.2014 and subsequently registration of the trust was cancelled on 01.11.2016. On the similar facts on record, the Coordinate Bench in the case of Shri Mrunal H. Shah v. ACIT in ITA.No. 4878/Mum/2019 dated 24.05.2021 dealt with the similar issue and observed as under: –
“4. During assessment proceedings, it transpired that the assesse made donation of Rs.15 Lacs to a Trust namely Navjeevan Charitable Trust and claimed deduction u/s 80GGA against the same. However, there was a search action u/s 132 on trust on 27/10/2014 wherein it was found that the trust was involved in the activities of providing accommodation entries by way of donation. The donation received in cheque were stated to be returned in cash after deducting commission of 3%. Relying upon the admission made by the Trustees during search, Ld. AO proceeded to disallow the deduction so claimed by the assessee. The assessee defended the claim by submitting that the donations were paid through cheque against valid receipt. However, not convinced, Ld. AO denied the deduction to the assessee.
5. During appellate proceedings the assessee submitted that the trustee had not named the assessee as recipient of cash and there was no substantiated statement that the appellant received the cash back from the trust. However, in the light of search findings, Ld. CIT(A) confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us.
6. After going through documents on record, it could be seen that the assessee had given donation on 21/06/2004 against valid receipt issued by the Trust. The donation was made through cheque which got cleared from assessee’s bank account. The assessee was issued requisite Form No.58A by the trust. The trust had valid registration at the time of making of donation. The approval was withdrawn only subsequently vide notification dated 30/11/2016. Further, it is evident from the assessment order that the deduction has been denied to the assessee only in the basis of allegations that the donations were bogus donations and the amount so donated has flown back to the assessee. However, except for statement of trustee of the society, we find that there is no positive evidence on record to substantiate the same. There is nothing on record which would show that on the date of donation, the trust did not have valid registration or its registration stood withdrawn. It was only subsequently that the approval was withdrawn. This being so, the deduction could not be denied to the assessee since Ld. AO failed to conduct any inquiry before making disallowance and except for mere allegations, he did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash. The assessee, in our opinion, has duly discharged the onus casted upon him and it was incumbent upon Ld. AO to refute the same. However, no such inquiry has been conducted and the deduction has been denied more on mere allegations. Therefore, the deduction could not be denied to the assessee as held by this very bench in the case of Devajyoti N. Bhattacharya V/s ACIT (ITA No. 5051/Mum/2018 order dated 12/03/2020). Our observations therein were as follows: –
4. Upon due consideration, we find that the assessee was denied aforesaid deduction, in more or less similar factual matrix, in AYs 2009-10, 2012-13 & 2014-15 which was agitated before this Tribunal vide common order dated 30/09/2019. The coordinate bench, vide para-7, held that that the assessee had adduced evidence to establish that payment of donation to Navjivan Charitable Trust and the onus had shifted to Ld.AO. However, Ld. AO failed to conduct any inquiry before making disallowance and did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash except mere allegations. Reliance was placed on the decision of Hon’ble Delhi High Court in CIT V/s A and A Bakery P. Ltd. (2008 302 ITR 51) to support the conclusions. Finally, the disallowance was deleted. We find that fact to be pari-materia the same in this year. The assessee has duly discharged the onus casted upon him and it was incumbent upon Ld. AO to refute the same. However, no such inquiry has been conducted and the disallowance has been made on mere allegations. Therefore, respectfully following the earlier order, we delete the disallowance as made by Ld. AO.
Therefore, we direct Ld. AO to grant the deduction u/s 80GGA and recompute assessee’s income.”
12. Respectfully following the above said decision, we are inclined to decide the issue in favour of the assessee and therefore deduction could not be denied to the assessee. Accordingly, we allow the ground raised by the assessee.
13. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 03rd April, 2023
