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2016 (8) TMI 1134 - ITAT CHENNAI

2016 (8) TMI 1134 - ITAT CHENNAI - TMI - Disallowance of loan - misuse of funds - assessee submitted that Government of India granted approval under Section 35(1)(iii) and when the statutory provision allows deduction for the donation given by the assessee, the same cannot be disallowed by the Assessing Officer on the ground that the recipient-society misused the funds - Held that:- The Axis Bank at Kolkata opened a fictitious account to give credit to this kind of transactions and subsequen .....

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On identical set of facts, this Tribunal remitted back the matter to the file of the Assessing Officer to examine the matter further and to find out the action taken against the officials of the Axis Bank for opening such fraudulent account at Kolkata. The Assessing Officer was also directed to give an opportunity to the assessee to cross-examine the persons who are In-charge of Society at the relevant point of time and find out how they were able to receive such kind of donation and transfer .....

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e officials of Axis Bank and the receipt of society need to be examined. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined. - ITA No.2316/Mds/2015 - Dated:- 18-8-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER Appellant by : Ms. T.C.A. Sangeetha, Advocate. Respondent by : Sh. P. Radhakrishnan, JCIT. ORDER This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) - 4, Chennai, dated 15.10.2015 and pertains to asse .....

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are of Handicapped Persons, Durgapur, West Bengal. According to the Ld. counsel, M/s Society for Welfare of Handicapped Persons, Durgapur, West Bengal was notified as a society eligible for deduction under Section 35(1)(iii) of the Incometax Act, 1961 (in short 'the Act'). The Assessing Officer, however, disallowed the claim of the assessee on the basis of the so-called communication said to be received from the Society informing that the Axis Bank opened an account with the help of some .....

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ssessee was credited. Therefore, according to the Ld. counsel, there was no meaning in claiming that the Axis Bank could not comply with KYC norms while opening the account. On a query from the Bench what is the status of criminal proceeding pending before the Kolkata Police? The Ld. counsel submitted that she has no idea and she does not know the status of the investigation. 3. The Ld. counsel for the assessee submitted that Government of India granted approval under Section 35(1)(iii) and when .....

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, the donation was given to the institution, which was approved by competent authority under Section 35 of the Act. Therefore, according to the Ld. counsel, the recipient-institution utilised the funds for which the approval was granted. The Ld. counsel placed her reliance on the judgment of Calcutta High Court in CIT v. M/s Bhartia Cutler Hammer Ltd. (1998) 232 ITR 785 and also judgment of Gauhati High Court in Chotatingrai Tea Estate Pvt. Ltd. v. CIT (1999) 236 ITR 644. According to the Ld. co .....

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irm in which the assessee s husband was a partner. Referring to the order of the CIT(Appeals), the Ld. D.R. submitted that the assessee s husband, a partner in M/s Megatrends Inc also claims that he had donated a sum of ₹ 1.5 Crore to the very same Society at Kolkata. The modus operandi of the assessee is to credit an amount in the Axis Bank account opened in the name of the Society. In fact, according to the Ld. D.R., the bank account to which the amount was credited does not belong to th .....

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g Officer made a thorough investigation and found that the entire transaction was sham. 5. The Ld. Departmental Representative further submitted that the assessee actually participated in the deceptive transaction in order to evade payment of tax. The so-called credit given to Axis Bank account was the amount transferred from various other organisations and concerns and none of them engaged in said activities for the purpose for which the institute was granted approval. Of course, the utilizatio .....

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Departmental Representative further submitted that the Assessing Officer made an investigation in exercise of his power under Section 133(6) of the Act. The Assessing Officer found that cheque No.020716 dated 25.02.2011 for an amount of ₹ 25,00,000/- was issued by M/s Megatrends Inc holding account in Axis Bank at Radhakrishnan Salai. The Axis Bank clarified that the cheque was deposited into Account No.255010100128834 in the name of Society for Welfare of Handicapped Persons, at Axis Ban .....

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e account were admittedly transferred to other organisations. Therefore, according to the Ld. D.R., it is obvious that the assessee has actually participated in the deceptive transaction in order to evade payment of tax, therefore, the Assessing Officer has rightly disallowed the claim of the assessee. 7. I have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that a payment of ₹ 25,00,000/- was made to M/s Society f .....

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ansactions and subsequently the same was transferred to various other institutions and persons. In one such transaction, a Division Bench of this Tribunal found one credit in the fictitious account opened in the Axis Bank by way of donation was, in fact, transferred to real account maintained by the Society itself in State Bank of India. Therefore, it is obvious that the so-called Society for Welfare of Handicapped Persons, Durgapur, West Bengal is also a party to the fraudulent transaction for .....

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tion and transfer the same to other institutions. The Assessing Officer also needs to examine when the funds were credited in the so-called fictitious account, how this money credited into such fictitious account was transferred to real account maintained by the Society for Welfare of Handicapped Persons. These facts are not examined by the Assessing Officer. The chain of transactions, which happened to credit the large amount of funds with fictitious account opened by Axis Bank at Kolkata, the .....

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y claims that they have no account in Axis Bank, how the funds were transferred from that account to State Bank of India account needs to be examined. Moreover, when the Assessing Officer received a letter dated 24.03.2014 from the society, the copy of the same shall be furnished to the assessee. Since the copy of the letter was not furnished, this Tribunal is of the considered opinion that there was violation of principles of natural justice. When the Assessing Officer received a letter from th .....

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