2020 (3) TMI 1270 - AT - Income Tax

Entitled for the benefit of the donation made to SHG PH u/s 35(1)(ii) - donations made to the institution SGH PH and NCT - HELD THAT- Regarding the donations made to SGH PH it is the undisputed facts that at the relevant time of donation to SHG PH , the institution was approved u/s 35(1)(ii) though such approval has been withdrawn on a later date by the Government by issuing notification. Thus, the assessee cannot be denied the benefit of deduction provided u/s 35(1)(ii) merely on the ground that the approval was withdrawn by the Government on a later date. We place our reliance on the order of this tribunal involving identical issue which has been decided in favour of the assessee in the case of ACIT v/s M/s Thakkar Govindbhai Ganpatlal HUF 2019 (7) TMI 1559 - ITAT AHMEDABAD . We disagree with the finding of the authorities below. Accordingly we hold that the assessee is entitled for the benefit of the donation made to SHG PH u/s 35(1)(ii) of the Act. Regarding the donation made to the NCT , we note that the benefit of the deduction under section 35AC of the Act was denied to the assessee on the reasoning that the trustee of such trust in the statement given under section 133A during the survey operation has admitted the fact the NCT is engaged in the activity of providing the accommodating entries to the parties. Admittedly there was no cross-examination provided to the assessee of the trustees who have admitted to be engaged in providing accommodating entries. Thus the question arises whether the assessee can be denied the benefit of the deduction under section 35AC on the basis of the statement recorded during survey operation which were not cross verified despite the request was made to the AO by the asssessee. In our considered view the answer stands in favour of the assessee. The statement recorded during survey operation cannot be used against the assessee until and unless it is cross verified in view of the judgment in the case of CIT v/s Chartered Speed Pvt. Ltd 2015 (3) TMI 809 - GUJARAT HIGH COURT . Revenue has not brought any tangible material suggesting that the donation paid by the assessee to NCT has come back to it in the form of cash. Thus in the absence of necessary documentary evidence, we are not inclined to confirm the order of the authorities below. We set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

Issues Involved:
1. Legality and factual correctness of the CIT(A)'s order.
2. Addition/disallowance of ?1,12,50,000/- regarding donations to School of Human Genetics & Population Health and Navjivan Charitable Trust.
3. Use of evidence collected behind the back of the assessee.
4. Denial of opportunity to cross-examine persons whose statements were used by the AO.
5. Entitlement to deductions for donations under sections 35(1)(ii) and 35AC.
6. Impact of subsequent withdrawal of approval for the institution on the legitimacy of deductions.

Issue-Wise Detailed Analysis:

1. Legality and Factual Correctness of the CIT(A)'s Order:
The assessee argued that the CIT(A) failed to appreciate its submissions properly and did not address various factual and legal contentions raised. The appellate order was claimed to be perverse and requested to be canceled.

2. Addition/Disallowance of ?1,12,50,000/- for Donations:
The assessee claimed deductions for donations made to the School of Human Genetics & Population Health (SHG & PH) and Navjivan Charitable Trust (NCT), which were eligible for deductions under sections 35(1)(ii) and 35AC, respectively. The AO disallowed these deductions, alleging that the donations were returned in cash after deducting a commission, based on information from a survey by the Kolkata Directorate and statements from trustees. The CIT(A) upheld the AO's decision, noting that the institutions were involved in bogus transactions.

3. Use of Evidence Collected Behind the Back of the Assessee:
The assessee contended that the AO used evidence collected behind its back without providing copies of statements or an opportunity for cross-examination. The AO's reliance on such evidence was claimed to be a violation of natural justice.

4. Denial of Opportunity to Cross-Examine:
The assessee argued that it was not given an opportunity to cross-examine the persons whose statements were used by the AO. The CIT(A) upheld the AO's decision despite this contention.

5. Entitlement to Deductions for Donations:
The assessee asserted that it was legitimately entitled to deductions for the donations made, as the institutions were approved under the relevant sections at the time of donation. The AO and CIT(A) disallowed the deductions, citing the subsequent withdrawal of approval and allegations of bogus transactions.

6. Impact of Subsequent Withdrawal of Approval:
The AO disallowed the deduction for donations to SHG & PH, citing the withdrawal of approval by the Central Board of Direct Taxes. The assessee argued that the approval was in force at the time of donation, and subsequent withdrawal should not affect the legitimacy of the claim. The CIT(A) upheld the AO's decision, presuming the transactions were bogus.

Tribunal's Findings:

On Donations to SHG & PH:
The Tribunal noted that at the time of donation, SHG & PH was approved under section 35(1)(ii). The subsequent withdrawal of approval does not justify disallowing the deduction. The Tribunal relied on a previous decision in a similar case (ACIT vs. M/s Thakkar Govindbhai Ganpatlal HUF), where it was held that donations made to an institution approved at the time cannot be disallowed based on later withdrawal. The Tribunal disagreed with the lower authorities and held that the assessee is entitled to the deduction.

On Donations to NCT:
The Tribunal observed that the denial of deduction was based on statements recorded during a survey, which were not cross-examined. Citing the Gujarat High Court's judgment in CIT vs. Chartered Speed Pvt. Ltd., the Tribunal held that statements recorded during a survey cannot be used against the assessee without cross-examination. The Tribunal noted the absence of tangible evidence showing that the donation was returned in cash. Consequently, the Tribunal set aside the CIT(A)'s findings and directed the AO to delete the addition.

Conclusion:
The Tribunal allowed the appeal, holding that the assessee is entitled to the deductions for donations made to both SHG & PH and NCT. The orders of the lower authorities were set aside, and the additions were directed to be deleted.

← Previous Next →