2022 (5) TMI 1145 - AT - Income Tax

Successful Appeal: Deduction Upheld for Donations Despite Recognition Withdrawal

Lord Real Estate Pvt. Ltd. Versus DCIT, CIRCLE-10 (1), Kolkata

The Tribunal allowed the appeal, holding the disallowance of the deduction under Section 35(1)(ii) unwarranted. Validating the reassessment proceedings, ... Deduction claimed u/s 35(1)(ii) - scope of withdrawal of recognition u/s 35(1)(ii) - donation made by the appellant to the School of Human Genetics & Population Health (SHGPH) and consequent deduction being 175% of the amount of donation made - HELD THAT:- As perused the material available on record on the identical facts, in the case M/s. Maco Corporation (India) Pvt. Ltd. [2018 (3) TMI 811 - ITAT KOLKATA] had held that withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of payee organisation would not affect the right and interest of the assessee for claim of deduction u/s 35(1)(ii) of the Act. We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted - See Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd [2018 (2) TMI 1220 - SUPREME COURT] - Decided in favour of assessee. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of the assessment framed under Section 143(3)/147 of the Income Tax Act, 1961.3. Legitimacy of the deduction claimed under Section 35(1)(ii) of the Income Tax Act, 1961.4. The impact of retrospective withdrawal of recognition of the donee institution on the assessee's right to claim deduction.Detailed Analysis:1. Condonation of Delay:The appeal was time-barred by 601 days. The assessee's counsel submitted an affidavit explaining the delay. After reviewing the affidavit and considering the larger interest of justice, the Tribunal condoned the delay and admitted the appeal for adjudication.2. Validity of Assessment under Section 143(3)/147:The assessee contended that the assessment framed under Section 143(3)/147 was invalid as no notice under Section 142(1) or any show cause notice regarding the disallowance of the claim was issued. The Tribunal noted that the reassessment proceedings were initiated based on information received about bogus donations. The Principal Director of Income Tax (Inv.), Kolkata, had identified the assessee as one of the donors involved in the bogus donation syndicate. The assessee's return was reopened under Section 148, and subsequent notices under Sections 143(2) and 142(1) were issued. The Tribunal found that the reassessment proceedings were validly initiated and dismissed the assessee's contention.3. Legitimacy of Deduction under Section 35(1)(ii):The core issue was the disallowance of the deduction claimed under Section 35(1)(ii) for a donation of Rs. 4,50,000 to the School of Human Genetics & Population Health (SHGPH). The assessee claimed a deduction of Rs. 7,87,500 (175% of the donation). The Assessing Officer (AO) disallowed the deduction, citing that SHGPH had admitted before the Income Tax Settlement Commission that it provided accommodation entries for bogus donations in lieu of service charges. The Tribunal examined the judicial precedents and found that the withdrawal of recognition of the donee institution would not affect the assessee's right to claim the deduction if the donation was made when the institution held valid recognition.4. Impact of Retrospective Withdrawal of Recognition:The Tribunal referred to the decision in the case of DCIT, Circle-12(1), Kolkata vs. M/s. Maco Corporation (India) Pvt. Ltd., where it was held that there is no provision in Section 35(1)(ii) for retrospective withdrawal of recognition. The Tribunal also cited the Supreme Court's decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs. CIT, which held that quasi-judicial orders like registration under Section 12A cannot be withdrawn retrospectively unless expressly provided by the statute. Following these precedents, the Tribunal concluded that the assessee's right to claim the deduction under Section 35(1)(ii) was unaffected by the retrospective withdrawal of recognition of SHGPH.Conclusion:The Tribunal allowed the assessee's appeal, holding that the disallowance of the deduction under Section 35(1)(ii) was unwarranted. The reassessment proceedings were found to be valid, and the delay in filing the appeal was condoned. The Tribunal emphasized that the withdrawal of recognition of the donee institution did not affect the assessee's right to claim the deduction for donations made when the institution held valid recognition. The appeal was allowed, and the disallowance made by the AO was deleted.Order Pronounced:The order was pronounced in the Open Court on 10th May, 2022.