2019 (1) TMI 1763 - AT - Income Tax

Tribunal grants deduction under Section 35(1)(ii) for assessment years 2013-2014 and 2014-2015

Kitchen Essentials Versus ACIT, Circle-4, thane

Kitchen Essentials Versus ACIT, Circle-4, thane - TMI Issues Involved:1. Failure of CIT(A) to provide reasons for rejecting the appellant's submissions.2. Violation of principles of natural justice due to denial of cross-examination.3. Justification of disallowance under Section 35(1)(ii) for donations.4. Reliance on preponderance of probability and presumptions by the AO.5. Drawing inferences from irrelevant instances by CIT(A).Issue-wise Detailed Analysis:1. Failure of CIT(A) to provide reasons for rejecting the appellant's submissions:The appellant did not press this issue during the tribunal proceedings. Therefore, this ground was dismissed as not pressed.2. Violation of principles of natural justice due to denial of cross-examination:Similarly, this issue was also not pressed by the appellant and was dismissed.3. Justification of disallowance under Section 35(1)(ii) for donations:The primary issue revolved around the disallowance of the appellant's claim for deduction under Section 35(1)(ii) of the Income Tax Act, 1961, for donations made to the School of Human Genetics & Population Health (SHG & PH). The AO disallowed the claim based on information from the investigation wing and a survey conducted at SHG & PH, which indicated that the institution was involved in providing bogus donation entries. The AO concluded that the activities of SHG & PH were not genuine and disallowed the deduction. The CIT(A) upheld this disallowance.4. Reliance on preponderance of probability and presumptions by the AO:The tribunal noted that the AO's disallowance was based on statements recorded during the survey, which indicated that SHG & PH was involved in a scheme of tax evasion. However, the tribunal referenced several decisions from coordinate benches, which held that mere admissions by office bearers of the trust do not justify penalizing the assessee. The tribunal cited the case of Narbheram Vishram vs. DCIT, where similar facts were involved, and the deduction under Section 35(1)(ii) was allowed despite the retrospective withdrawal of SHG & PH's approval by the government.5. Drawing inferences from irrelevant instances by CIT(A):The tribunal found that the CIT(A) relied on irrelevant instances and presumptions to uphold the disallowance. The tribunal emphasized that the withdrawal of recognition under Section 35(1)(ii) does not affect the rights of the assessee to claim the deduction, as held in various judicial precedents.Conclusion:The tribunal allowed the appeals for both assessment years 2013-2014 and 2014-2015, directing the AO to grant the deduction under Section 35(1)(ii) of the Act. The tribunal's decision was based on the principle that the assessee should not be penalized for the admissions made by the office bearers of SHG & PH, especially when the assessee was not provided an opportunity for cross-examination, which is against the principles of natural justice. The tribunal also referenced multiple decisions where similar deductions were allowed despite the retrospective withdrawal of the institution's approval.