AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1598
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.... u/s 143(3) is prayed for restoration and quashed the order u/s 263. 2. The Ld. PCIT has erred in not accepting the plea of the appellant as to his fulfilling all the conditions of section 80GGC and genuineness is not required to be looked into by the Ld. assessing officer before allowance of deduction u/s 80GGC. The order u/s 263 dated 16.03.2023 is prayed for setting aside. 3. The Ld. PCIT has erred in passing an order u/s 263 dated 16.03.2023 ignoring the judicial precedents of Delhi Tribunal in the case of Pushp Steel and Mining Private Ltd., Pune Tribunal in Alfa Laval Lund AB. The same is prayed for deletion. 4. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the Grounds at or before the time of final hearing of appeal." 2. Brief facts, as discernible from the orders of lower authorities are that assessee had e-filed return of income for assessment year(AY).2018-19 on 17.09.2018, declaring total income of Rs.1,57,88,570/-. Thereafter, assessee`s case was selected for Limited type scrutiny through CASS for the reason; Viz: (i) deduction from total income (Chapter VI-A)(Business ITR). The assessment was....
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....s were received through cheque and returned in cash, after deducting a small commission. The search clearly revealed this modus operandi. During the course of search proceedings, it was observed that the aforesaid political party, to whom the assessee had given donation, was also found to be not genuine. This party had received the donations by cheque after that the amount withdrawn in cash and paid the cash to the donors after deduction of them commission i.e. around 3% of the total amount and helped the donors to evade the taxes. On the other hand, the assessee availed 100% deduction on such donations. Further on verification it is observed that you have also paid the donations of Rs.2,25,000/ to one trust Tara Foundation and claimed the 50% deductions under chapter VIA i.e. Rs. 1,12,500/-, looking to your nature for claiming deduction to evade the payments of tax. Therefore, it is clear that, this is nothing but accommodation entry to claim bogus donation and thereby evade taxes. Hence, the entire amount of donations of Rs 30,00,000/- was required to be disallowed as 100% deduction has been claimed under chapter VIA and the entire amount of Rs 2,25,000 is required to be disallow....
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.... stated before ld PCIT that order passed by the assessing officer, under section 143(3) of the Act, dated 02.02.2021 has merged with the order of the Commissioner of Income Tax (Appeals), as the assessee has filed, the appeal before the ld CIT(A), therefore, ld PCIT does not have right to revise such assessment order, which is subject matter of appeal before ld CIT(A). 5. The Ld. PCIT had gone through the assessee's submission dated 02.12.2020 filed during the course of original assessment proceedings and the reply of the assessee filed on 06.03.2023 before him and noted that in respect of donation made of Rs.30,00,000/-, to the political party, known as Rashtriya Samajwadi Party (Secular), and it was observed by ld PCIT that assessee furnished copy of four donation receipts of Rs.10,00,000/- dated 01/02/2018 Rs.10,00,000/- dated 02/02/2018 Rs.5,00,000/- dated 07/02/2018 and Rs.5,00,000/- dated 21/02/2018,alltotaling to Rs.30,00,000/, being made to Rashtriya Samajwadi Party. Such receipts as submitted by assessee were reproduced by ld PCIT in his order page Nos. 7 to 8.The assessee has also submitted copy of certificate of registration of Rashtriya Samajwadi Party (Secular),....
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....f the party and then routed through intermediary(ies) (which is generally shell entity(ies) controlled by either the persons running the party or by any other person) in the garb of various purchases or other payments, which are found to be bogus in nature. This money is then re-routed through various layers, and returned to the original donors, primarily in the form of cash, in lieu of some commission that ranges from 3.5% to 5%. It is pertinent to mention here that the political party doesn't pay any tax since itis exempt u/s 13A of the Act. (iii). The modus operendi of such political party for receipt of non-genuine deposit is explained by the ld PCIT on page No. 10 of his order. (iv) During the search proceedings, on 07.09.2022, statement on oath u/s 132(4) of the I.T. Act, was recorded of Smt. Sandhya Singh, National Party President of the Rashtriya Samajwadi Party (Secular).As evident from the declaration made on oath by Smt. Sandhya Singh that although she is national party president of the party, however, all the work related with party is being looked-after by her husband Shri Bishwajeet Singh. She was not aware about any activity of the party. Furthe....
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....ed the modus operandi of the party with respect to donation received by the party. He stated that the party arranges donations through CAs/commission agents from, various individuals. On receipt of such donations, party follows the following two modus: (a).The party withdraws cash from its bank account and returns donated amount to the donors either directly or through angadiya/CAs/commission agents after deducting certain commission. (b).Donated, amount is transferred to bank accounts of various dummy entities. The amount is transferred for layering purpose and to show that such entities have facilitated in purchase of agro-based products e.g. wheat, rice, vegetables etc, from the vendor of APMC market. At least, the donated amounts are transferred to accounts of vendor of APMC Market. From these accounts, cash is with drawn and returned to donors after deducting certain commission. He has categorically stated that these transactions are sham transactions and reflected only on paper. He further stated that no goods are ever being purchased from any entities. He has also mentioned that cash are being withdrawn from the accounts of vendors of APMC Market as there i....
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....ash against such donation which is not found to be recorded in books of account. It is found that assessee has used bogus donation, as a tool to generate unexplained cash and as he is found to be owner of such cash, which is not disclosed in books of account, such cash is "unexplained money" under section 69A of the Act. It is relevant to refer to provision of section 115BBE of the Act which states that when the total income of the Assessee includes, income referred in Section 69A of the Act, the tax payable shall be @ 60% as increased by relevant surcharge and interest. Even on this ground, order of Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 9. The ld PCIT noticed in respect of donation paid to Tara Foundation of Rs.2,25,000/-, that assesses has submitted receipt dated 20.02,2018 along with copy of approval u/s80G(5) of the Act, dated 30.05.2017, copy of PAN card of Tara Foundation and bank account statement highlighting the transaction. However, it was noticed by ld PCIT that the assessee is found to be claiming huge bogus donation payment as deduction under Chapter-VIA to evade payment of tax, however, assessee has paid donation of Rs,2,25,....
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....ank account, statement highlighting the transactions routed through banking channel, however, considering the modus operandi adopted by the political party and to evade payment of tax by claiming bogus deduction under Chapter VIA of the Act, the donation paid to Tara Foundation may be treate das bogus. While passing the Assessment Order, assessing officer has over looked the details of donation received by such parties/trusts which is available on public domain, as discussed herein above and such list does not include the name of assessee. These facts clearly proves that assessment "order passed by assessing officer is prejudicial to interest of revenue as well as erroneous as envisaged in provisions of section 263 of the Act. 11. The ld PCIT also noted that with effect from 01/06/2015, Explanation 2 to the section 263(1) has been, inserted by which scope of section 263 of the Act has been expanded by incorporating the concept of "deemed to be erroneous". The same is reproduced as under: "Explanation 2-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to th....
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....ld PCIT set-aside the order u/s 143(3) of the Act, dated 02.02.2021 on the issues discussed above and ld PCIT directed the Assessing Officer to pass a fresh assessment order to the extent the issues discussed herein above. 13. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 14. Shri Samir Jani, Learned Counsel for the assessee, argued that during the assessment proceedings, the Assessing Officer has issued the notice under section 142(1) of the Act to examine the deductions under Chapter VIA of the Income Tax Act. In response to the said notice, under section 142(1) of the Act, the assessee has submitted detailed reply before the Assessing Officer, which is placed at paper book page no.3 to 37. Before the assessing officer, the assessee has submitted various documents and details, including bank statements, and receipt of donation etc. The ld Counsel for the assessee also relied on the following judgments: (i). Asiatic Bearing Co. ITA No.67/RJT/2022, order dated 10.11.2023. (ii). Smt. Pravinaben Anantrai, ITA No.94/RJT/2020, order dated 15.12.2022. In the light of the above judgements, the ld Counsel stated that Assessing Officer ....
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....gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. First, we should examine the fact whether assessing officer has conducted enquiry by issuing notice under section 142 (1) of the Income Tax Act 1961, in respect of the donation given by the assessee to the tune of Rs.30,00,000/- to Rashtriya Samajwadi party (Secular). The relevant para of the notice issued by the assessing officer under section 142(1) of the Income Tax Act 1961, is reproduced below: "You have furnished the detail/documents in response to the notice u/s 142(1) of the Income Tax Act, 1961 vide letter dated 02 12 2020. It is seen that you have claimed deduction u/s 80D of the Act amounting to Rs 25,0000/- You have submitted the receipt of the payment of the premium towards the mediclaim of amounting to Rs. 26,163/-, paid to the New India Assurance Co. Ltd., dated 23.03.2017. The receipt of the premium paid is belong to the FY 2016-17, i.e. AY 2017-18. Therefore, you are requested to furnish your explanation and furnish th....
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....e cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. We derive support for the proposition as stated above, from the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises 99 ITR 375 (Del). Therefore, we find that what the talk to conduct further enquiry, we note that assessing officer has never conducted enquiry, so far donations of Rs 30,00,000/- to political party,"Rashtriya Samajwadi Party(Secular)" and donation to Tara Foundation of Rs.2,25,000/-,u/s 80G(5) of the Act, are concerned. Hence, we find merit in the submissions of Ld. DR to ....
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....s mentioned in the above judgment, viz: (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him, are applicable to the facts of the assessee`s case under consideration therefore, the order passed by the Assessing Officer can be termed as erroneous order which is prejudicial to the interest of Revenue also. 21. On the identical facts, our view is fortified by the Judgment of the Coordinate Bench of ITAT Mumbai in the case of Babulal as Solanki, in ITA No. 3493/Ahd/2016, order dated March 4, 2019, wherein the coordinate Bench held as follows: "5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 6. We find that the Assessing Officer, vide letter dated 9thDecember 2013, did state, in rather general terms, that where the stamp duty valuation (i.e. jantri value) is different from sale consideration, the assessee has to state whether the stamp duty valuation was adopted as sale consideration. There was neither a specific reference to the facts of this case or the application of Section 50.....
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....ame. As observed by Hon'ble Delhi High Court, in the case of Gee Vee Enterprises Vs ACIT (99 ITR 375), "The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made ....
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.... of revenue and therefore, we uphold the order passed by ld PCIT under section 263 of the Act, dated 16.03.2023. 22. Now, we shall also adjudicate the other arguments advanced by ld. DR for the revenue to the effect that "fraud vitiates everything". In this connection, at the cost of repetition, we reiterate the findings of ld PCIT, which are as follows: (i)Rashtriya Samajwadi Party (Secular) is a Registered Unrecognized Political Party and it is one of the 23 RUPPs covered in the RUPPs Group of Ahmedabad. This party was established on 21.10.2008 and its registered address as per its website is Samruddhi Complex, Opp- Sakar-3, Income Tax Circle, Ahmedabad. However, during pre-search enquiry, no party office is found at the aforesaid address. (ii) The modus-operandi of this political party is that the donation is received through cheque in the bank account of the party and then routed through intermediary(ies) (which is generally shell entity(ies) controlled by either the persons running the party or by any other person) in the garb of various purchases or other payments, which are found to be bogus in nature. It is pertinent to mention here that the political p....
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....i).The party been claiming wrong and invalid exemption, over the years under section 13A of the I.T. Act but it has also been, mentioning in its Income Tax Return of F.Y. 2018-19 that no contribution report has been filed u/s 29C of the R.P. Act, 1951. (ix)Rashtriya Samajwadi Party (Secular) is not registered, as of today, as informed by ld Counsel for the assessee, with Election Commission of India/R.P. Act, 1951. (x) There is no retraction of statements given by Smt. Sandhay Singh, Shri Bishwajeet Singh and Shri Amit Kumar, hence their statements are correct and valid. 23. From the above facts, it is abundantly clear that donation received by "Rashtriya Samajwadi Party" is bogus. The assessee has claimed deduction under Section 80GGC of the Act, and 80G(5) of the Act, which is also bogus and to that extent Assessment Order passed by assessing officer is erroneous and prejudicial to the interest of Revenue. There is a saying that The 'tail' cannot wag the 'dog'. When there is a fraud, then the details and documents submitted by the assessee, before the assessing officer, during the assessment proceedings, do not assist the assessee in any manner, that is, the ....
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....ed in any court even in collateral proceedings." 21. In the said case it was clearly stated that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands. A person whose case is based on falsehood has no right to approach the Court. A litigant who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If a vital document is withheld in order to gain advantage on the other side he would be guilty of playing fraud on court as well as on the opposite party. 22. In Smt. Shrist Dhawan v. M/s. Shaw Brothers [AIR 1992 SC 1555] it has been opined that fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It has been defined as an act of trickery or deceit. The aforesaid principle has been reiterated in Roshan Deen v. Preeti Lal [AIR 2002 SC 33], Ram Preeti Yadav v. U. P. Board of High School and Intermediate Education and other [(2003) 8 SC 311] and Ram Chandra Singh v. Savitri Devi and others [(2003) 8 SCC 319]. 23. In State of Andhra Pradesh and another v. T. Suryachandra Rao [AIR 200....