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Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Manish Borad
Per Rajpal Yadav, Vice-President (KZ):- It is a Bunch of 13 appeals and one of the major issues involved in all these appeals is common, therefore, we heard them together and deem it appropriate to dispose of them by this common order. In order to appreciate the facts in a simplified manner, we deem it appropriate to take note of the facts in a seriatim from each appeal.
The assessee is impugning the order of ld. Commissioner of Income Tax (Appeals) dated 29.11.2019 passed in A.Y. 2013-14, which has arisen against the assessment order dated 30.03.2016 passed under section 143(3) of the Income Tax Act. The assesee has taken eleven grounds of appeal. However, on perusal of the grounds, it revealed to us that basically three-folds of grievance are being raised by the assessee, namely- (a) in Grounds No. 2 to 6, the assessee has pleaded that ld. CIT(Appeals) has erred in confirming the action of the ld. Assessing Officer for not allowing the deduction of Rs.87,50,000/- claimed
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 under section 35(1)(ii) of the Income Tax Act, 1961;
(b) In Grounds No. 7 & 8, the assessee has submitted that ld. CIT(Appeals) has erred in confirming the action of the ld. Assessing Officer for considering disallowance of Rs.87,50,000/- under normal provisions for computing book profit and thereby erred in calculating the book profit at Rs.4,17,01,736/- as against returned book profit of Rs.3,29,51,736/-.
(c) The ld. Assessing Officer has erred in charging interest under section 234C of the Income Tax Act.
2.1. In rest of the grounds, i.e. Grounds No. 1 & 11, it has not raised any specific grievance. Similarly Grounds No. 3 to 6 are supporting arguments with Ground No. 2.
2.2. Brief facts of the case are that the assessee- company has filed its return of income electronically on 29.09.2013 disclosing total income at Rs.2,41,07,380/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 on 04.09.2014, which was duly served upon the assessee. The ld. Assessing Officer thereafter issued a questionnaire by way of a notice under section 142(1). During the course of assessment proceeding, it revealed to the ld. Assessing Officer that assessee has claimed weighted deduction of Rs.87,50,000/- under section 35(1)(ii) of the Income Tax Act. The ld. Assessing Officer has observed that a donation of Rs.50,00,000/- has been paid by the assessee to the School of Human Genetics and Population Health (in short ‘SHG&PH’) and in lieu of such donation, it has claimed deduction @ 175% of the donation. The ld. Assessing Officer has disallowed such claim of the deduction on the ground that SHG&PH undertakes the transaction of bogus donation through false billing and by providing accommodation entries in this matter. The ld. Assessing Officer has made reference to the investigation carried out in the case of recipient as to how the recipient has gone in Settlement Commission admitting that in lieu of service charges, it has provided accommodation entries of the donation to the donors. Armed with this information, ld. Assessing Officer has confronted the assessee to show its bonafide belief as to how such donation was made. According to the ld. Assessing Officer, nothing was submitted by the assessee except that donation was given to a duly recognized Institution for receiving such donation. In this way, ld. Assessing Officer has made the addition. As far as 7
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 computation of book profit under section 115JB is concerned, ld. Assessing Officer did not make much discussion. He carried out such adjustment only in the computation.
2.3. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee. The ld. CIT(Appeals) has allowed partly on other small disallowances, but the issues agitated before the Tribunal, ld. CIT(Appeals) has concurred with the ld. Assessing Officer.
The present two appeals are directed at the instance of assessee against the separate orders of ld. CIT(Appeals) dated 02.12.2019 passed on the appeals of the assessee for A.Y. 2013-14 and 2014-15.
3.1. The assessee has taken two grounds of appeal in A.Y. 2013-14 and three grounds of appeal in A.Y. 2014- 15.
3.2. Ground No. 1 in A.Y. 2013-14 is similar with Ground No. 1 in A.Y. 2014-15. In this ground of appeal, the assessee has pleaded that ld. CIT(Appeals) has erred in confirming the disallowances of deduction amounting to Rs.35,00,000/- and Rs.17,50,000/-, which were claimed 8
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 by the assessee under section 35(1)(ii) for grant of donation to SHG&PH i.e. School of Human Genetics and Population Health.
3.3. Ground No. 2 is common with Ground No. 3 of A.Y. 2014-15. In this ground, the assessee has not raised any specific grievance. In A.Y. 2014-15, it has raised one more ground of appeal whereby it has challenged the disallowance of Rs.13,12,500/-, which was claimed deduction @ 175% in respect of donation of Rs.7,50,000/- to Maitribani Institute of Experimental Research & Foundation.
3.4. Brief facts of the case are that the assessee has filed its return of income on 30.09.2013 and 29.11.2014 declaring total income of Rs.61,76,369/- and Rs.62,00,581/- respectively in A.Y. 2013-14 and 2014- 15. The returns of both the years were selected for scrutiny assessment and notices under section 143(2) were issued and served upon the assessee. The ld. Assessing Officer found that the assessee has given donation to SHG&PH, similarly to Maitribani Institute of the Experimental Research & Foundation, Kolkata. He observed that both the Trusts were involved in providing accommodation entries in lieu of such donations. SHG&PH has admitted this fact before the Settlement Commissioner and offered its commission income for 9
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 providing such an accommodation to the assessee. The ld. Assessing Officer accordingly disallowed the claim of the assessee in both the years and appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
ITA No. 136/KOL/2020 4. (P.S. Magnum)
The present appeal is directed at the instance of assessee against the order of ld. CIT(Appeals) dated 02.12.2019 passed for A.Y. 2013-14.
4.1. The appeal before the ld. CIT(Appeals) was filed against an assessment order dated 10.06.2016 passed under section 143(3) of the Income Tax Act. The assesese has taken five grounds of appeal, but its grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the disallowance of claim under section 35(1)(ii) of the Income Tax Act amounting to Rs.3,50,00,000/-.
4.2. Brief facts of the case are that the assessee-firm had filed its return of income on 26.11.2013 declaring its total income of Rs.5,42,42,510/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. The ld. Assessing Officer thereafter issued a questionnaire under section 142 of the Income Tax Act. 10
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 On scrutiny of the accounts, it revealed to the ld. Assessing Officer that assessee has claimed deduction of Rs.3,50,00,000/- under section 35(1)(ii) of the Income Tax Act. The assessee has shown an expenditure of Rs.2,00,00,000/- under the head “Administrative Expenses”. This has been debited under Sub-Head “Donation for Scientific Research”. In the return under Schedule (e), it claimed a deduction of Rs.3,50,00,000/-. The ld. Assessing Officer has disallowed this deduction. He has made a similar discussion as made in the earlier two appeals of the Group. He has made reference to the statements, for appreciating the affairs of SHG&PH, recorded during post-survey enquiry in their cases. He has made reference as to how the donors went to the Settlement Commission and admitted the fact that they have provided only accommodation entries on commission based. All these materials were confronted to the assessee.
ITA No. 23/KOL/2020 5. M/s. Coalsale Co.
The present appeal is directed at the instance of assessee against the order of ld. CIT(Appeals) dated 24.12.2019 passed for A.Y. 2015-16.
5.1. The assessee has raised five grounds of appeal, but its grievances revolve around a single issue, namely ld. 11
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 CIT(Appeals) has erred in confirming the disallowance of deduction claimed under section 35(1)(ii) amounting to Rs.17,50,000/-.
5.2. Brief facts of the case are that the assessee has filed its return of income electronically on 27.09.2015 declaring total income of Rs.1,43,82,590/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that the assessee has paid a donation of Rs.10,00,000/- to M/s. SHG&PH. It has claimed deduction under section 35(1)(ii) of the Income Tax Act @ 175% of the donation given by it. In this way, a deduction of Rs.17,50,000/- was claimed. The ld. Assessing Officer has made reference towards the evidence collected by Investigation team on the recipient of the donation, i.e. on the SHG&PH. The ld. Assessing Officer has confronted the assessee as to how such recipient was involved in providing accommodation entry under the garb of receipt of donation and as to how the recipient has admitted this fact on oath before the Settlement Commission. Contrary to this confrontation, nothing was submitted by the assessee and accordingly ld. Assessing Officer has disallowed the deduction claimed by the assessee.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 5.3. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee. Hence the assessee is in appeal before the Tribunal.
(Abhilasha Tradecom Pvt. Limited
The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 31.03.2021 passed for A.Y. 2011-12.
6.1. The assessee has raised five grounds of appeal, but its grievances revolve around two issues, namely – (a) ld. CIT(Appeals) has erred in upholding the reopening of assessment under section 147 of the Income Tax Act;
(b) ld. CIT(Appeals) has erred in confirming the addition of Rs.5,25,000/-, which was added by the ld. Assessing Officer by disallowing the claim of the assessee made under section 35(1)(ii) of the Income Tax Act.
6.2. Brief facts of the case are that the assessee has filed its return of income on 26.09.2011 declaring total income of Rs.1,21,426/-. This return of the assessee was processed under section 143(1). The assessment was 13
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 reopened by issuance of a notice under section 148 of the Income Tax Act on 05.11.2015, which was duly served upon the assessee. The ld. Assessing Officer has issued the notice on the ground that an information was received from the Director (Investigation), Kolkata vide letter No. 75/2015 dated 05.10.2015, in which it has been pointed out that assessee is a beneficiary of bogus donation. The ld. Assessing Officer found that assessee has given a donation of Rs.3,00,000/- to M/s. Horticulture Harbal Healthcare Bio-Harbal Research Foundation (in short ‘HHBRF’) and it claimed weighted deduction of Rs.5,25,000/-. The ld. Assessing Officer has confronted the assessee with regard to the material unearthed during the course of search by the Investigation Wing in the case of recipient of the donation, but the assessee failed to give any plausible reply to rebut such donation except by submitting that it has given donation under a bonafide belief. Accordingly ld. Assessing Officer has disallowed the claim of the assessee vide assessment order dated 25.10.2016 passed under section 143(3) read with section 147 of the Income Tax Act. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 31.03.2021 passed for A.Y. 2012-13.
7.1. In the grounds of appeal, the assessee has raised six grounds of appeal, however, its grievances revolve around two issues, namely- (a) ld. CIT(Appeals) has erred in upholding the reopening of assessment;
(b) ld. CIT(Appeals) has erred in confirming the addition of Rs.12,25,000/-, which was claimed as a deduction under section 35(1)(ii) of the Income Tax Act. In rest of the grounds, the assessee has raised supporting arguments qua these two issues.
7.2. Brief facts of the case are that the assessee has filed its return of income on 29.09.2012 declaring total income of Rs.4,26,540/-. This return was processed under section 143(1). The assessment of the assessee was reopened by issuance of a notice under section 148 on 05.11.2015. The ld. Assessing Office has reopened the assessment on the strength of information received from the Director (Investigation), Kolkata exhibiting the fact that assessee is a beneficiary of alleged bogus donation given by it. On scrutiny of the accounts, it revealed to 15
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 the assessee that it has given a donation of Rs.7,00,000/- to M/s. Horticulture Harbal Healthcare Bio-Harbal Research Foundation and claimed weighted deduction @175% of the donation amounting to Rs.12,25,000/-. The ld. Assessing Officer has disallowed this claim as was disallowed in A.Y. 2011-12. The reasonings in both the years are identical and the ld. CIT(Appeals) has confirmed the addition, hence appeal before the Tribunal.
8. (Orient Industrial Corporation)
The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 24.09.2017 passed for A.Y. 2013-14.
8.1. The assessee has raised five grounds of appeal, but its grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the addition of Rs.26,25,000/-, which was claimed by the assessee as a deduction under section 35(1)(ii) of the Income Tax Act.
8.2. Brief facts of the case are that the assessee has filed its return of income on 06.09.2013 declaring total income of Rs.37,79,520/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. 16
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 On scrutiny of the accounts, it revealed to the ld. Assessing Officer that the assessee has donated the amount of Rs.15,00,000/- to School of Human Genetics and Population Health. It has given deduction @175% of the donation under section 35(1)(ii). The ld. Assessing Officer has confronted the assessee with the Investigation Report pointing out as to how affairs of the recipient were found to be bogus and as to how the recipient has approached the Settlement Commission admitting the fact that it was involved in bogus donation. Contrary to this claim, the assessee was unable to submit any evidence except pleading bonafide donation. The ld. Assessing Officer disallowed the claim of the assessee by passing an assessment order on 02.03.2016 under section 143(3) of the Income Tax Act. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
ITA Nos. 2316 & 2317/KOL/2019 9.
The present two appeals are directed at the instance of assessee against separate orders of ld. CIT(Appeals) dated 28.08.2019 passed in A.Y. 2013-14 and 2014-15.
9.1. The grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the disallowance of Rs.5,25,000/- in A.Y. 2013-14 and Rs.5,25,000/- in A.Y. 2014-15. 17
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 9.2. Brief facts of the case are that the assessee his filed its return of income on 20.12.2013 and 28.03.2015 declaring total income of Rs.13,08,950/- and Rs.13,74,490/- respectively in A.Ys. 2013-14 and 2014- 15. All the returns of the assessee involved in both the years were for scrutiny assessment. It was found that the assessee has given bogus donation to School of Human Genetics and Population Health in both the years and such claim of the assessee has been disallowed. The facts of the present appeals are common with & 2449/KOL/2019 discussed in immediate preceding paragraph in the case of assessee M/s. Hiralal Bhandari as represented the legal heir of Late Champalal Bhandari. The earlier appeals are of Late Shri Champalal Bhandari, Kolkata, which are being represented by the assessee. The facts on all vital points are common in all these four appeals.
The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 30.08.2019 passed for A.Y. 2014-15.
10.1. In the solitary substantial ground of appeal, the assessee has pleaded that ld. CIT(Appeals) has erred in confirming the disallowance of Rs.26,25,000/-, which 18
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 was claimed as a deduction under section 35(1)(ii) of the Income Tax Act.
10.2. Brief facts of the case are that the assessee has filed its return of income on 25.09.2014. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that assesese has claimed weighted deduction @ 175% on donation of Rs.15,00,000/- to School of Human Genetics and Population Health. The ld. Assessing Officer has disallowed this claim of deduction calculated at Rs.26.25.000/-. The ld. Assessing Officer confronted the assessee to the investigation report on the recipient of donation and pointed out that such recipient has admitted before the Settlement Commissioner that it was engaged in providing accommodation entries. On the strength of such material, ld. Assessing Officer disallowed the claim of the assessee. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 28.08.2019 passed for A.Y. 2013-14.
11.1. The assessee has taken three grounds of appeal, but its grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the disallowance of Rs.35,00,000/- claimed by the assessee under section 35(1)(ii) of the Income Tax Act.
11.2. Brief facts of the case are that the assessee has filed its return of income electronically on 29.09.2013. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that the assessee had claimed a deduction of Rs.35,00,000/- under section 35(1)(ii) on a donation of Rs.20,00,000/- to School of Human Genetics and Population Health. The ld. Assessing Officer confronted the assessee with regard to the material unearthed during the course of search/survey in the case of recipient of the donations. He confronted the assessee as to how this recipient has admitted before the Settlement Commission that it has provided accommodation entries after receipt of commissions. The assessee was unable to submit any evidence in support of its claim except pleading bonafide 20
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 belief of its donation. It was submitted by the assessee that since recipient was enjoying the status of a Research Institute when it has made donation. If any subsequent enquiry was made, it unearthed that such recipient was receiving bogus donation beyond the control of the assessee, the ld. Assessing Officer was not satisfied with the explanation of the assessee. He disallowed the claim of the assessee and made the addition of Rs.35,00,000/- by way of an assessment order dated 29.11.2016 passed under section 143(3) of the Income Tax Act. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.
The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 28.08.2019 passed for A.Y. 2014-15.
12.1. The grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the disallowance of Rs.61,25,000/-, which was claimed under section 35(1)(ii) of the Income Tax Act..
12.2. The facts in the present year are almost verbatim except variation of the amounts as available in A.Y. 2013-14 discussed in ITA No. 2448/KOL/2019. 21
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019
Question in dispute 13. With the assistance of ld. Representative, we have gone through the record carefully. The solitary issue involved in all these appeals relates to – “whether the appellants are entitled to weighted deduction @ 175% of the donations given by them to allege Research Institute namely SHG&PH under section 35(1)(ii) of the Act.
It is imperative upon us to take note of this provision, the relevant part reads as under:- “Expenditure on scientific research 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- (i).................. (ii) [an amount equal to [one and three-fourth] times of any sum paid] to a [research association] which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research: [Provided that such association, university, college or other institution for the purposes of this clause- (A) Is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 (B) Such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government;] x x x x x x x x x x x x x x x
A bare perusal of the above provision would indicate that if an assessee, which is not engaged in carrying out research work on their own and rather contribute to some other scientific research organisation having its main object of undertaking scientific research or to a University, College or other Institution to be used for scientific research, then this Section provides that such Institution, University, College has to be ‘approved’ for such purposes by prescribed authority. Therefore, if a research institute is approved and notified by the prescribed authorities under the Rules of Income Tax Rules, 1962 and the provision of this Act, then the donors will be entitled for a deduction equivalent to 175% of donation given by them. Therefore, as far as scope of this Section or meaning/instruction of the language employed in this section is concerned, there is no dispute between the parties. In other words, interpretation of the meaning of section is not involved, which requires reference to any judgment from the authoritative pronouncements of Hon’ble High Courts as well as Hon’ble Supreme Court.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 16. The dispute relates to the factum of giving donations to a genuine institution for claiming deduction under section 35(1)(ii) of the Income Tax Act.
Arguments: 17. Shri S.M. Surana, ld. Sr. Advocate has led the arguments on behalf of the assessees. He could not dispute to the proposition that as far as interpretation and scope of section 35(1)(ii) is concerned, there is no dispute. He submitted that neither the ld. Assessing Officer nor the ld. CIT(Appeals) have denied the fact that payments of donation by all these appellants were made to the Institution, who was enjoying the benefit of registration with the Department. In other words, the section contemplates approval of prescribed authority for carrying out research work. If such approval is available, then donations given by the donor is allowed to be deduction given in the provision. While elaborating this contention, he submitted that authorities whenever required to approve any Institute engaged in research work, they carry out necessary inquiries/ investigation to ensure the genuineness of such Institution and after analysis all the objects, activities, personnel, who will be managing such organisation, they approve such an organisation to receive donation. Thus a person/entity, who wishes to avail the benefit of section 35(1)(ii) by contributing a specified sum, is not supposed to and in 24
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 fact is not equipped with so much tools to verify genuineness of the activities of such Institution. It is a bonafide belief that once approval is granted by CBDT, contribution made to such Institution will qualify exemption, more particularly when such Institution is not related at all to the assessee and the assessee has no control whatsoever over the activities of such Institution in any manner. Ld. Counsel for the assessees drew our attention towards Notification vide which approval was granted. This fact is not disputed by the Revenue also about the grant of approval when these assessees have given the donations.
The ld. Counsel for the assessees further contended that approval granted to the SHGPH was rescinded by the competent authority. Such approval was rescinded on 15.09.2016 with a retrospective effect from 01.04.2007. Thus he emphasized that after four years from the date of payment of contribution, how the assessees could be branded that such a donation was bogus one. This retrospective effect cannot be given on the bonafide belief and for this purpose, he relied upon the judgment of the Hon’ble Supreme Court in the case of CIT –vs.- Vatika Township Pvt. Limited reported in 367 ITR 466. He also made reference to the judgment of Hon’ble Supreme Court in the case of Hitendra Vishnu Thakur –vs.- State of Maharashtra [AIR 1994 S.C. 2623]. On the strength of 25
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 these two decisions, he submitted that a procedural statute should not generally be applied retrospectively, where the result would be to create new disabilities or obligations, or to impose new duties in respect of transactions are not accomplished. The ld. Counsel for the assessees thereafter made reference to a series of decisions, where ITAT has allowed such a deduction to the assesses. He pointed out that some of the decisions in Kolkata have been upheld upto the Hon’ble High Court also. He pointed out that across India, such deductions have been allowed to the assessees.
All the ld. Counsels have been by and large took the same line of argument. They only placed on record different ITAT orders in their paper book, wherein identical issues were involved.
Originally Shri Amal Kamat, ld. CIT(DR) appeared in the case of Tarasafe International Private Limited assisted with Smt. Ranu Biswas, Addl. CIT, Sr. D.R. Thereafter Shri Arup Chatterjee, ld. Sr. D.R. represented the Revenue. In the case of Tarasafe International Pvt. Limited, a paper book has been filed by the Revenue running into 268 pages. In this paper book, the Revenue has placed on record the papers recovered during the course of survey conducted at the premises of the recipient of the donations. It has also placed on record 26
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 the copy of the Settlement Order passed in the case of the recipient. Such order is available on pages no. 52 to 62. On pages no. 63 to 81, a list of the alleged bogus donors has been placed by the Revenue. Such list has been prepared on the basis of alleged brokers, who have arranged the donations to the Institution and a total revenue received through by means of such donation is Rs,159,36,11,602/-. In other words, it is Rs.159.36 crores. Similarly one more list has been placed on pages no. 136 to 159, where the Revenue has complied with PAN, Data, who has availed weighted deduction on this bogus donation. On the strength of all these details, it was submitted by the Revenue that during the course of assessment proceedings in all these appeals, the ld. Assessing Officer has confronted the assessees with the material discovered during the course of survey on the premises of the recipient. None of the assessees has justified their claim. They are only harping upon bonafide. He pointed out that originally the Institute might have prepared the documents and submitted for carrying out the research activities. The motive might be genuine but ultimately it detracted from its motive and indulged in fraudulent activities with the help of brokers. The ld. CIT(DR) thereafter made reference to the decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax , Kolkata –vs.- Batanagar Education & Research Trust. The Batanagar Education & 27
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 Research Trust was enjoying registration under section 12AA of the Income Tax Act. During the course of survey carried out on SHGPH, it came to the notice of the Revenue that Batanagar Society was receiving bogus donations and giving the money in cash. Its registration was cancelled by the ld. Commissioner of Income Tax under section 12AA(3)of the Act. The appeal of the assessee was dismissed by the Tribunal bearing ITA No. 756 & 912/KOL/2016.
Dissatisfied with this order, assessee carried the matter in appeal before the Hon’ble High Court. The Hon’ble High Court has reversed the decision of the Tribunal. However, Department took it to the Hon’ble Supreme Court, which reversed the decision of the Hon’ble Calcutta High Court and upheld the rejection of the registration under section 12A(3). He emphasized that in this decision, the Hon’ble Supreme Court has taken note of the discussion made by the ld. CIT (Exemption), who cancelled the registration as well as the finding recorded by the Tribunal. Both these findings are based upon the material discovered during the survey upon SHG&PH and, therefore, in view of this latest decision of the Hon’ble Supreme Court, he emphasized all other orders of the ITAT and the decisions of the Hon’ble High Court are not to be followed.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 22. Since this decision was supplied by the Revenue after conclusion of the arguments, therefore, we re-fixed the hearing and confronted the assessee with this latest position of law. However, Shri Soumitra Chowdhury, ld. Counsel for the assessee has placed on record the judgment of the Hon’ble Calcutta High Court in the case of Commissioner of Income Tax (Exemption), Kolkata – vs.- Sanskriti Sagar. In this decision, the Hon’ble High Court has considered the judgment of the Hon’ble Supreme Court in the case of Batanagar Education & Research Trust and dismissed the appeal of the Revenue. In this case also, registration under section 12AA was cancelled by the ld. Commissioner by exercising the powers under section 12AA(3) of the Act. This cancellation was set aside by the Tribunal and Revenue carried the matter before the Hon’ble High Court, who upheld the order of the ITAT by dismissing the appeal of the Revenue. On the strength of this decision, ld. Counsel for the assessee submitted that Hon’ble High Court has explained the ratio laid down in Batanagar Education & Research Trust and, therefore, this subsequent decision is to be followed.
Finding:- 23. The Department has filed a paper book containing 268 pages in M/s. Tarasafe International Pvt. Limited.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 On second page of the paper book, order of the Settlement Commission dated 22.07.2016 passed under section 245D(4) of the Income Tax Act has been placed on record. In this order, Settlement Commission has noticed the facts of assessee before them, i.e. SHG&PH. Such facts have been noticed by them on the basis of statement of facts filed before them. We deem it appropriate to take note of the facts about the Institution, who has received such a huge donation. As emerging out from that order, the facts are that the Society SHG&PH was registered under West Bengal Society Registration Act, 1961 on 26.04.1993. It was founded by Professor D.P. Mukherjee, the Society was formed with the objective of service oriented researches in the field of Human Genetics and to address all the problems ailing the population i.e. epidemics, ethnicity and ethos of common man along with following welfare activities:- (i) to conduct seminars, lecture sessions, conferences awareness generation;
(ii) to acquire, establish and run educational centre (science medicine, IT),
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 (iii) women empowerment through self- help group, women literacy & vocation;
(iv) to fight major population health issues, as Cancer Thalassaemia etc. The Registered Office of the donee society is situated at 7, Nilamber Mukherjee Street, Kolkata-700004. The particulars of various registrations/approvals/legal status of the Applicant Society are as under:- Particulars Regn. No. Date Authority Registration DIT(E)/S- 27.10.2004 Director of u/s 12A of the Income Tax 132/8E/23/04-05 I.T. Act (Exemption), Kolkata Registration DIT(E)/906/SE/23/04- 27.10.2004 Director of u/s 80G(5)(vi) 05 Income Tax of the I.T. Act, (Exemption), 1961 (made DIT(E)/3248/SE/23/04- 12.12.2011 Kolkata perpetual) 05 Registration Initial order no. 49 27.02.2004 CCIT-III, u/s 10(23C) of Kolkata Renewal vide No. CCIT- 16.01.2014 the I.T. Act III/10(23C)(iv)/11- 12/245 Recognition of Renewal till 31.03.2016 01.04.2013 Government of Scientific and vide Communication No. India, Ministry Industrial 14/473/2007-TU-V(for of Science and Research 01.04.10 to 31.03.13) 01.04.2013 Technology Organization 17.06.2010 For 01.04.08 to 31.03.10) Gazette Notification No. 4/2010 28.01.2010 Government of Notification u/s India, Ministry 35(1)(ii) of the of Finance I.T. Act, 1961 (Department of Revenue) (Central Board of Direct Taxes)
The Governing Body members of the recipient are as under:
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 (a) Dr. Madhumita Roychoudhury President (b) Dr.Shyamal Kumar Nandy Vice-President (c) Dr. Samadrita Mukherjee Secretary Sardar (d) Ms. Basanti Rauth Assistant Secretary (e) Mrs. Moumita Raghavan Treasurer (f) Mr. Gautam Das Executive Member (g) Dr. Debashis Mukherjee Executive Member
The Society, carried scientific research in the field inherited genetic diseases, cancer genetics (leukemia) and Geriatric disorders in the research lab. The donee had pursued research in the community understand the population, i.e. monarchial age, nutrition status and reproductive health issues. It is stated that at the level of community welfare, the society had trained teachers and counselors to take care Attention Deficit Hyperactivity Disorder including Cystic Fibrosis Children workshops of Arts & Crafts, which had been published in various national £ international journals. The society had ongoing community projects i.e. Kangaroo Project - exclusive breast feeding in urban and rural Ben; health situation assessment studies at Ruppur Birbhum, West Bengal and had acquired six acres of land at Ruppur, Birbhum, along with 3 building structures for care centre for elders and disabled senior citizens. Besides, the lab of applicant society is located in approx. 1000 sq. ft space at 6A, Malanga Lane, Kolkata-12, which has been taken on rent of Rs.28,000/- p.m. Various machines and equipments have been purchased for various research/testing 32
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 etc. by the society at Rs.25 lakh. In addition, the donee has also incurred huge expenses or chemicals, Primars and other consumables for research work, salary and rent etc.
It was further, submitted that as the society had inadequate financial resources, it was made to understand by certain persons acting as mediators about a way of earning some income as commission through the route of giving accommodation entries for 'donations'. The Society was enticed into accepting cheques towards ‘donations' and refunding almost similar amounts by debiting the payments under various heads in books of account after retaining a certain margin of 3% to 8% towards service charges for itself. Owing to lack of financial flows and for the need for meeting their financial requirements, the Secretary and Treasurer of the Society accepted such ‘donations' during the F.Y. 2011-12, 2012-13 and 2013-14, which were accommodating entries for ‘donations’ through mediators. The refunds were made by debiting the payments, mainly under the head Research & Development Expenditures and some other heads i.e. SHG Advances etc. in the books of account and returned to the ‘donors’.
It was also submitted before Settlement Commission that a survey operation under section 133A of the Act was carried out at the premises of the done Society at 6A, Malanga Lane, Kolkat-12 on 27.01.2015. During the course of survey following documents were found and impounded:-
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 Name & Items Annexure Documents Documents Address found impounded School of Books of ‘A’ SHG/1 to SHG/1 to Human accounts SHG/8 and SHG/8 and Genetics & SHG/PD/1 SHG/PD/1 Population (one Pen Drive) (one Pen Drive) Health, 6A, Malanga Cash ‘3’ Rs.82,400/- NIL Lane, Kolkata- 700012 Bank A/c. ‘2’ 16 nos. NIL Debit/Credit ‘4’ 4 nos. NIL Card 28. The main allegation and reason for the survey against the donee was that it had received huge amount of donations on which the applicant society earned service charges. During the survey operation, statements of the Secretary and the Treasurer of the Society were recorded in which they admitted the fact of accepting donations through certain mediators and refunding the same after keeping 3% - 8% as service charges for the society.
In 2019, one of us was posted ITAT, Ahmedabad Vice-President (Judicial Member), when first time such issue came up for consideration. Deduction of Rs.8,75,000/- was claimed by the assessee and we passed the order in ITA No. 1943/AHD/2017. This order was followed in of 2017 since in the first appeal tax effect was less, therefore, it was not challenged by the Revenue before the Hon’ble High Court. However, the second order in the case of Principal CIT-3 –vs.- M/s. Thakkar Govindbhai Ganpatlal HUF was challenged before the Hon’ble High Court in Tax Appeal No. 881 of 2019. The Hon’ble Gujarat High Court has 34
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 dismissed the appeal of Revenue and upheld the order of the ITAT. The Hon’ble High Court has reproduced the finding of the Tribunal recorded in paragraph no. 2, 4, 5 & 6 verbatim and thereafter held that no question of law is involved. This finding reads as under:-
“6. Learned Senior Advocate Mr. M.R. Bhatt for the appellant submitted that there no appeal is filed by the Revenue against the decision of the Tribunal in the case of S.G. Vat Care Private Limited (supra). It would therefore be germane to refer to the following findings, given by the Tribunal in the case of S.G. Vat Care Private Limited (supra):-
“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 Heathcare 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.4,47,9I0/-. 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 donation from various sources, and after deducting certain amount of commission, these donations were refused 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 ld.CIT(A) did not bring any relief to the assessee.
4. Before us, the !d. Counsel for the assessee contended that donations were given on 25.03.2014. 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 6.9.2016. There is no ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 mechanism with the assessee to verify 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 representative 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 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”.
7. In the facts of the present case, the CIT(Appeals) has given the finding of the fact that the amount of donation was transferred to the Herbicure through Bank channel and there is no evidence that the same is returned back in cash.
8. It is also found that the Herbicure Foundation has confirmed that the amount has been utilized for scientific research vide confirmation dated 29.09.2016. Accordingly, the onus placed upon the assessee was discharged.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019
In view of the aforesaid findings of the fact given by both the authorities below, no interfere in the impugned order passed by the Tribunal is required to be made. No substantial question of law arises from the order of the Tribunal. Therefore, the appeal fails and is hereby dismissed. Sd/- Sd/- (J.B. Pardiwala, J) (BHARGAV D. KARIA, J) PALAK
The same line of reasoning has been developed everywhere including ITAT, Kolkata. The order of the ITAT, Kolkata got the approval of the Hon’ble High Court, a reference can be made to the decision of the Hon’ble Calcutta High Court in the case of Pr. CIT –vs.- Mackaw Corporation (2022) 8 TMI 1750, ITA 42 of 2020, G.A. No. 2 of 2019, Old G.A. No. 1477 of 2019.
The ld. Counsels have emphasized that under identical circumstances, deductions have been allowed by the ITAT and the order of ITAT has been upheld by the Hon’ble High Courts. Therefore, these appeals are to be allowed and deductions be granted to the appellants.
With respect to all the case laws including our own order, which has been upheld by the Hon’ble Gujarat High Court, we are of the view that all the decisions are based on the set of facts in those cases. In these cases,
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 the Department did not file paper book, did not bring it to the notice of the ITAT about the nature and quantum of the material discovered during the course of survey exhibiting as to how a modus operandi in an organized manner was adopted by the recipients with the help of brokers to fraud the nation. There was no question of law involved in the factual finding given by the Tribunal in all the cases. Thus on facts the orders of the Tribunal were upheld.
Let us take note of the material placed before us persuading us to record a finding of fact being a last authority on this aspect. There is no dispute that a survey under section 133A was carried out at the premises of M/s. SHG&PH as well as M/s. Herbicure Healthcare Bio-Herbal Research Foundation (in short ‘HHBRF’) because Abhilasha Tradecom Pvt. Limited obtained the accommodation entry from this Institution and issue is involved in ITA No. 132/KOL/2021. In this survey, statement of the Secretary of M/s. SHG&PH was recorded. The Secretary has admitted that the Trust has not used such amount in any research activity, rather it has received the donation in a connived manner on the alliance of certain brokers. They have pleaded specifically in their statement of facts before the Settlement Commission that certain brokers have approached them for augmentation of their revenue in 38
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 this fraudulent manner and without realising the seriousness of its impact upon the economy in general and Income Tax Department in particular. They involved in this activity.
The Department thereafter recorded the statements of the brokers, who have arranged these claim of bogus deduction for the assessees across the country. It has been brought to our notice that in one assessment year total donations of around Rs.387 crores were received by this Institution and the donors have availed benefit of deduction of more than Rs.650 crores. This is the magnitude of revenue swindled by the donors with the connivance of brokers and SHG&PH. These details have come up in the Settlement order.
We would like to refer the statement of one of the brokers Shri Vijay Kumar Agarwal, son of Late Mohan Lal Agarwal, aged about 65 years. His statement was recorded under section 131 of the Income Tax Act, 1961 on Oath on 23.02.2015, which was in continuation of his statement recorded dated 13.02.2015 i.e. subsequent to the survey conducted upon SHG&PH. Copy of this statement along with the statements of other brokers have been placed by the Revenue and copy of the statement of Shri Vijay Kumar Agarwal is available on pages 82 to 90 of the paper book. Certain questions and 39
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 their answers are very important in order to demonstrate the modus operandi adopted by them:-
Q. 6. What is your source of income?
Ans. My main source of income is from brokerage by raising bogus bills for various beneficiaries/parties.
Q.13. How do you know the Trust called “School of Human Genetics & Population Health (SHGPH)?
Ans.: Initially, I came with the contact of Smt. Moumita Raghavan, President and Smt. Samadrita Mukherjee Sardar, Secretary of School of Human Genetics & Population Health through a market broker named Shri Sailesh Gupta, residing at howrah who approached me for bogus billing. After that, I have direct contact with Smt. Moumita Raghavan & Smt. Samadrita Mukherjee Sardar of SHGPH regularly and raise bogus bills for SHGPH over the years as per their directions. I shall furnish the details of bogus billing on 10.03.2015.
Q. 6: Please explain the nature of business done by you in detail.
Ans.: I am an accommodation entry operator and I am engaged in the business of providing accommodation entries in the form of bogus share capital/unsecured loans/bogus bills etc. to various beneficiaries/parties through various ‘jama-kharchi’/paper
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 companies/proprietorship concerns controlled by me in lieu commission.
Q.7. Kindly go through the Annexure-A which is submitted by you in the case of SHG&PH. Kindly provide the bank account along with the bank name and branch addresses of 21 concerns mentioned in the Annexure-A.
Ans.: I will submit all the required details by 27.03.2015.
Q.8. Kindly furnish the names, postal addresses and phone numbers of the directors /proprietors of the 21 concerns mentioned in the Annexure-A.
Ans.: I will submit all the required details by 27.03.2015.
Q.9. Please go through the Annexure-A in which total billing is shown as Rs.1118848138/-. Please state where this amount has been transferred after bogus billing and how.
Ans.: This amount has been transferred to the donors through ‘Hawala Opeators’. First I transferred this amount to various parties, who was raised bogus bill on my concerns by bank channel through layering. Then from these parties, I have go cash in return which is transferred to the donors in cash through ‘Angarias/howala’. The details of bogus bills raised by my concerns will be provided by 27.03.2015.
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 Q.10. Kindly explain the modus operandi of your business in the case of SHG&PH.
Ans.: The donor will deposit cheque/RTGS in the account of SHG&PH. The SHG&PH will transfer the amount to my concerns which is mentioned in Annexure-A. Sometimes they used to transfer the amount after deducting their commission @ 8% and we used to settle our accounts periodically for settling commission. After that, my concerns will pay to the parties who have raised bogus bills to my concerns cheque/RTGS. In lieu of the same, I will get the amount in cash. Thereafter, I will get the phone calls from the donors who will give me distinctive number of Indian currency of any denomination. They I will give the cash to Angarias with the details of note number. The Angaria’s commission was given by the donors and Angaria’s commission was not the part of my job. This is how the whole system was run.
Q.11. Kindly provide the list of donors with amount for whom you have worked.
Ans.: I will submit all the required details by 27.03.2015.
In identical manner, other brokers have deposed and thereafter provided the details of the donors, which are also compiled with and certain details are available on pages 63 to 81 of the paper book filed by the Revenue. The ld. Assessing Officer armed with the above materials,
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 confronted all these assesses during the assessment proceedings itself, the Officer brought to the notice of the assessees about the outcome of the survey and how these donations are to be treated as bogus.
The stand of all these appellants right from the ld. Assessing Officer upto the Tribunal is that since Institution was approved by the Competent Authority to receive donation. This approval was intact when they have made the donation. Therefore, under bonafide belief, they have given the donations and on the basis of post donation, material collected by the Revenue should not be used against them for doubting the genuineness of the donation. The scheme of the Income Tax Act provides that a claim made by an assessee has to be proved by the assessee. Thus the first onus is upon the assessee about the claim made by him. This onus was discharged by the assessee by pointing out that Institution to whom donations were given. They are approved by the Income Tax Authority and, therefore, their claim is to be allowed. However, if the first onus discharged by the assessee was dispelled by the ld. Assessing Officer by confronting them with the material recovered during the survey and post survey enquiries, then the questions posed before us is, whether this belief harped by all the appellants was such a bonafide that could not be questioned in any circumstances. To our 43
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 mind, it is a misplaced argument at the end of the appellants. It is to be appreciated that recipient came into existence in 1993, it might have been working on charitable objects and got approval for the purpose of recognition of Scientific and Industrial Research Organisation first time on 17.06.2010. There might be a good intention at the end of the recipient but it has detracted its objectives and indulged in fraudulent activities. The fraud of this magnitude cannot be done without an organised planning where involvements of alleged brokers have come. Thus operative force in the minds of all decision-maker in donors organisation/individual was acting with a fraudulent intent in giving donation through broker in this manner. The ld. CIT(Appeals) in the case of Tarasafe International Pvt. Limited has posed the following questions to the assessee:- (a) What was the purpose of this donation?
(b) Whether such donation has been given to the School in the past or in the future?
(c) How the assessee came to know about the activities of the Trust?
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 (d) What influence the assessee to give this donation to this Institution other than deduction under section 35(1)(ii).
(e) The appellants are not in this line of business and, therefore, it is difficult to understand the very purpose of this transaction undertaken by them. They have failed to explain how the cheques in their case were given to the Society, whether it was given by post or directly to the Office bearer or through some agents.
(f) If it was handed over to the office bearer, then name of such office bearer.
These are certain questions, which point a figure to the circumstances, which are to be explained by each appellant. Their first onus discharged by them has been dispelled by the ld. Assessing Officer with credible material. If the appellants are of such a spirited Corporate House, who wants to build the research organisation of the nation, then they have to demonstrate how such donations were given in the past or in the subsequent period. We have confronted them specifically, but none of the assesses except M/s. H.K. Dutta & Company could submit anything in this regard. In the case of this Company, ld. Counsel for the assessee 45
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 has submitted that small amount of donation has been given to a different organisation in the next year. Therefore, if we weigh the simple plea of the appellants about their bonafide belief for giving such donations, vis- a-vis huge materials collected by the Revenue demonstrating the fact how such a belief is misplaced, then, the scale would tilt in favour of the revenue. It is to be appreciated that roughly 720 entities including individuals available in a part-list on pages no. 72 to 81 of the paper book compiled by the Revenue would have not formed a bonafide belief about giving donation to one entity across India in Kolkata. This material speaks in itself that under a criminal conspiracy, these donations have been arranged by the brokers across India for defrauding the nation. We do not find any credence in the belief of bonafide raised by the appellants.
We are aware of the facts that a large number of orders have been passed in favour of the assessee by ITAT and some of those were upheld by Hon’ble High Courts also. We have extracted one of the orders from Hon’ble Gujarat High Court. The Hon’ble Supreme Court in the case of CIT –vs.- Batanagar Education & Research Trust reported in 129 taxmann.com 30, whose copy has been placed on the record by the ld. CIT(DR), has considered the identical material, which has been placed before us also. In the case of Batanagar Education &
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 Research Trust, the facts are that during the course of survey at the premises of SHG&PH, and in post survey inquiry statement of Shri Ramendra Lahiri, Managing Trustee of the assessee, i.e. Batanagar Society was recorded. The Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Moumita Raghavan of SHG&PH have categorically deposed in their statements that source of income of SHG&PH was the money received in the form of donations from Corporate Bodies as well as from individuals. The assessee Batanagar Society was selected by the brokers, who have arranged the donations to SHG&PH as a conduit for receiving the donations from SHG&PH. This donation was to be returned back to those Corporate Houses and individuals in cash after layering the transaction and the Batanagar Education & Research Trust would also retain commission income for such an activity. On the basis of that, its registration was cancelled by the ld. Commissioner (Exemption) by exercising the powers under section 12AA(3). This order was upheld by the ITAT. However, on further appeal, Hon’ble High Court has reversed this order but Hon’ble Supreme Court restored this order, in other words upheld the cancellation of the registration to Batanagar Education & Research Trust. In this judgment, Hon’ble Supreme Court has made reference to the outcome of the survey at SHG&PH coupled with the post survey enquiry conducted 47
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 upon Batanagar Society and satisfied that it was an organized fraud to misuse the status of a charitable entity. This judgment has been pronounced on 02.08.2021. After this judgment, a judgment of the Hon’ble Calcutta High Court in the case of Mackaw Corporation has been passed, which has been relied upon by the ld. Counsel, but in this decision, Hon’ble High Court has not considered the judgment of the Hon’ble Supreme Court, because the judgment of the Hon’ble Supreme Court in the case of Batanagar Education & Research Trust was not cited by both the parties.
The ld. Counsel for the assessee, Shri Soumitra Chowdhury, during the course of argument submitted that in the decision rendered on 26.04.2022 in the case of Commissioner of Income Tax (Exemption), Kolkata – vs.- Sanskriti Sagar, this judgment of the Hon’ble Supreme Court was considered.
We find that in this case, the assesese was recipient of a small donation of Rs.85,000/- from Herbicure and on the basis of receipt of this donation, its registration was sought to be cancelled. The Hon’ble High Court has propounded that the decision in the case of Batanagar Education & Research Trust is not applicable on the facts of that case because Sanskriti Sagar has neither 48
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 given any donation to this Trust and claimed deduction under section 35(1)(ii) nor it has returned the money in cash out of a small donation received by it from Herbicure, a similar Trust to SHG&PH. Hon’ble High Court has held that Tribunal has rightly set aside the order passed by the ld. Commissioner vide which registration was cancelled. In our opinion, it is purely a fact-based decision without laying down any particular proposition of law, rather an inference could be drawn from it that if there is no element of fraud committed by an assessee, then such an assessee does not deserve to be punished. This case cannot buttress any of the contentions of the appellants before us.
It is also pertinent to note that it is not a simple case of claiming deduction on fulfilment of conditions under section 35(1)(ii) of the Income Tax Act, rather it is a case where Revenue has disproved this claim and proved that, with a criminal mind all such donors have layered their transaction in such a manner which apparently appears to be genuine, but in reality not genuine. They took such a step to commit fraud, an economic offence against the economy of the country.
The bonafide of the assessees can be appreciated if they have demonstrated that they have given the donations in the past or subsequent periods to some
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 Institution of national importance, such as Tata Research Centre, certain Hospitals, etc. but none of them has given such a donation except a small amount of few thousand in the case of Abhilasha Tradecom Pvt. Limited. The moment Assessing Officers have dispelled onus discharged by the assessee, then it was their duty to prove the genuineness of their claim with circumstantial evidence as pointed out by the ld. Commissioner in the case of Tarasafe International Pvt. Limited, i.e. what was the purpose of the donation; whether such donation has been given to the School in the past or in the future; whether the Corporate Houses have discussed in the meeting and the Management Committee passed the Resolution for giving the donations; what influenced the assessee to give this donation to the Institution other than deduction under section 35(1)(ii) etc.
It is also pertinent to observe that recently Hon’ble Jurisdictional High Court has examined the issue of bogus capital gain claim made by a large number of assessees in Kolkata. This issue has been examined in the case of Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022. A large number of assessees have claimed long-term capital gain/loss. The Income Tax Department has carried out search/survey upon different entities, which unearthed that certain
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 companies and professionals were providing such claim in the shape of accommodation by manipulating the stocks of certain shell companies. The Hon’ble Court has made a detailed analysis of the material found during the course of search and survey on the premises of third entities and set aside the orders of the ITAT in a group of appeals by holding that such claim by the assessees for long-term capital gain was a bogus claim. The Hon’ble Court has considered the material collected by the Investigating Wing of the Department on the premises of certain companies ,who were manipulating the stocks or indulging any accommodation entry business. If we apply the ratio of this judgment upon these cases, then it would reveal that the benefit of claim under section 35(1)(ii) is outcome of an organized fraud with the help of certain manipulators. Therefore, we do not find any material in the first-fold of arguments raised by the ld. Counsels for the assessees. The appellants are not entitled for deduction under section 35(1)(ii) of the Income Tax Act. This finding is subject to our finding on other preliminary issues in the case of Abhilasha Tradecom Pvt. Limited i.e. ITA Nos. 132 & 133/KOL/2021. In ITA Nos. 132 & 133/KOL/2021, assessee has challenged the reopening of the assessment. We will be deciding this issue in the following part of the judgment. Similarly in the case of Tarasafe International Pvt. Limited, i.e. ITA No. 51
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 261/KOL/2020, the assessee has taken an additional ground of appeal, which we are taking up separately in the following part.
First we take the additional ground of appeal taken by Tarasafe International Pvt. Limited (ITA No. 261/KOL/2020). The assessee has filed an application for permission to raise additional ground of appeal. Such permission was allowed to the assessee vide Interim order dated 20.07.2022, which reads as under:- 20.07.2022:- Ld. Counsel for the assessee filed an application dated 20th July, 2022 pleading therein that notice issued under section 143(2) dated 04.09.2014 for scrutinising the return of assessee for A.Y. 2013-14 is without jurisdiction. He submitted that Board has issued a Circular bearing No.1/2011 [F. No.187/12/2010- IT(AT)] dated 31.01.2011, whereby Board has assigned pecuniary jurisdictions to different Officers for passing the assessment orders. According to the ld. counsel for the assessee, if monetary limit of more than Rs.30 lakhs exceeds in the declared income, then jurisdiction to scrutinise the return as well as passing assessment order would be with Deputy Commissioner/Assistant Commissioner, whereas in the present case, notice under section 143(2) has been issued by an Assessing Officer i.e. Income Tax Officer, Ward-10(3), Kolkata, Code No.WBG, Ward-10(3). According to the ld. Counsel for the assessee, since the income of the assessee was more than 2 crores of rupees, therefore, ld. Assessing Officer was not competent to issue notice under section 143(2) of the Income Tax Act.
The above application do indicate that a jurisdiction issue is involved but it has been filed for the first time before the Tribunal even after two years of presentation of the appeal when all pleadings are complete, i.e. paper book etc. have been filed by the assessee as well as by the Revenue. The assessee did not file an affidavit along with the application. However taking cognizance of the 52
ITA No.261/KOL/2020, 108/KOL/2020, ITA No. 136/KOL/2020, ITA No. 23/KOL/2020, ITA Nos. 132 & 133/KOL/2021, ITA Nos. 2316, 2317/KOL/2019, ITA No. 2385/KOL/2019, ITA Nos. 2448, 2449/KOL/2019 application, we admit the additional ground of appeal for adjudication, which reads as under:- “For that the notice u/s 143(2) dated 04.09.2014 issued by the ld. AO being ITO, Ward-10(3), Kolkata was without jurisdiction and therefore the assessment is bad in law”.
On the other hand, it has been brought to our notice that the assessment order has been passed by the ld. DCIT. However, admission of additional ground of appeal is a preliminary step at the end of the Tribunal. It is to be adjudicated after hearing the Revenue. We will appreciate if complete details with regard to this issue are being placed by the Revenue before us demonstrating how there is no irregularity in assuming the jurisdiction for issuing notice under section 143(2) as well as passing the assessment order. We adjourn the hearing to 2nd of August, 2022 treated as part-heard. Copy of this order-sheet be supplied to both the parties for compliance.