2022 (3) TMI 1451 - AT - Income Tax

Tribunal grants appeal, nullifies Rs. 52,50,000 addition as bogus donation under Section 35(1)(ii).

Bhavesh Arunkumar Shah Versus ACIT – 19 (1) MUMBAI

Bhavesh Arunkumar Shah Versus ACIT – 19 (1) MUMBAI - TMI Issues Involved:1. Jurisdiction for initiating reassessment proceedings under Section 147 of the Income Tax Act.2. Confirmation of addition of Rs. 52,50,000/- as bogus donation under Section 35(1)(ii).3. Denial of opportunity for cross-examination, violating principles of natural justice.Detailed Analysis:1. Jurisdiction for Initiating Reassessment Proceedings:The assessee contested the assumption of jurisdiction by the Assessing Officer (A.O.) for initiating reassessment proceedings under Section 147 of the Income Tax Act, arguing that the conditions laid down under the Act for such proceedings were not fulfilled. However, this issue was not pressed by the assessee during the hearing before the Tribunal and was left open.2. Confirmation of Addition as Bogus Donation:The primary dispute revolved around the addition of Rs. 52,50,000/- claimed as a deduction under Section 35(1)(ii) for donations made to M/s Herbicure Health Care Bio Herbal Research Foundation (HHBRF). The A.O. received information from the DDIT (Inv) Kolkata that the donation was bogus and that HHBRF provided accommodation entries for such donations. Despite the assessee submitting donation receipts, a certificate of registration under Section 12AA, and other documentary evidence, the A.O. treated the donation as an accommodation entry and denied the claim, leading to an assessed total income of Rs. 74,44,300/-.The Tribunal reviewed the material on record and noted that the assessee's submissions were supported by evidence. It referred to several decisions of the ITAT, including M/s Sopariwala Exports Pvt Ltd vs. DCIT, where similar issues were decided in favor of the assessee. The Tribunal emphasized that mere retrospective withdrawal of recognition of the payee institution by the CBDT does not affect the assessee's right to claim the deduction if the donation was made when the institution was duly recognized. The Tribunal cited the case of Kitchen Essentials vs. ACIT, which held that the disallowance based on retrospective cancellation of the institution's recognition was not justified.3. Denial of Opportunity for Cross-Examination:The assessee argued that they were not provided an opportunity to cross-examine the persons whose statements were relied upon by the A.O., nor were they given copies of such statements or any material evidence. This, the assessee claimed, was against the principles of natural justice. The Tribunal acknowledged that not providing the opportunity for cross-examination is indeed against the principles of natural justice, referencing the judgment of the Hon'ble Delhi High Court in CIT vs. Dharam Pal Prem Chand Ltd.Conclusion:The Tribunal found that the facts of the case were similar to those in previous decisions where the ITAT had ruled in favor of the assessee. It concluded that the withdrawal of recognition of HHBRF after the donation was made did not invalidate the assessee's claim for deduction under Section 35(1)(ii). Consequently, the Tribunal set aside the order of the CIT(A) and directed the A.O. to delete the addition, allowing the appeal in favor of the assessee.Order:The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 23.03.2022.