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2021 (11) TMI 356 - AT - Income TaxBogus deduction u/s. 35(1)(ii) - party to whom payment made has been made found to be bogus entity - HELD THAT - CIT(A) is passing a peculiar order, when he says that the party to whom payment has been made has been made found to be bogus entity, at the same time learned CIT(A) says that since assessee has not produced the party or obtained a confirmation, it cannot be said that the payment is made to the said party. It is further strange that the assessee's plea of cross examination opportunity the said party is being rejected by counter observation that the same party has not been produced by the assessee As decided in SOPARIWALA EXPORTS PVT. LTD. VERSUS DCIT, CC-8 (1) , MUMBAI 2021 (7) TMI 442 - ITAT MUMBAI where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid. Hence the payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly,we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) - Decided in favour of assessee.
Issues Involved:
1. Validity of the CIT(A) order. 2. Interpretation and application of Explanation to Section 35 of the Income-tax Act, 1961. 3. Genuineness of the donation made by the assessee. 4. Charging of interest under sections 234B, 234C, and 234D, and initiation of penalty proceedings under section 271(1)(c). Issue-wise Detailed Analysis: 1. Validity of the CIT(A) Order: The assessee challenged the validity of the CIT(A) order on the grounds that it was "invalid and bad in law." The CIT(A) had confirmed the addition of ?3,50,000 made by the Assessing Officer (AO) without bringing any corroborative evidence on record. The Tribunal noted that the CIT(A) had passed a peculiar order by stating that the party to whom the payment was made was a bogus entity and simultaneously stating that the assessee had not produced the party or obtained a confirmation from them. The Tribunal found this contradictory and decided in favor of the assessee, setting aside the CIT(A) order. 2. Interpretation and Application of Explanation to Section 35 of the Income-tax Act, 1961: The assessee argued that the AO and CIT(A) failed to interpret and apply the explanation to Section 35, which states that the deduction should not be denied merely because the approval granted to the institution was withdrawn after the payment. The Tribunal referred to several precedents, including the case of Sopariwala Exports Pvt. Ltd., where it was held that the withdrawal of approval to the payee institution subsequent to the payment does not affect the assessee's entitlement to the deduction. The Tribunal upheld this interpretation, stating that the assessee is eligible for the deduction under Section 35(1)(ii) as the institution was approved at the time of payment. 3. Genuineness of the Donation Made by the Assessee: The CIT(A) had questioned the genuineness of the donation, stating that the assessee failed to produce the party or obtain a confirmation. The Tribunal noted that the assessee had provided necessary evidence, including money receipts, bank statements, and notifications showing the trust's approval by CBDT. The Tribunal found that the CIT(A)'s reasoning was flawed and that the assessee had discharged the primary onus of proof. The Tribunal referred to the case of Kitchen Essentials and other similar cases where it was held that the mere admission of misuse by the donee institution does not penalize the donor. The Tribunal concluded that the donation was genuine and allowed the deduction. 4. Charging of Interest and Initiation of Penalty Proceedings: The assessee contended that the charging of interest under sections 234B, 234C, and 234D, and the initiation of penalty proceedings under section 271(1)(c) were invalid and bad in law. The Tribunal did not provide a detailed analysis of this issue but implicitly allowed the appeal in favor of the assessee by setting aside the orders of the authorities below. Conclusion: The Tribunal allowed the appeal of the assessee, setting aside the orders of the AO and CIT(A). The assessee was held to be eligible for the deduction under Section 35(1)(ii) of the Income-tax Act, 1961, and the issues raised by the assessee were decided in their favor. The appeal was pronounced in the open court on 21.10.2021.
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