The Income Tax Appellate Tribunal (ITAT) has held that the genuineness of the donations made out of business receipts which are allowable as expenditure under the provisions of the Income Tax Act, 1961 cannot be suspected.
Facts of the case:
A survey operation under Section 133A of the Act was carried out at the business premises of M/s Bhandari Hospital & Research Centre. During the course of survey undisclosed income amounting to Rs.31,24,41,685/- was surrendered by the assessee through its partners under different heads. Out of the surrendered amount of Rs.31,24,41,685/-, the amount of Rs.23,61,18,930/- was surrendered in the hands of the assessee firm. There are three limbs of the issue.
Interpretation of law:
The first claim of the assessee is that it used to advance hundi loans out of undisclosed/out of books hospital receipts, this is the precise explanation offered by the assessee in respect of hundi found during the course of search.
Secondly the assessee has disclosed the amount of hundi loan as undisclosed hospital receipts. Thirdly out of the maturity amount the assessee made other hundis amounting to Rs.6,21,25,115/-. While relying on the decision of the Supreme Court, the assessee contended that the maturity amount was available with the assessee for making further investments tribunal consisting of a Judicial Member, Kul Bharat, and an Accountant Member, Manish Boradwhile deleting the order passed by the department held that “If it is presumed that investment in hundi was bogus in such a situation there was no money available for the investment made by the assessee as such amount surrendered was not available.
Donation is made out of business receipts, which is an allowable expenditure. Even otherwise also in the light of the judgment of Hon’ble Supreme Court rendered in the case of A.V. Singhai& Co V/s CIT 126 ITR 457 (AO) we do not find any infirmity in the assessment order. Hence the decision of Ld. Pr. AO for revising the assessment order on this ground is not in accordance with the mandate of law.
Therefore, the same is hereby set aside.” “The revenue has filed a copy of the charge sheet where the partners of the assessee firm are arrayed as an accused. There is no material suggesting the quantum of receipts was transferred by the partners of the firm out of the alleged proceeds of crime. There ought to be some receipt which the assessee could be subjected to tax,” the tribunal said.