2020 (1) TMI 1477 - AT - Income Tax

ITAT rules in favor of assessee due to lack of evidence; donation not deemed bogus post-certificate cancellation.

H.N. Metal Corporation Versus DCIT, Cir. 1 (2) Ahmedabad

The ITAT allowed the appeal, ruling in favor of the assessee, as there was insufficient evidence to support treating the donation as bogus. The ... Addition on account of donation made by the assessee to Herbicure Healthcare BioHerbal Research Foundation - HELD THAT:- AO is harping upon an information supplied by the survey team of Kolkatta. He has not specifically recorded statement of representatives of the donee. He has not brought on record any specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. Donation given by the assessee to the donee, on which the assessee no mechanism to check the veracity, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. Appeal of the assessee is allowed. Issues:Appeal against addition of donation made to a foundation.Analysis:The appeal before the ITAT Ahmedabad was against the addition of a donation made by the assessee to a foundation. The assessee had filed the return of income declaring total income, and during the scrutiny, it was found that the donation made to Herbicure Healthcare Bio-Herbal Research Foundation was being misused. The AO treated the donation as bogus based on a survey report, and the CIT(A) upheld the addition.The assessee contended that at the time of donation, the donee was a notified eligible institution, and the certificate for receiving donations was canceled later. The assessee argued that there was no mechanism to verify the genuineness of the donee at the time of donation.The Departmental Representative argued that investigations revealed the bogus nature of the affairs conducted by the donee, justifying the treatment of the donations as bogus.Upon careful consideration, the ITAT found that the AO relied on general information from the survey team without recording specific statements from the donee's representatives. There was no evidence to show that the donations were refunded in cash after deducting commission. The ITAT noted that the cancellation of the certificate occurred two years after the donation, and there was no specific evidence to doubt the genuineness of the donation. As there was no mechanism for the assessee to verify the donee's authenticity, the ITAT allowed the appeal, stating that the donation cannot be doubted solely based on subsequent events.In conclusion, the ITAT allowed the appeal of the assessee, emphasizing the lack of concrete evidence to support the addition of the donation as bogus.