ITA Nos.

2586, 2587 & 2588/Ahd/2017

A.Ys. 2010-11, 2011-12 & 2012-13

Page 1 of 7

IN THE INCOME TAX APPELLATE TRIBUNAL

AHMEDABAD “SMC” BENCH, AHMEDABAD

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND

Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER

(Conducted through Virtual Court)

ITA Nos.2586, 2587 & 2588/Ahd/2017

Assessment Years: 2010-11, 2011-12 & 2012-13

P M Bhimani Orgochem Pvt. Ltd., vs. The Dy. Commissioner of

511, Mahakant, Income Tax,
Opp. V S Hospital, Circle-3(1)(1), Ahmedabad.
Ellisbridge,
Ahmedabad – 380 006
[PAN – AACCP 1527 G]
(Appellant) (Respondent)

Appellant by : Shri S.N. Divatia, Advocate

Respondent by : Shri R.R. Makwana, Sr. D.R.

Date of hearing : 08.12.2021

Date of pronouncement : 10.12.2021

ORDER

PER BENCH :

These 3 appeals are filed by the same assessee against 3 separate orders, all
dated 12.10.2017, passed by the CIT(A)-9, Ahmedabad for the Assessment Years
2010-11, 2011-12 & 2012-13.

2. All these 3 appeals are identical and, therefore, we are taking up the facts of
Assessment Year 2010-11.

3. The grounds of appeal raised by the assessee in ITA No.2586/Ahd/2017 for

Assessment Year 2010-11 are as under :

1.1 The order passed u/s.250 on 12.10.2017 for A.Y.2010-11 by CIT(A)-9,

Abad upholding the disallowance deduction u/s. 35AC of Rs.15 lakh made by
AO is wholly illegal, unlawful and against the principles of natural justice.
 ITA Nos.2586, 2587 & 2588/Ahd/2017
A.Ys. 2010-11, 2011-12 & 2012-13

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1.2 The Ld. CIT{A) has grievously erred in law and or on facts in not
considering fully and properly the submissions made and evidence produced by
the appellant with regard to the impugned disallowance.

2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming
that the donation of Rs.15 lakhs to Navjeevan Charitable Trust u/s.35AC
was not genuine and thereby disallowing the claim of deduction u/s. 35AC of
Rs.15 lakhs.

2.2 That in the facts and circumstances of the case as well as in law, the Ld.
CIT(A) ought not to have upheld that the donation of Rs.15 lakhs to Navjeevan
Charitable Trust u/s. 35AC was not genuine and thereby disallowing the claim
of deduction u/s. 35AC of Rs.15 lakhs.

3.1 The observations made with regard to the activities and genuineness of
Navjeevan Charitable Trust as well as the ultimate conclusion reached by
Ld.CIT(A)to uphold the claim of deduction u/s. 35AC of Rs.15 lakhs are not
admitted by the appellant in so far as the same contrary to the evidence on
record and prejudicial to the appellant.

It is, therefore, prayed that the claim of deduction u/s. 35AC of Rs.15 lakhs
upheld by the CIT(A) may kindly be deleted.”

4. The assessee was engaged in the business of trading in dyes and chemicals.
The assessee filed its original return of income declaring total income at
Rs.33,51,799/- on 15.09.2010. The return of income was processed under Section
143(1) of the Income Tax Act, 1961. Thereafter, a notice under section 148 of the Act
was issued on 09.02.2016 after recording the reasons for reopening. In response to
the notice under section 148 of the Act ,the assessee requested to treat the original
return filed to be treated as return filed in response to notice under Section 148 of the
Act vide letter dated 02.06.2016. The reasons recorded were provided to the
assessee on its request. A notice under section 143(2) of the Act was issued on
18.07.2016. The assessee raised objection in respect of reasons recorded which was
disposed of by the Assessing Officer on 21.07.2016. The Assessing Officer observed
that a search action under Section 132 of the Act was conducted by Investigation Unit,
Mumbai on 27.10.2014 on M/s Navjeevan Charitable Trust. The Trust was notified by
the National Committee, Ministry of Finance, Government of India for the purpose of
deduction under Section 35AC of the Act. The investigation into the financial
transactions of the Trust showed that the Trust had received donations of about Rs.80
crores in the past 5 financial years. The said amount was transferred to around 20
parties (as expenses). The Assessing Officer further observed that a list of donors
 ITA Nos.2586, 2587 & 2588/Ahd/2017
A.Ys. 2010-11, 2011-12 & 2012-13

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who have donated to Navjeevan Charitable Trusty in 6 financial years includes the
name of the assessee. The year-wise details of donations made by the assessee to
Navjeevan Charitable Trust are as under :-

F.Y. Amount of donation

2009-10 Rs.15,00,000/-
2010-11 Rs.10,00,000/-
2011-12 Rs.5,00,000/-

5. During the course of assessment proceedings, a statement under Section 131

of the Act of Shri Jignesh Jayeshbhai Bhimani, one of the Directors of P M Bhimani
Orgochem Pvt. Ltd. was recorded on 03.08.2016. The Assessing Officer made
addition of Rs.15 Lakhs thereby observed that the assessee failed to discharge its
onus to produce Shri Subhash Rajaram Kadam or any other Trustee and thus the
donation made by the assessee company are mere accommodation entry which do
not qualify deduction eligible under Section 35AC of the Act.

6. Being aggrieved by the Assessment Order, assessee filed appeal before the
CIT(A). The CIT(A) has dismissed the appeal of the assessee.

7. The Ld. AR submitted that similar issue involving the Navjeevan Charitable
Trust and the donation was decided by the Tribunal in ITA No.968/Ahd/2018 for
Assessment Year 2014-15 in case of Inspiron Engineering Pvt. Ltd vs. DCIT, order
dated 19.03.2020, which was allowed in favour of the assessee therein.

8. The Ld. DR relied upon the Assessment Order and the order of the CIT(A)

9. We have heard both the parties and perused all the relevant materials available
on record. The assessee challenging the order of the CIT(A) thereby confirming the
addition related to donation to Navjeevan Charitable Trust under Section 35AC of the
Act. The assessee has made donation in the year 2009-10, 2010-11 & 2011-12. At
the time of donation to Navjeevan Charitable Trust, the Trust was operational and
there was no investigation in those Assessment Years. The Revenue at no point of
time pointed out that the donation made by the assessee to SHG and PH were
returned back to the assessee in the form of cash. In fact, all the records were before
 ITA Nos.2586, 2587 & 2588/Ahd/2017
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the Assessing Officer which stated that the assessee has made those donations as
per the approved terms of donation under the Income Tax Act. The decision of the
Tribunal in case of Inspiron Engineering Pvt. Ltd. vs. DCIT (supra) is identical to the
assessee’s case wherein it is held as under :-

“7. We have heard the rival contentions of both the parties and perused the
materials available on record. The issue before us arises with respect to the
donations made to the institution “SGH & PH” and “NCT”. Regarding the
donations made to “SGH & PH” it is the undisputed facts that at the relevant
time of donation to “SHG & PH”, the institution was approved under section
35(1)(ii) of the Act though such approval has been withdrawn on a later date by
the Government by issuing notification. Thus, the assessee cannot be denied
the benefit of deduction provided under section 35(1)(ii) of the Act merely on
the ground that the approval was withdrawn by the Government on a later date.
In this regard we place our reliance on the order of this tribunal involving
identical issue which has been decided in favour of the assessee in the case of
ACIT v/s M/s Thakkar Govindbhai Ganpatlal HUF in ITA No. 2318/AHD/2017
wherein it was held as under:
5. We have duly considered rival contentions and gone through the
record carefully. In the case of S.G. Vat care P. Ltd.(supra), the tribunal
has recorded the following finding:
2. In the first ground of appeal, the grievance of the assessee
is that the ld.CIT(A) has erred in confirming addition of
Rs.8,75,000/- on account of alleged bogus donation to Herbicure
Healthcare Bio-Herbal Research Foundation.
3. Brief facts of the case are that the assessee has filed
return of income on 20.11.2014 declaring total income at
Rs.4,47,910/-. On scrutiny of the accounts, it revealed that the
assessee-company has given donation to Herbicure Healthcare
Bio-Herbal Research Foundation, Calcutta. A survey action was
carried out at the premises of the donee wherein it revealed to the
Revenue that this concern was misusing the benefit of notification
issued by the Income Tax Department. It has been getting
donations from various sources, and after deducting certain
amount of commission, these donations were refunded in cash.
On the basis of that survey report registration granted to its favour
was cancelled. On the basis of the outcome of that survey report,
the Id.AO construed the donation given by the assessee as
bogus. Appeal to the Id.CIT(A) did not bring any relief to the
assessee.
4. Before us, the Id.counsel for the assessee contended that
donations were given on 25.3.2014. At that point of time, donee
was notified as eligible institution and fall within the statutory
eligibility criterion. Certificate for receiving donation was cancelled
on 5.9.2016. There is no mechanism with the assessee to verify
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A.Ys. 2010-11, 2011-12 & 2012-13

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whether such donee was a genuine institute or not, which can

avail donation from the society.
5. The Id. DR, on the other hand, contended that in the
investigation it came to know about bogus affairs conducted by
the donee. Hence, these donations are rightly been treated as
bogus, and addition is rightly made.
6. We have duly considered rival contentions and gone
through the record carefully. The AO is harping upon an
information supplied by the survey tern of Calcutta. He has not
specifically recorded statement of representatives of the donee.
He has not brought on record a specific evidence wherein donee
has deposed that donations received from the assessee was paid
back in cash after deducting commission. On the basis of a
general information collected from the donee, the donation made
by the assessee cannot be doubted. Neither representatives of
the donee have been put to cross-examination, nor any specific
reply deposing that such donation was not received, or if received
the same was repaid in cash, has been brought on record. In the
absence of such circumstances, donation given by the assessee
to the donee, on which the assessee no mechanism to check the
veracity, can be doubted, more particularly, when certificate to
obtain donation has been cancelled after two years of the
payment of donation. It is fact which has been unearthed
subsequent to the donations. Therefore, there cannot be any
disallowance on this issue. We allow this ground. "
6. There is no disparity on the facts. On the basis same survey report,
the genuineness of the donation has been doubted in the case of the
assessee also. Therefore, the issue in dispute is squarely covered in
favour of the assessee. Respectfully following the order of the ITAT in
the case of S.G.Vat care P.Ltd., we do not find any merit in the appeal of
the Revenue. It is dismissed.
7. In the result, appeal of the Revenue is dismissed.
7.1 As the issue decided by this tribunal in the case above, is squarely
applicable to the present facts of the case, therefore we disagree with the
finding of the authorities below. Accordingly we hold that the assessee is
entitled for the benefit of the donation made to “SHG & PH” under section
35(1)(ii) of the Act.
7.2 Regarding the donation made to the “NCT”, we note that the benefit of
the deduction under section 35AC of the Act was denied to the assessee on the
reasoning that the trustee of such trust in the statement given under section
133A during the survey operation has admitted the fact the NCT is engaged in
the activity of providing the accommodating entries to the parties. However,
admittedly there was no cross-examination provided to the assessee of the
trustees who have admitted to be engaged in providing accommodating entries.
Thus the question arises whether the assessee can be denied the benefit of the
deduction under section 35AC of the Act on the basis of the statement recorded
 ITA Nos.2586, 2587 & 2588/Ahd/2017
A.Ys. 2010-11, 2011-12 & 2012-13

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during survey operation which were not cross verified despite the request was
made to the AO by the assessee. In our considered view the answer stands in
favour of the assessee. The statement recorded during survey operation cannot
be used against the assessee until and unless it is cross verified in view of the
judgment of Hon’ble Gujarat High Court in the case of CIT v/s Chartered Speed
Pvt. Ltd. reported in Tax Appeal No. 126 of 2015 wherein it was held as under:
“It is an undisputed position that the statement of the persons concerned
which were recorded by the department, those persons were not made
available for cross examination, may be for one reason or another
inspite of the attempts made by the department. Therefore the Tribunal
has rightly found that the statement of those persons cannot be read
against the assessee.”
7.3 Furthermore, the revenue has not brought any tangible material
suggesting that the donation paid by the assessee to “NCT” has come back to it
in the form of cash. Thus in the absence of necessary documentary evidence,
we are not inclined to confirm the order of the authorities below.
7.4 In view of the above, we set aside the finding of the learned CIT (A) and
direct the AO to delete the addition made by him. Hence the ground of appeal
of the assessee is allowed.”
10. No distinguishing facts were pointed out by the Ld. DR at the time of hearing.
The assessee has made the donation as per the provisions of the Income Tax Act and
no defect was pointed out by the Assessing Officer or by the CIT(A) regarding the
donation to Navjeevan Charitable Trust. In fact, the Revenue authorities could not
establish that the said amount was returned back to the assessee from any of the
records as well. Appeal being ITA No.2586/Ahd/2017 for Assessment Year 2010-11
filed by the assessee is thus allowed.

11. ITA Nos.2587 & 2588/Ahd/2017 for Assessment Years 2011-12 & 2012-13 are
identical and no distinguishing facts were pointed out by the Ld. DR, hence both these
appeals as well are allowed.

12. In the result, all the three appeals filed by the assessee are allowed. Order
pronounced in the open Court on this 10th day of December, 2021.

Sd/- Sd/-
(WASEEM AHMED) (SUCHITRA KAMBLE)
Accountant Member Judicial Member

Ahmedabad, the 10 th day of December, 2021

PBN/*
 ITA Nos.2586, 2587 & 2588/Ahd/2017
A.Ys. 2010-11, 2011-12 & 2012-13

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Copies to: (1) The appellant

(2) The respondent
(3) CIT
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
UE COPY

Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad