TaxTMI 
TaxTMI 
2026 (7) TMI 565
X X X X Extracts X X X X
X X X X Extracts X X X X
....roving the appellant's direct or indirect involvement in the alleged arrangements. 3. The order of CIT(A) is solely based on the circumstantial evidences without any incriminating or corroborative evidence making it legally unsustainable. 4. The judgements cited by the Ld. CIT(A) in his appeal order does not have direct relevance in the present matter." 3. The brief facts of the case are that the assessee, a salaried employee, derived income under the head "salaries" during the year under consideration and filed his return of income u/s 139(1) of the Act on 28.08.2019, declaring a total income at Rs. 56,79,530/-, after claiming deduction of Rs. 12,00,000/- u/s 80GGC of the Act in respect of a donation made to the political party, Rashtriya Samajwadi Party (Secular). The said claim of deduction was disallowed by the Assessing Officer, who added the amount of Rs. 12,00,000/- to the total income of the assessee, and the disallowance was subsequently confirmed by the Ld. CIT(A). 4. Aggrieved by the order of the Ld. CIT(A), the assessee has filed an appeal before the Tribunal. 5. Before us, the Ld. AR, Shri Ashish B. Kanabar, argued that the assessee has taken....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the onus of establishing that the conditions of taxability are fulfilled; it is always for the Revenue to prove it otherwise. 6. On the other hand, Ld. DR, objected to the case laws quoted by the Ld. AR and argued that the investigations conducted by the Revenue and subsequent cancellation of the registration by the Ld. CIT(E) with regard to the political parties involved in receiving the donations and paying back to the donors. He also submitted that the case relied upon by the Ld. AR in the case of Vithaldas Nathubhai Shah and other cases are totally distinguishable on facts, particularly in the case of Vithaldas Nathubhai Shah which pertains to 263 order. The Ld. DR also contended that there is no direct relevance of the orders and once it is proved by the Revenue that the political party in question has given the monies back to the assessee, the issue cannot be revisited. 7. Rebutting the arguments of the Ld. DR, the Ld. Counsel for the assessee argued that the assessee has made donation in FY 2018-19 under a bona-fide belief and the fact that the donee political party has contested election in 2019 proves the genuine/bona-fide of the donor - assessee. He further argu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eceipt of cash by the assessee also does not merit acceptance. In matters involving tax evasion and accommodation entries, direct evidence is rarely available. The Courts have consistently recognised that taxing authorities are entitled to examine the surrounding circumstances, human probabilities and the test of preponderance of probabilities while determining the real nature of a transaction. Once the Revenue establishes, on the basis of cogent material, that the recipient itself was engaged in systematic accommodation entry operations and that the assessee's transaction forms part of such chain, the burden shifts upon the assessee to rebut the same with credible evidence. In the present case, except relying upon payment through banking channels and donation receipts, no material has been produced to dislodge the findings emerging from the investigation. 8.4 The plea that the assessee acted under a bona fide belief because the political party was registered under Section 29A of the Representation of the People Act is equally unconvincing. Registration under the Representation of the People Act merely entitles a political party to function as a recognised legal entity. Such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 263 where the Tribunal examined the scope of revisional jurisdiction and not the allowability of deduction under Section 80GGC after appreciation of investigation material. Likewise, the other decisions were rendered on their own factual matrix where either the investigation material presently available was absent or the Tribunal was dealing with different issues. 8.9. The further argument that the Revenue has failed to establish direct receipt of money by the assessee also deserves rejection. Tax adjudication proceeds on appreciation of evidence as a whole and not on isolated facts. Where the surrounding circumstances, banking trail, statements recorded during search and conduct of the parties collectively establish the accommodation entry mechanism, insistence upon direct evidence of cash delivery would defeat the very purpose of investigation into clandestine transactions. The cumulative circumstances are sufficient to conclude, on the touchstone of preponderance of probabilities, that the impugned donation was not a genuine voluntary contribution qualifying for deduction under Section 80GGC of the Act. 8.10 Even otherwise also, on careful consideration of the ground....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quiry from the Oriental Bank of Commerce the amount of Rs. 27,00,000/- credited to Sterlite Inc and Rs 25,00,000/- credited to Shah And Co. on 7-10-2015. 2.2. On examination of the RSP bank statement, it was found that it is a general practice of crediting huge cash and subsequently transferring to another party on same day. Further analysis of the transaction particulars reveals that the cash was transferred to mainly four parties namely Guru Enterprise, Unique Trading, Mahavaisnavi and KK Indersriz. It was also observed that no cash withdrawal for expenses like rent, electricity, water, newspaper, fuel etc of RSP and is not reflecting in the bank account. There is an Inspector of Income-tax was deputed to visit the premises of RSP at UG-8. Harekrishna Complex, C.TM Char Rasta, Amraiwadi, Ahmedabad- 380026 on 15-11-2018 The Inspector submitted his report that RSP office situated on 2nd Floor of 3 storey building which is a small shop and shutter of which was half closed on that day. Nearby peoples were inquired that RSP Office which is found to be closed in most of the times. Copy of the said RSP Office photographs is reproduced in the assessment order. Further perusal of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e ground realities. The facts of the case cannot be considered in isolation with the ground realities. It will, therefore, be useful to understand as to how the shell entries, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions to give it colour of a normal business entity used as a vehicle for various financial manoeuvers. A shell entity, by itself, it not an illegal entity but it is their act of abatement, of, and being part of financial manoeuvring to legitimize illicit monies and evade taxes, that takes it actions beyond what is legally permissible These entities have every semblance of a genuine business its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets its apart from a genuine business entity is lack of genuineness in its actual operations. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed before it was to be dismissed Whether Special Leave Petition against impugned order was to be dismissed. 5.2 In the absence of any evidence from the assessee, the grounds raised by the assessee are untenable and therefore the same is rejected. The findings given by the lower authorities does not require any interference and the addition is sustained. It is pertinent to mention here that out of two political parties to whom the appellant paid total donation of Rs. 1,13,51,000/- the modus operandi of the one political party named the Rashtriya Samajwadi Party (Secular) has already been discussed in details in the preceding paragraphs of the instant order. It can be safely presumed that the modus operandi of other political party named Kisan party of India is also indulging only in providing accommodation entry as can be ascertained from various newspaper reports and enquiries which is being conducted by various institutions. In view of the findings in the above case I am inclined to agree with the decision made by the AO during the assessment proceedings regarding the donation made was basically a bogus donation as the Political Party is indulging only i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of ready reference, the detailed adjudication in the case of Milind Pankajbhai Shroff, vs The Pr. CIT 1, Rajkot in ITA No.93/RJT/2023 dtd 20/05/2024 is reproduced as under :- "22. Now, we shall also adjudicate the other arguments advanced by Id. DR for the revenue to the effect that "fraud vitiates everything". In this connection, at the cost of repetition, we reiterate the findings of Id 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not filed any contribution report, since F.Y. 2013-14 onward. (viii) 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 Id 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. On analysis of gathered data of the conducted search, it was learnt that these RUPP's are either not carrying out any sort of genuine political or social activity or they are carrying out such activities to project themselves as genuine parties. However, in reality these political parties are being used as a vehicle of accommodation entries under the garb of political activities. The biggest advantage of creating a façade of a political party to propagate the accommodation entry scam is the fact that t....