TaxTMI 
TaxTMI 
2025 (7) TMI 1680
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....sessment to investigate (i) Unsecured loans and (ii) Deduction claimed under chapter VI-A of the Act. During the assessment proceedings the Assessing Officer issued notice u/s.142(1) of the Act dated 26.11.2020 calling for the details of the donation of Rs.25,00,000/- paid to political parties and also details of unsecured loans. The Assessing Officer received a reply on 09.01.2021 based on that completed the assessment order by making Nil addition. 3. Perusal of the above Assessment Order, by the Ld.PCIT found that when the donation of Rs.25,00,000/- and the claim of deduction u/s.80GGC of the Act by the assessee to four political parties namely Sardar Vallabhbhai Patel Party, Manav Adhikar National Party, Kisan Party of India and Bahujan Suraksha Dal has not been correct since several persons related to the political parties have confessed to running a scheme of bogus donation. Though accepted to have received donations and later refunded of the same to the donors after subtracting their commission amount. As per the findings of the search and statement of person managing the affairs of these political parties revealed that the donations made by them are part of elaborate sche....
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....at your honour has directly adopted the information received from the investigation wing. It is well settled principle of law that before initiating any provisions of assessment, adequate inquiry ought to have been made. The information received from any source should have been tested before invoking any provisions of the Act. Reliance is placed on the decision of Hon'ble ITAT Delhi Bench in case of Dwarkadhish Buildwell Pvt. Ltd. vs. CIT (109 taxmann.com 5) (dtd:01.07.2019) in which it was held that if the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry if the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. Your honour has mechanically relied upon the information received from DDIT (Inv), A'bad without possessing any precise information or corroborative evidence to allege the assessee. Provisions of section 263 are not mechanical that the principal commissioner can exercise without testing the information before issuing a revisional show cause notice. 147 Therefore, no revision should be made in such a ....
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.... 4. The above reply was considered by the Ld. PCIT and the same was found not acceptable by observing as follows: "... It has emerged from the statement u/s.132 of the Act dated 02.02.2021 of Shri Champak N Prajapati recorded during a search action related to bogus donation to parties as under: From the above statement, it is evident that there are many registered political parties, including the ones in which assessee has made donations, that are active only for 'cash-back' work. ii. The assessee has contended that the AO did his best on the basis of the facts and material available with him at the time of assessment proceedings and that the AO has formed a scrutinised opinion only after satisfying himself it has been further asserted by the assessee that this cannot be tantamount to error on part of the assessing officer in concluding the assessment merely because the Pr. CIT got some other material from investigation wing In this regard, it is significant to cite the case of CIT vs. Shree Manjunatheaware Packing Products & Camphor Works [1998] 231ITR 53(SC), wherein the hon'ble Supreme Court has held that the power of the Commissioner to ....
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....that as seen from above para 4(1), Shri Champak N. Prajapati has accepted during recording of his statement that he works in connivance with the entry providers/ shroffs who facilitate the cash-back work Further, in order to expose any nexus between the assessee and bogus donation, detailed investigation/ enquiry is required which is why fresh assessment proceedings need to be initiated as the order dated 15.03.2021 has been passed without making inquiries or verification which should have been made by the A.O. 4.1. Thus, the Ld. PCIT set-aside the Assessment Order dated 15.03.2021 as erroneous in so far as prejudicial to the interest of Revenue within the meaning of provisions of section 263 of the Act and directed the Assessing Officer to make fresh assessment on the donation of Rs.25,00,000/- after making all the necessary enquiries by giving adequate opportunities of hearing to the assessee. 5. Aggrieved against the revision order, the assessee is in appeal before us raising the following Grounds of Appeal: 1.1 The order passed u/s.263 on 31.03.2023 for A.Y.2018-19 by PCIT, Ahmedabad-1, Ahmedabd directing the AO to review the allowability of Donation claimed u/s ....
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....n from the Paper Book 1 filed by the assessee, pursuance to the show-cause notice dated 27.03.2023, the assessee requested for copies of the statement relied by the Ld. PCIT, which were furnished to him on 29.03.2023. In reply, the assessee claimed that the statement furnished is incomplete and so called person Shri Champak N Prajapati's statement cannot be relied upon, since he did not have any position in any of the political parties. However, the same was considered by the Ld.PCIT and found not acceptable, the same which is reproduced in paragraph no.4 above, which is self explanatory. Thus, we do not find any infirmity in the revision order passed by the PCIT setting-aside the Assessment Order passed by the Assessing Officer to make fresh assessment by properly verifying the claim of donation claimed u/s.80GGC of the Act. 8.1 The case law relied by the Counsel namely Shardaben B Patel, wherein information received by the PCIT from DIT(Investigation) were not provided to the assessee at any stage of the revision proceedings and PCIT was remained silent on the contents of interim reply filed by the assessee against invocation of revision. It is under the circumstances Co-ordin....
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....rough 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 Id. 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, te. AY 2017-18 Therefore, you are requested to furnish your explanation and furnish the documen....
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....igator. 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. 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....
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....essee's facts under consideration, as the conditions 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 9th December 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 refer....
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.... Assessing Officer chose to remain silent on the same. 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 he 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. correct Of course, if the explanation given by the assessee was of the nature as could possibly satisfy the situation would have been different. The explanation given by the assessee in this case, however was simply not a legally possible view of the matter Even in the oft quoted case of Malabar Industrial Co Ltd Vs CIT (243 ITR 83), Hon ble Supreme Court ha....
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....ad. 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 party doesn't pay any tax since it is exempt u/s 13A of the Act. (iii) 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 a....
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....t 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 assessee cannot take the plea that he has submitted enough documents and details before the assessing officer and assessing officer has taken the plausible view. For that reliance can be placed on the judgment of the Coordinate Bench of ITAT Pune, in the case of Abhishek Ashok Lohade in ITA No.816/PUN/2018, order dated 22.11.2022. the findings of the Coordinate Bench of ITAT Pune, are reproduced below: 9. There is yet one more reason ax to why we are inclined to confirm the addition made by Asses....
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....side he would be guilty of playing fraud on court as well as on the opposite party. 22. In Smt. Shrist Dhawan v. Mix Shaw Brothers [AIR 1992 SC 15551 it has been opined that fraud and collusion vitiate even the most solema 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 Deenv Preeti Lal [AIR 2002 SC 331. Ram Preeti Yadav v. UP Board of High School and Intermediate Education and other (2003) & 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 2005 SC 31101 after referring to the earlier decision this court observed as follows- "In Lazaurs Estate Ltd. v. Beasley [(1956) | QB 702] Lord Denning observed at pages 712 & 213. No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud unravels everything in the same judgment Lord Parker LJ observed that found valets all transactions known to the law of however high a degree of solemnity 24. Yet in another decision Hamza Haji v. State of Kerala & Anr. [AIR ....