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2023 (7) TMI 1510 - AT - Income TaxAddition of bogus donation as expenditure claimed u/s. 35(1)(ii) - During the course of assessment proceedings, assessee took note of its mistake in claiming deduction in respect of donation made to MIERE u/s. 80G instead of u/s. 35(1)(ii) - HELD THAT - From the judgment of Batanagar Education and Research Trust 2021 (8) TMI 139 - SUPREME COURT the apprehension on the factual aspect of utilization of money by the recipient donee trusts for the approved programme which remained open, is set to rest by the fact-based conclusion arrived at, as quoted above. Hon'ble Court has made reference to the outcome of the survey at SHGPH and the post survey enquiry conducted upon Batanagar Education and Research Trust to conclude about the organized fraud. This very judgment of Batanagar Education and Research Trust (supra) was relied upon and analysed in the decision of Tarasafe International Pvt. Ltd. ORs 2022 (12) TMI 1545 - ITAT KOLKATA recorded finding of facts, based on the material placed before it by the Revenue in voluminous paper books gathered in the course of survey conducted u/s. 133A in the case of the donee trusts as well as post survey enquiries. In the present case before us, the donee trusts are the same whose facts and credible material were brought on record by the Revenue and considered by the Coordinate Bench. Claim of deductions by the donors have already been disproved by the Revenue by dispelling the claim of first onus discharged by the donors, on the strength of credible material. These fact findings are substantive and cannot be overlooked in the present case wherein the donee trusts are the same. There is nothing brought on record by assessee to rebut these factual findings except for relying on the judgment of Chotatingrai Tea 1998 (12) TMI 81 - GAUHATI HIGH COURT which is distinguished in the light of recent judgment of Batanagar Education and Research Trust (supra) as discussed above. Thus, we hold that assessee is not entitled for the deduction claimed u/s. 35(1)(ii) of the Act in respect of payments made to both SHGHP and MIERE(the done trusts). Relief granted by CIT (A) on this issue is set aside. Grounds taken by the Revenue are allowed.
Issues Involved:
1. Deletion of addition of Rs. 1,75,00,000/- as bogus donation claimed under section 35(1)(ii) of the Income Tax Act, 1961. 2. Withdrawal of recognition by CBDT for the donee institutions and its impact on the claim of deduction. 3. Consideration of the jurisdictional High Court's decision in Swati Bajaj and its relevance to the case. 4. Restriction of addition under section 14A of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 1,75,00,000/- as Bogus Donation: The primary issue revolves around whether the CIT(A) erred in law in deleting the addition made by the Assessing Officer (AO) for a bogus donation claimed under section 35(1)(ii) of the Income Tax Act, 1961. The AO disallowed the deduction claimed by the assessee on donations made to two institutions, School of Human Genetics & Population Health (SHGPH) and Matrivani Institute of Experimental Research & Education (MIERE), citing that these institutions were engaged in accepting bogus donations and returning the amounts to donors in cash. The CIT(A) allowed the deduction based on the fact that the institutions had valid registration and approval at the time the donations were made, relying on the decision of the Hon'ble Calcutta High Court in the case of Maco Corporation (India) (P) Ltd. However, the Tribunal, while considering the decision of the Hon'ble Supreme Court in Batanagar Education and Research Trust, highlighted that the donations were part of an organized fraud and hence, the deduction under section 35(1)(ii) was not permissible. The Tribunal set aside the relief granted by the CIT(A) on this issue. 2. Withdrawal of Recognition by CBDT: The revenue contended that the CBDT had withdrawn the recognition granted to the donee institutions, which invalidated their authority to receive donations for the purpose of claiming deductions under section 35(1)(ii). The CIT(A) observed that the withdrawal of approval had a retrospective effect, but the deduction should not be denied merely on the grounds of subsequent withdrawal. The Tribunal, however, found that the retrospective withdrawal was justified based on the fraudulent activities of the institutions, as evidenced by the survey and investigation reports. The Tribunal concluded that the assessee's claim for deduction was not sustainable due to the organized fraud and misuse of the charitable status by the donee institutions. 3. Consideration of Jurisdictional High Court's Decision in Swati Bajaj: The revenue argued that the CIT(A) ignored the jurisdictional High Court's decision in Swati Bajaj, which upheld additions based on findings of the Investigation Wing. The Tribunal noted that similar issues of bogus claims and fraudulent activities were addressed in the Swati Bajaj case, where the High Court had set aside ITAT orders favoring assessees. The Tribunal applied the reasoning from Swati Bajaj, emphasizing that the deductions claimed were part of an organized fraud, and upheld the revenue's stance against the deduction under section 35(1)(ii). 4. Restriction of Addition under Section 14A: The revenue also contested the CIT(A)'s decision to restrict the addition under section 14A to Rs. 26,610/-. The CIT(A) had considered the assessee's own funds and investments yielding exempt income, along with the suo moto disallowance by the assessee. The Tribunal found no reason to interfere with the CIT(A)'s findings on this issue and dismissed the revenue's grounds related to section 14A. Conclusion: The Tribunal partly allowed the revenue's appeal, setting aside the relief granted by the CIT(A) regarding the deduction under section 35(1)(ii) due to the fraudulent nature of the donations and upheld the CIT(A)'s decision on section 14A. The judgment underscores the importance of genuine compliance with statutory provisions and the repercussions of engaging in fraudulent tax practices.
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