2022 (7) TMI 1416 - AT - Income Tax

Disallowance of the deduction claimed u/s 35AC - making the donation to M/s.Navjeevan Charitable Trust - HELD THAT - Issue decided in favour of assessee as relying on P.M. Bhimani Orgochem Pvt. Ltd. 2021 (12) TMI 987 - ITAT AHMEDABAD assessee has made the donation as per the provisions of the Income Tax Act and no defect was pointed out by the Assessing Officer or by the CIT(A) regarding the donation to Navjeevan Charitable Trust. In fact the Revenue authorities could not establish that the said amount was returned back to the assessee from any of the records as well. Decided in favour of assessee.

Summary

Issues:
Disallowance of deduction claimed under section 35AC for donation to M/s. Navjeevan Charitable Trust.

Analysis:
The appeal was filed by the Assessee against the order of the Commissioner of Income (Appeals) confirming the disallowance of the deduction claimed under section 35AC for donating Rs.30,00,000 to M/s. Navjeevan Charitable Trust. The Assessee, a private limited company engaged in trading, made the donation under section 35AC of the Income Tax Act. However, the Assessing Officer (AO) treated the donation as bogus due to a search operation revealing the trust's involvement in fraudulent activities, leading to the cancellation of its registration. The Assessee's appeal to the CIT(A) was unsuccessful, prompting the current appeal.

In a similar case involving the P.M. Bhimani Orgochem Pvt. Ltd., the Tribunal decided in favor of the Assessee regarding the donation to Navjeevan Charitable Trust. It was noted that the Trust was operational at the time of donation, and no evidence suggested the donations were returned in cash. The Tribunal emphasized the importance of cross-examination and verification of statements recorded during survey operations before using them against the Assessee. The Tribunal's decision was based on the principle that statements not cross-examined cannot be used against the Assessee.

The Tribunal found no distinguishing facts or defects in the Assessee's donation process, allowing the appeal for the Assessment Year 2010-11. For subsequent years (2011-12 & 2012-13), where identical issues arose, the appeals were also allowed. The Revenue failed to provide material indicating any overturning of the Tribunal's decision or any contrary binding decision. Consequently, the Tribunal upheld the decision in favor of the Assessee, emphasizing the lack of evidence supporting the disallowance of the deduction under section 35AC for the donation to Navjeevan Charitable Trust.

In conclusion, the Tribunal allowed the Assessee's appeal, setting aside the CIT(A)'s decision to disallow the deduction claimed under section 35AC for the donation to M/s. Navjeevan Charitable Trust. The Tribunal's decision was based on the lack of concrete evidence supporting the disallowance and the importance of verifying statements before using them against the Assessee.