Tribunal Grants Assessee's Deductions, Orders Advance Tax Credit Verification

The Tribunal allowed the appeal of the assessee, granting the deductions claimed under Sections 35(1)(iii) and 35AC, and directing verification and allowance of the advance tax credit. The order was pronounced in the open court on 28.02.2023.

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Issues Involved:
1. Disallowance of deduction claimed under Section 35(1)(iii) and Section 35AC of the Income-tax Act, 1961.
2. Credit of Rs.10,00,000/- towards advance tax paid not given in computation of tax as reflected in Form 26AS.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claimed Under Section 35(1)(iii) and Section 35AC of the Income-tax Act, 1961

The assessee filed its return of income for the Assessment Year 2015-16, reporting a total income of Rs.56,66,010/-. During the scrutiny assessment, the Assessing Officer (AO) noted that the assessee claimed deductions totaling Rs.2,38,25,000/-, which included Rs.1,41,25,000/- under Section 35(1)(iii) and Rs.97,00,000/- under Section 35AC. The AO disallowed these deductions, alleging that the contributions were bogus, based on reports and statements from the Investigation Wing, which indicated that the trusts were engaged in providing bogus donations in exchange for commission income.

The assessee appealed to the CIT(A), reiterating that all necessary documents were provided to substantiate the deductions. The CIT(A) upheld the AO's disallowance, leading the assessee to appeal before the Tribunal.

Before the Tribunal, the assessee's counsel provided detailed submissions and documentary evidence to demonstrate the genuineness of the transactions with the three trusts/institutions involved:

a. Kashba Youth (Section 35(1)(iii))
- Registered under Section 12A and recognized by the Central Government under Section 35(1)(iii).
- Donations were made via account payee cheque/RTGS, and necessary documents were provided.
- The AO relied on statements from the trust's secretary, alleging involvement of a third party (Shri Raj Kr. Mishra) in providing accommodation entries, without corroborative material or evidence.

b. Red Plus Society (Section 35AC)
- Registered under the West Bengal Societies Act and approved under Section 35AC.
- Donations were made through proper banking channels, and necessary documents were provided.
- The AO relied on statements from two individuals (Mr. Praveen Agarwal and Mr. Umesh Singh) alleging bogus transactions, without providing the assessee an opportunity for cross-examination.

c. Gohaldiha Jati Upajati Blue Bird Women's Welfare Centre (Section 35AC)
- Registered under the West Bengal Societies Act and approved under Section 35AC.
- Donations were made through proper banking channels, and necessary documents were provided.
- The AO took an adverse view due to the secretary's non-response to summons, without conducting independent enquiries.

The Tribunal noted that the AO did not conduct independent enquiries or rebut the documentary evidence provided by the assessee. The reliance on statements and reports from the Investigation Wing without providing the assessee an opportunity for cross-examination was a violation of natural justice. The Tribunal cited the Supreme Court's judgment in CIT vs Andaman Timber Industries Ltd., emphasizing the importance of cross-examination and adherence to principles of natural justice.

The Tribunal concluded that the AO's disallowance was based on suspicion and surmise, without independent verification or corroborative evidence. Therefore, the Tribunal allowed the assessee's claim for deductions under Sections 35(1)(iii) and 35AC.

2. Credit of Rs.10,00,000/- Towards Advance Tax Paid

The assessee claimed that a credit of Rs.10,00,000/- towards advance tax paid was not given in the computation of tax. The CIT(A) directed the AO to verify the claim from Form 26AS and the bank statement and allow the credit based on verification. The Tribunal upheld this direction, allowing the ground taken by the assessee.

Conclusion:

The Tribunal allowed the appeal of the assessee, granting the deductions claimed under Sections 35(1)(iii) and 35AC and directing verification and allowance of the advance tax credit. The order was pronounced in the open court on 28.02.2023.

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