2021 (9) TMI 288 - AT - Income Tax

Deduction u/s 35(1)(ii) - weighted deduction to donation to School of Human Genetics and Pollution Health ( SHG PH) - proof of valid approval granted under the Act by the CBDT - Whether cancellation of registration to SHG PH vide CBDT order dated 15.09.2016 with retrospective effect can invalidate the assesse s claim of deduction under Sec. 35(1)(ii)? - HELD THAT - If the assessee acting upon a valid registration/approval granted to an institution had donated the amount for which deduction is claimed such deduction cannot be disallowed if at a later point of time the same is cancelled with retrospective effect. We have perused the aforesaid judicial pronouncements relied upon by the ld. A.R and are persuaded to accept his claim that the issue involved in the present appeal is squarely covered by the view taken by the co-ordinate benches of the Tribunal. Recently a co-ordinate bench of Tribunal i.e ITAT Mumbai Bench C Mumbai in the case of M/s Pooja Hardware Pvt. Ltd. 2019 (10) TMI 1281 - ITAT MUMBAI had after relying on the earlier orders of the co-ordinate benches of the Tribunal on the issue pertaining to the allowability of deduction under Sec. 35(1)(ii) of the Act in respect of a donation given to SHG PH by the assessee before them had vacated the disallowance of the assessee s claim for deduction under Sec.35(1)(ii) Accordingly we set-aside the order of the CIT(A) and vacate the disallowance of the assessee s claim for deduction under Sec.35(1)(ii) . Ad hoc disallowance of 20% of the expenses - expenditure been disallowed by the A.O on the basis of his conviction that the personal element in incurring of the said expenditure could not be ruled out - HELD THAT - Admittedly it is a matter of fact borne from the records that neither of the lower authorities had pointed out as to what all expenses claimed by the assessee were not supported by documentary evidences nor earmarked those which as per them did not inspire much of confidence. Also nothing is discernible from the records which would reveal as to what all expenses the A.O was of the view had not been incurred by the assessee wholly and exclusively for the purpose of his profession. In the backdrop of the aforesaid facts we find substantial force in the claim of the ld. A.R that devoid of any such specific finding by the lower authorities the disallowance of the aforesaid expenses in a most arbitrary manner on an ad hoc basis could by no means be held to be justified - Decided in favour of assessee. Addition u/s 68 - unexplained cash credit - assessee received the gift from his father - discharge the primary onus as cast upon to prove the nature and source of the cash credit - HELD THAT - As both the financial statement of Shri. Virendra Tandon (father) for the year under consideration i.e A.Y 2014-15 as well as his admission in the gift deed dated 21.06.2013 a/w a mention of the source of the gift transaction in question i.e accumulated savings of the past as were filed by the assessee with the A.O in the course of the assessment proceedings therein clearly sufficed to discharge the primary onus that was cast upon him to prove the nature and source of the cash credit in his books of accounts. A.O on the basis of half-baked facts and premature observations and all the more without considering the material that was filed by the assessee in the course of the assessment proceedings before him had rejected the assessee s claim of having received the gift from his father; and treated the same as an unexplained cash credit within the meaning of Sec. 68 of the Act. We cannot remain oblivious of the fact that Shri Virendra Tandon had duly disclosed the gift transaction in his financial statement for the year under consideration i.e A.Y 2014-15 and also categorically admitted in the gift deed dated 21.06.2013 of having gifted the amount in question to his son. As the assessee s father i.e Shri Virendra Tandon had gifted the amount in question to his son i.e the assessee by way of financial assistance at a time when the assessee is stated to be struggling for his survival in the industry. In our considered view utilisation of accumulated savings by a father for the purpose of financially assisting his son is not something unheard of in our society. - Decided in favour of assessee. Charging of interest u/s 234A 234B 234C and 234D - HELD THAT - As the charging of interest under the said respective sections is mandatory as per the judgment of the Hon ble Supreme Court in the case of CIT vs. Anjum M. H. Ghaswala Ors. 2001 (10) TMI 4 - SUPREME COURT therefore the A.O is directed to recompute the same while giving effect to our aforesaid order. The Ground of appeal no. 5 is allowed in terms of our aforesaid observations.

Summary

Issues Involved:

1. Confirmation of assessment order by CIT(A) assessing total income at Rs. 1,10,50,730/-.
2. Disallowance of deduction of Rs. 17,50,000/- claimed under Section 35(1)(ii).
3. Disallowance of genuine expenditure amounting to Rs. 5,71,958/-.
4. Addition of Rs. 30,00,000/- as undisclosed income under Section 68.
5. Charging of interest under Sections 234A, 234B, 234C, and 234D.
6. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Confirmation of Assessment Order:
The assessee, a film actor/model, filed a return declaring an income of Rs. 57,28,770/-. The AO assessed the income at Rs. 1,10,50,730/- after making certain additions and disallowances. The CIT(A) upheld the AO's order, and the assessee appealed further.

2. Disallowance of Deduction under Section 35(1)(ii):
The assessee donated Rs. 10,00,000/- to the "School of Human Genetics and Pollution Health" (SHG&PH) and claimed a weighted deduction of Rs. 17,50,000/-. The AO disallowed the deduction due to the subsequent cancellation of SHG&PH's approval by CBDT. The Tribunal noted that the cancellation was retrospective and held that the deduction should not be denied if the donation was made when the institution had valid approval. Citing judicial precedents, the Tribunal allowed the deduction, vacating the disallowance of Rs. 17,50,000/-.

3. Disallowance of Genuine Expenditure:
The AO disallowed 20% of certain expenses (Rs. 5,71,958/-) on an ad hoc basis, suspecting personal use. The CIT(A) upheld this view. The Tribunal observed that neither the AO nor the CIT(A) specified which expenses lacked supporting evidence or were not incurred for business purposes. Citing precedents, the Tribunal held that ad hoc disallowances without specific findings are unjustified and vacated the disallowance of Rs. 5,71,958/-.

4. Addition under Section 68:
The AO added Rs. 30,00,000/- as unexplained cash credit, questioning the genuineness of a gift from the assessee's father, citing his low income. The assessee provided a gift deed and the father's financial statements showing accumulated savings. The Tribunal noted that the AO did not examine the father or disprove the evidence provided. The Tribunal held that the primary onus was discharged by the assessee and the AO failed to disprove the explanation. The addition of Rs. 30,00,000/- was vacated.

5. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
The Tribunal noted that charging interest under these sections is mandatory as per the Supreme Court's judgment in CIT vs. Anjum M. H. Ghaswala. The AO was directed to recompute the interest while giving effect to the Tribunal's order.

6. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal dismissed the ground regarding the initiation of penalty proceedings as premature.

Conclusion:
The Tribunal allowed the appeal in favor of the assessee, vacating the disallowances and additions made by the lower authorities. The grounds related to the confirmation of the assessment order and penalty proceedings were dismissed as not pressed or premature. The AO was directed to recompute the interest as per the Tribunal's findings.