TMI Blog2023 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... d statements of certain persons which have been claimed by the assessee as having no relation with assessee or trust. From the perusal of answers to certain questions noted by the ld. Assessing Officer in the assessment order, we note that the persons mentioned in the answers have no connection with the assessee as claimed by the assessee. Such an aversion in the statements relied upon, leads us to understand that heavy reliance placed by the ld. Assessing Officer on these statements, is misplaced. From the perusal of documentary evidence placed in the paper book, it is evident that the three trusts/societies are eligible entities duly notified by the Central Government/CBDT u/s 35(1)(iii) and u/s 35AC of the Act. It is also noted that approval is granted to an organization u/s 35(1)(iii) and u/s 35AC by the Central Government/CBDT only after strict compliance of law. The approval is granted for after various levels of scrutiny and checks and to the concerns of evident track record and doing research activity. It is also a fact that the three trusts/societies were eligible to receive the contributions from assessee as duly notified by CBDT. Further, assessee had made submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi, (hereinafter the ld. CIT(A) ) dated 27/09/2022 for Assessment Year 2015-16 against the assessment order passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) passed by DCIT, Circle-6(1), Kolkata, dated 23/12/2017. 2. Assessee has taken as many as ten grounds and the issues involved in these grounds relate to disallowance of deduction claimed u/s 35(1)(iii) and 35AC of the Act for contribution made by it under respective Sections and in respect of credit of Rs.10,00,000/- towards advance tax paid, not given in computation of tax as reflected in Form 26AS. Grounds of appeal are not reproduced for the sake of brevity. 3. Brief facts of the case are that, assessee filed its return of income on 29/09/2015, reporting total income of Rs.56,66,010/-. Case of assessee was selected for scrutiny through CASS for which statutory notices were issued and served and were duly complied with by the assessee. In course of assessment proceedings, ld. Assessing Officer noted that assessee has claimed deduction of Rs.2,38,25,000/- which included weighted deduction of Rs.1,41,25,000/- u/s 35(1)(iii) and Rs.97,00,000/- u/s 35AC of the Act. Ld. Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A). Before him, assessee reiterated its submissions and furnished documents placed before ld. Assessing Officer. It was strongly contended before ld. CIT(A) that ld. Assessing Officer has simply relied on the report received from Investigation wing containing certain statements which formed basis of treating donations/contributions as bogus. It was also submitted that, ld. Assessing Officer has not made any effort to examine the evidence placed before him but simply relied on observations of the investigation wing without any material to support the said observations. Further, assessee submitted that statements recorded of certain persons had no relation with the assessee and moreover, said statements were not supplied to assessee for cross-examination and rebuttal. It was thus contended that all the observations, findings and conclusions arrived at by the ld. Assessing Officer are based on suspicion and surmises. According to the assessee, the presumption or suspicion, howsoever strong it may appear to be true has to be corroborated with evidence to prove that assessee had adjusted its profit in the form of bogus donations. According to assessee, statements relied upon by ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement was recorded on 11/12/2017 u/s 131 of the Act. From answer to question no. 11 of the statement of Shri Ambikesh Manna, secretary of the said Trust, ld. Counsel pointed that for the statement made in respect of providing accommodation entries, these activities were controlled by Shri Raj Kr. Mishra, who acted as the accommodation entry provider for the bogus donations. e) In answer to question no. 12 of the same statement, it is stated that Shri Raj Kr. Mishra, does not hold any position in the trust, Kashba Youth. Ld. Counsel asserted that merely on some telephonic communication as stated in the answer, Shri Raj Kr. Mishra arranged for the accommodation entry who is stated to hold no position in the aforesaid trust. According to ld. Counsel, Department has not identified who is Shri Raj Kr. Mishra and what are his connection with the assessee and the said trust. f) Ld. Assessing Officer, according to the ld. Counsel, has simply relied on these statements which do not have any legs to stand in absence of any corroborative material. Ld. Counsel submitted that Shri Raj Kr. Mishra, is neither an employee nor Director of the assessee company and has no relation with the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58A under rule 11 towards certificate of expenditure by way of payment in respect of eligible project or schemes notified u/s 35AC along with donation receipts were issued by the trust to the assessee, placed on record, giving all the details in respect of the donation. c) Ld. Counsel submitted that in this case also, ld. Assessing Officer has taken similar view by placing reliance on the commission report. Ld. Counsel submitted that Secretary of the trust sought some time to submit its reply against the summons. In absence of the response from the secretary, ld. Assessing Officer took an adverse view and treated the donations as bogus, ignoring all the documents and evidence filed by the assessee. In this case also, it was submitted that ld. Assessing Officer has presumed the donations as bogus without conducting any independent enquiry to verify the authenticity of the transaction, from the evidence placed on record. 7. Per contra, ld. Sr. D/R, vehemently argued and submitted that, donations made by assessee are rightfully held as bogus since funds were transferred by the respective societies/trust to the companies which are shell companies as observed by the ld. Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer on these statements, is misplaced. 8.2. From the perusal of documentary evidence placed in the paper book, it is evident that the three trusts/societies are eligible entities duly notified by the Central Government/CBDT u/s 35(1)(iii) and u/s 35AC of the Act. It is also noted that approval is granted to an organization u/s 35(1)(iii) and u/s 35AC by the Central Government/CBDT only after strict compliance of law. The approval is granted for after various levels of scrutiny and checks and to the concerns of evident track record and doing research activity. It is also a fact that the three trusts/societies were eligible to receive the contributions from assessee as duly notified by CBDT. Further, ld. Counsel for assessee had made submission before the Bench which is taken on record as a statement at the Bar that in case of all the three trusts/societies, their registrations have not been cancelled by the Department. 9. We also note that ld. Assessing Officer has made some enquiries regarding the bank account of the assessee and that of the three trusts/societies from where he noted that donations made by assessee got transferred from the accounts of the three t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch no opportunity was granted to the assessee, more importantly when the persons who have been claimed to be accommodation entry provider are unrelated to the assessee. 10.2 While noting this, we draw force from the judgment of the Hon ble Supreme Court in the case of CIT vs Andaman Timber Industries Ltd. [2015] 62 taxmann.com 3 (SC), which is squarely fitting into the facts of the case. It was held by the Hon ble Supreme Court as under:- 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, deeply rooted in tradition and conscience, to be ranked as fundamental. Further, provisions of Section 142(3) makes it incumbent on the ld. Assessing Officer to give an opportunity of being heard to the assessee in respect of any material gathered on the basis of any enquiry which is proposed to be utilized for the purpose of assessment. This is a mandatory and statutory procedural requirement before completing the assessment in which ld. Assessing Officer has failed. 12. Before concluding, we also draw attention to the decision of the Hon ble Supreme Court in the case of CIT (Exemp) vs. Batanagar Education and Research Trust [2021] 129 taxmann.com 30 (SC), which has dealt with the cancellation of registration of Trust u/s 12AA of the Act on the ground that the Trust had received bogus donation. On this, ld. Counsel for the assessee has made a statement before the Bench noted above that in the present case of the assessee, registration of the three donee trust/societies has not been cancelled and, therefore, the ratio of this judgment does not apply to the facts and circumstances of assessee s case. 13. After carefully considering the entire gamut of facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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