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2022 (12) TMI 438 - AT - Income TaxDeduction u/s 35(1)(ii) - deduction u/s 35(1)(ii) equivalent to 175% of donation given - HELD THAT - We observe that facts in the present appeal are exactly similar to the facts in the other Assessment Years in which the Coordinate Bench has allowed the claim of the assessee 2022 (3) TMI 1451 - ITAT MUMBAI Since the issue involved in this appeal is also exactly similar to those Assessment Years. DR relied in the case of Krupa Trading Co. 2020 (4) TMI 722 - MADRAS HIGH COURT in which has observed that the Founder/Director of organization had made a sworn statement during the survey u/s. 133A of the Act that donation made to organization was returned back to assessee after deducting 5% commission. Relying on the above sworn statement the ITAT has decided the issue in favour of the revenue and the same was confirmed by the Hon'ble High Court. In the given case no such findings were recorded by the lower authorities. Therefore, this case is distinguishable to the facts of the present case. Respectfully relying on the decision of the Coordinate Bench in assessee s own case we are inclined to allow the appeal filed by the assessee.
Issues Involved:
1. Genuineness of the donation made by the assessee. 2. Denial of deduction under Section 35(1)(ii) of the Income-tax Act, 1961. 3. Principles of natural justice regarding cross-examination and evidence. Issue-wise Detailed Analysis: 1. Genuineness of the Donation: The assessee, engaged in trading chemicals under M/s. Sahara Impex, filed an e-return declaring an income of Rs. 1,24,510 for A.Y. 2013-14. During the scrutiny, it was revealed that the assessee claimed a deduction under Section 35(1)(ii) of the Act for a Rs. 35 lakh donation to M/s. Navjeevan Charitable Trust. The deduction claimed was Rs. 61,25,000 (175% of the donation). The Assessing Officer (AO) observed that the receipts for the donations were issued in serial order despite the cheques being issued on different dates, raising doubts about the genuineness of the donation. The AO concluded that the trust was bogus and denied the deduction, stating the financial transactions were a "colorable device meant to be a smoke screen to defraud the revenue and evade taxes." 2. Denial of Deduction under Section 35(1)(ii): The AO disallowed the deduction of Rs. 61,25,000 under Section 35(1)(ii) based on the investigation findings that the trust was not genuine. The assessee's appeal to the Ld.CIT(A) was dismissed, affirming the AO's conclusion that the transactions were sham. The Ld.CIT(A) stated, "the entire edifice is only a colorable device meant to be a smoke screen to defraud the revenue and evade taxes." 3. Principles of Natural Justice: The assessee contended that the AO's decision violated the principles of natural justice, as they were not given the opportunity to cross-examine the individuals whose statements were relied upon, nor were they provided with copies of such statements or evidence. This argument was raised in the appeal before the ITAT. ITAT's Decision: The ITAT considered the rival submissions and material on record. It was noted that in the assessee's own case for A.Y. 2011-12 and A.Y. 2012-13, the Coordinate Bench had allowed similar claims. The ITAT observed that the facts in the present appeal were identical to those in previous years where the deduction was allowed. The ITAT referred to various decisions, including the case of M/s. Sopariwala Exports Pvt. Ltd. vs. DCIT, where it was held that the withdrawal of recognition of the payee organization does not affect the assessee's right to claim deduction if the donation was made when the payee was recognized. The ITAT also noted that the Hon'ble Madras High Court's decision in Krupa Trading Co. v. ITO was distinguishable as it involved a sworn statement during a survey that the donation was returned to the assessee after deducting a commission, which was not the case here. Conclusion: The ITAT allowed the appeal filed by the assessee, directing the AO to grant the deduction under Section 35(1)(ii) of the Act. The ITAT emphasized that the assessee could not be penalized for the subsequent withdrawal of the trust's recognition, as the donation was made when the trust was duly approved. The appeal was allowed, and the order was pronounced in the open court on 29th November 2022.
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