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TMI Blog2021 (9) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. - ITA No. 7572/MUM/2019 - - - Dated:- 3-9-2021 - SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) Assessee by : Shri Vimal Punmiya, A.R Revenue by : Shri Gurbinder Singh, D.R ORDER PER RAVISH SOOD , J. M : The present appeal filed by the assessee is directed against the order passed by the CIT(A)-4, Mumbai, dated 17.09.2019, which in turn arises from the order passed by the A.O u/s 143(3) of the income Tax Act, 1961 (for short Act , dated 27.12.2016 for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds before us: 1. On the facts and circumstances of the case the ld. CIT(A) erred in confirming the.. Assessment order, passed by the Id. AO u/s143(3) assessing the total income at ₹ 1,10,50,730/- as against the income declared by the assessee of ₹ 57,28,770/-. 2. On the facts and circumstances of the case the Ld CIT(A) erred in confirming the disallowance of the deduction of ₹ 17,50,000/- claimed u/s 35(1)(ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addition of the gift received from father as an unexplained cash credit u/s 68 of the Act. ₹ 30,00,000/- On the basis of his aforesaid deliberations, the A.O vide his order passed u/s 143(3), dated 27.12.2016 assessed the income of the assessee at ₹ 1,10,50,730/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, as the contentions advanced by the assessee qua the aforesaid issues did not find favour with the CIT(A), therefore, he upheld the additions/disallowances made by the A.O and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. 6. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them in order to drive home their respective contentions. As multiple issues are involved in the present appeal, therefore, we shall hereinafter take up the same in a chronological manner. 7. We shall first address the disallowance of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. On a similar footing, we find, that the Hon ble High Court of Bombay in the case of National Leather Cloth Mfg. Co. Vs. Indian Council of Agricultural Research (2000) 100 Taxman 511 (Bom), while dealing with an identical issue of denial of deduction under Sec.35(1)(ii) of the Act due to a subsequent withdrawal of approval with retrospective effect, had observed, that such retrospective cancellation of registration will have no effect upon the deduction claimed by the donor since such donation was given acting upon the registration when it was valid and operative. On a perusal of the aforesaid statutory provision i.e Sec. 35(1)(ii) of the Act, as well as the ratio laid down in the aforesaid judicial pronouncements, it can safely be concluded 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 cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 had introduced an Explanation in Section 35 of the Act which reads as under:- Section 35(1)(ii) Explanation The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn. Hence the aforesaid provisions of the Act are very clear that the payer (the assessee herein) would not get affected if the recognition granted to the payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii) of the Act could be made in the instant case. 7. Similarly, the another co-ordinate Bench of this Tribunal, Jaipur Bench, in the case of P.R. Rolling Mills Pvt. Ltd. vs. DCIT in ITA No. 529/JP/2019 vide order dated 05.07.2018 for AY 2014-15 has considered the same Trust/ institute i.e. SHG PG and allowed the claim of the assessee. The facts and circumstances are exactly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business Promotion 1040730 Telephone expense 265661 Total 2859790 The A.O holding a conviction that involvement of personal element in the aforesaid expenditure could not be ruled out, thus, called upon the assessee to explain as to why the same to the said extent may not be disallowed. In reply, the assessee produced the requisite details viz. bills, vouchers, and payment details to substantiate the genuineness and veracity of the aforesaid expenses, and also to drive home the fact that the same had been incurred wholly and exclusively in the normal course of his profession. However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee and rejected the same. It was observed by the A.O that as the assessee had supported his claim for the aforesaid expenses on the basis of self-raised vouchers and not on the basis of third party bills, therefore, the same did not inspire much of confidence. Apart from that, it was noticed by the A.O that some of the expenses were claimed by the assessee to have been paid in cash. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to substantiate on the basis of supporting material nor that which had a tinge of not having been incurred wholly and exclusively for the purpose of his business and profession, therefore, the ad hoc disallowance made by the A.O in a most arbitrary manner could not be sustained and was liable to be vacated. 12. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had failed to substantiate that the expenses booked by him in his profit and loss account were incurred wholly and exclusively in the course of his profession, therefore, the lower authorities considering the said fact a/w the fact that some of the expenses were claimed on the basis of self-raised vouchers had thus rightly disallowed on an ad hoc basis 20% of the aforesaid expenditure. 13. We have heard the ld. authorized representatives in context of the aforesaid issue under consideration, and perused the orders of the lower authorities. 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper explanation qua the transaction in question, thus, held the amount of ₹ 30 lac as an unexplained cash credit within the meaning of Sec. 68 of the Act. 15. On appeal, the CIT(A) finding no infirmity in the view taken by the A.O upheld the addition of ₹ 30 lac made by him u/s 68 of the Act. 16. Before us, it was submitted by the ld. A.R that the assessee who hails from Lucknow, Uttar Pradesh is an actor/model who had bagged various titles in fashion shows and had acted in TV serials etc. It was submitted by the ld. A.R that the assessee being a struggler in the film/TV industry was during the year under consideration facing serious financial constraints. Elaborating on his aforesaid contention, it was submitted by the ld. A.R that the limited earnings of the assessee did not suffice to meet out the expenses that were necessarily required to be incurred by him for a decent survival in the industry. It was submitted by the ld. A.R that it was in the backdrop of the aforesaid serious financial crunch that the assessee s father viz. Shri. Virendra Tandon had came to the rescue of the assessee, his only son, and had out of his past accumulated savings gifted an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce thereof by the financial statement of Shri. Virendra Tandon wherein the gift transaction under consideration was duly disclosed in his apital a/c for the year under consideration; as well as the clear admission made by him in the gift deed , dated 21.06.2013, however, both the lower authorities had summarily brushed aside the aforesaid documents and had most arbitrarily stamped the amount of gift received by the assessee as an unexplained cash credit within the meaning of Sec. 68 of the Act. It was, thus, submitted by the ld. A.R that Shri. Virendra Tandon had not only duly disclosed the gift transaction in his financial statement for the year under consideration; but had also admitted the said gift transaction a/w the source thereof in the gift deed , dated 21.06.2013. Further, the Ld. A.R in order to substantiate the creditworthiness of Shri. Virendra Tandon had taken us through his return of income for the year under consideration i.e A.Y.2014-15 a/w those for the preceding three years. It was submitted by the ld. A.R that Shri. Virendra Tandon who had multiple sources of income, viz. salary income, rental income, income from other sources (bank interest income and lorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamping of the irrevocable gift received by the assessee out of love and affection from his father, as an unexplained cash credit within the meaning of Sec. 68 by the lower authorities. 17. Per contra, the ld. D.R. relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had failed to substantiate the authenticity of the gift transaction on the basis of irrefutable documentary evidence, therefore, the same was rightly treated as an unexplained cash credit u/s 68 of the Act. 18. We have given a thoughtful consideration to the aforesaid issue before us in the backdrop of the contentions advanced by the ld. Authorized Representatives for both the parties. As brought to our notice by the ld. A.R, it is a matter of fact borne from the record that Shri Virendra Tandon i.e the father of the assessee had duly disclosed the gift transaction in his financial statement for the year under consideration i.e A.Y 2014-15. Notably, the amount gifted by the assessee to his son is found debited in the apital A/c of Shri. Virendra Tandon (Page 129 of APB). Apart from that, we find that the Shri. Virendra Tandon had separately by way of a gift deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the explanation of the assessee in the backdrop of whatever material/documents he had placed on record to support the same was shifted to the A.O. Now, it was on the basis of the aforesaid explanation of the assessee that the A.O had two recourses available with him, viz. (i). he could have summoned Shri. Virendra Tandon and examined him qua the gift transaction and also the source thereof; or (ii). he could have directed the assessee to produce Shri. Virendra Tandon so that he could examine him as regards the gift transaction in question. However, we are afraid that the A.O in all his wisdom had not opted for either of the aforesaid recourses that were available to him. On a perusal of the orders of the lower authorities, we find that at no stage the A.O had either summoned Shri Virendra Tandon i.e the donor, nor ever directed the assessee to produce him for examination in order to facilitate necessary verification qua the gift transaction in question. We would not hesitate to observe that as the assessee had discharged the primary onus that was cast upon him as regards putting forth an explanation regarding the nature and source of the cash credit in his books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statement of Shri. Virendra Tandon (supra) 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. 19. Now, coming to the observation of the lower authorities that the paltry income of Shri. Virendra Tandon neither inspired any confidence as regards his creditworthiness to make a gift of ₹ 30 lac to his son, nor the genuineness of the transaction under consideration. At this stage, we may herein observe that it has never been the claim of Shri. Virendra Tandon (supra) that he had gifted the amount in question out of his income for the year under consideration, but he had in fact clearly stated in the gift deed that the same was given by him from his accumulated savings. In fact, the financial statement of Shri. Virendra Tandon for the year under consideration i.e A.Y 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee specifically vide its Written Submissions , dated 29.07.2019 (Page 132-135 of APB) had brought the fact of having filed the declaration of gift in the course of the assessment proceedings to the notice of the CIT(A), however, the latter too had not taken cognizance of the same. Also, as observed by us hereinabove, no reference is made by the lower authorities of the fact that Shri. Virendra Tandon had in his financial statement for the year under consideration i.e A.Y 2014-15 duly disclosed the gift transaction in question. (Page 129 of APB). Backed by the aforesaid facts, we are of the considered view that the fact that Shri. Virendra Tandon had duly admitted of having gifted the amount in question to his son i.e the assessee a/w the source thereof stands established beyond any doubt. Now, in the backdrop of the aforesaid duly substantiated admission of Shri. Virendra Tandon of having gifted the amount in question to his son, we may herein observe, that in case the department was not satisfied as regards the source of the gift transaction that was though disclosed by the donor in his financial statement for the year under consideration a/w the separate admission i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax as the income of the assessee of that previous year. However, in the case before us the aforesaid requisite conditions are not found to have been satisfied. Before the A.O, the assessee had came forth with an explanation that he had received the amount in question as a gift from his father i.e Shri Virendra Tandon. Although the copy of the return of income a/w the financial statement of Shri. Virendra Tandon disclosing the source qua the gift transaction under consideration (Page 129-131 of APB), as well as the gift deed , dated 21.06.2013 (Page 112-113 of APB) evidencing the gift transaction in question were filed in the course of the assessment proceedings by the assessee, however, the A.O merely going by the fact that the returned income of Shri Virendra Tandon was not sufficient enough to justify the amount of gift in question had summarily discarded the same, and without bothering to take the issue to a logical conclusion by exercising the powers vested with him i.e summoning the aforesaid donor, viz. Shri Virendra Tandon and examining him qua the transaction in question in the backdrop of the documentary evidence that were filed by the assessee, had however, hushed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Virendra Tandon of having gifted the amount in question out of his accumulated savings by no means could have been summarily rejected by doing away with his examination qua the claim of having made the gift a/w the source thereof in the backdrop of the material that was filed in support thereof in the course of the assessment proceedings. Be that as it may, in our considered view, now when Shri Virendra Tandon had categorically admitted of having gifted the amount in question alongwith the source thereof, then, the amount so received by the assessee could not have been summarily stamped as an unexplained cash credit, for the reason, that the A.O carried certain doubts as regards the source of the source of the amount that was claimed by the assessee to have been received as a gift from him. Our aforesaid view is supported by the judgment of the Hon ble High Court of Madhya Pradesh in the case of CIT vs. Metachem Industries (2000) 245 ITR 160 (MP). In its said order, it was observed by the Hon ble High Court that in case of a credit entry, if the person in whose name the same appears owns the same, then, the burden cast on the assessee is discharged and it is open for the A.O to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iberations are unable to subscribe to the view taken by the lower authorities, which we are afraid had been arrived at without considering the facts/material on record, and is glaringly bereft of the basic verifications that were required to be carried out by the A.O. Accordingly, in the backdrop of our aforesaid deliberations, as the very basis of the impugned addition of the amount of ₹ 30 lac (supra) is found to be devoid of any merit, therefore, the same cannot be sustained and is accordingly vacated. The Ground of appeal No. 4 is allowed in terms of our aforesaid observations. 23. The assessee has assailed before us the charging of interest u/s 234A, 234B, 234C and 234D of the Act. 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) 252 ITR 1 (SC), 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. 24. The assessee has assailed the initiation of penalty proceedings u/s 271(1)(c) of the Act. As the said ground of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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