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Facts
The assessee claimed a weighted deduction under Section 35(1)(ii) of the Income Tax Act, 1961, for a donation of Rs. 15,00,000/- to the School of Human Genetics and Population Health (SHG&PH). The Assessing Officer disallowed the deduction, and this was upheld by the CIT(A).
Held
The Tribunal held that the donation was not a genuine contribution towards scientific research but part of an organized accommodation entry mechanism. The approval granted to SHG&PH was withdrawn, and the institution itself admitted to engaging in accommodation entries and refunding donations.
Key Issues
Whether the weighted deduction under Section 35(1)(ii) for a donation to an institution whose approval was subsequently withdrawn is allowable, especially when the donation is found to be part of an accommodation entry scheme.
Sections Cited
35(1)(ii), 133(6), 12AA(3), 35CCA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “J (SMC
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 29.05.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:
1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A), NFAC erred in upholding the decision of the Ld AO in respect of disallowance of deduction u/s 35(1)(ii) of the Income Tax Act, 1961 claimed towards contribution of Rs. 15,00,000/- made to School of Human Genetics & Population Health inspite of all compliances being Human Genetics & Population Health inspite of all compliances being Human Genetics & Population Health inspite of all compliances being made as required in the law and the reasons assigned for doing so made as required in the law and the reasons assigned for doing so made as required in the law and the reasons assigned for doing so are wrong and contrary to the provisi are wrong and contrary to the provisions of Income Tax and rules ons of Income Tax and rules made thereunder. made thereunder.
2. At the outset, the Ld. Counsel submitted that Registry has At the outset, the Ld. Counsel submitted that Registry has At the outset, the Ld. Counsel submitted that Registry has pointed out delay of one day in filing the appeal. She submitted that pointed out delay of one day in filing the appeal. She submitted that pointed out delay of one day in filing the appeal. She submitted that order of the Ld. CIT(A) was received on 29.05.2024 but the appeal order of the Ld. CIT(A) was received on 29.05.2024 but the appeal order of the Ld. CIT(A) was received on 29.05.2024 but the appeal has been filed on 29.07.2024 for the reason that limitation was has been filed on 29.07.2024 for the reason that limitation w has been filed on 29.07.2024 for the reason that limitation w expiring on the Sunday and appeal has been filed on the next expiring on the Sunday and appeal has been filed on the next expiring on the Sunday and appeal has been filed on the next working day and therefore working day and therefore there is no delay in filing appeal. In view delay in filing appeal. In view of Explanation submitted of Explanation submitted by the assessee, the appeal is treated appeal is treated as filed within the limitation filed within the limitation period and accordingly and accordingly, admitted for adjudication.
3. Briefly stated, facts of the case are that t Briefly stated, facts of the case are that the assessee is engaged he assessee is engaged in in the the business business of of trading trading in in dye-intermediates dye intermediates and and pharmaceuticals. For the assessment year under consideration, the pharmaceuticals. For the assessment year under consideration, the pharmaceuticals. For the assessment year under consideration, the assessee filed its return of income on 01.11.2014 declaring total assessee filed its return of income on 01.11.2014 declaring total assessee filed its return of income on 01.11.2014 declaring total income of ₹15,53,930/ 15,53,930/-. The return of income filed by the assessee d by the assessee was selected for scrutiny and statutory notices under the Income- was selected for scrutiny and statutory notices under the Income was selected for scrutiny and statutory notices under the Income tax Act, 1961 (in short ‘the Act’) were issued and complied with. tax Act, 1961 (in short ‘the Act’) were issued and complied with tax Act, 1961 (in short ‘the Act’) were issued and complied with 3.1 During assessment, it was noticed that the assessee had made During assessment, it was noticed that the assessee had made During assessment, it was noticed that the assessee had made a donation of ₹15,00,000/ 15,00,000/- to “School of Human Genetics and Human Genetics and Population Health” (hereinafter SHG&PH) and claimed weighted Population Health” (hereinafter SHG&PH) and claimed weighted Population Health” (hereinafter SHG&PH) and claimed weighted deduction of ₹26,25,000/ 26,25,000/- u/s 35(1)(ii) of the Act. On verification, u/s 35(1)(ii) of the Act. On verification, the notice issued u/s 133(6) to the donee institution was returned the notice issued u/s 133(6) to the donee institution was returned the notice issued u/s 133(6) to the donee institution was returned unserved, and it further transpired that unserved, and it further transpired that the approval earlier granted the approval earlier granted to SHG&PH stood withdrawn by Government of India notification to SHG&PH stood withdrawn by Government of India notification to SHG&PH stood withdrawn by Government of India notification dated 15.09.2016. The Assessing Officer, accordingly, disallowed dated 15.09.2016. The Assessing Officer, accordingly, disallowed dated 15.09.2016. The Assessing Officer, accordingly, disallowed the deduction.
3.2 On appeal, the learned CIT(A) confirmed the disallowance, On appeal, the learned CIT(A) confirmed the disallowance, On appeal, the learned CIT(A) confirmed the disallowance, relying inter alia on relying inter alia on the coordinate Bench decision in the coordinate Bench decision in P.R. Rolling Mills (P.) Ltd. v. DCIT Mills (P.) Ltd. v. DCIT [(2018) 171 ITD 683 (Jaipur)] and [(2018) 171 ITD 683 (Jaipur)] and Tarasafe International Pvt. Ltd. v. DCIT International Pvt. Ltd. v. DCIT order dated order dated 07.03.2023, holding that donations to SHG&PH were part of an 07.03.2023, holding that donations to SHG&PH were part of an 07.03.2023, holding that donations to SHG&PH were part of an organised accommodation entry arrangement and not genuine dation entry arrangement and not genuine dation entry arrangement and not genuine contributions towards scientific research. The relevant finding of ld contributions towards scientific research. The relevant finding of ld contributions towards scientific research. The relevant finding of ld CIT(A) is reproduced as under: CIT(A) is reproduced as under:
“5.5 Further, the Hon'ble ITAT, 'A' Bench, Kolkata in a bunch of 13 5.5 Further, the Hon'ble ITAT, 'A' Bench, Kolkata in a bunch of 13 5.5 Further, the Hon'ble ITAT, 'A' Bench, Kolkata in a bunch of 13 appeals in case of Tarasafe International Pri appeals in case of Tarasafe International Private Limited Vs DCII vate Limited Vs DCII in in in ITA No.261/Kol/2020 dated dated dated 07.03.2023 07.03.2023 07.03.2023 and and and Others, Others, Others, considering the decision of Hon'ble Supreme Court in case of CIT considering the decision of Hon'ble Supreme Court in case of CIT considering the decision of Hon'ble Supreme Court in case of CIT vs Batnagar Education & Research Trust had held as under: vs Batnagar Education & Research Trust had held as under: vs Batnagar Education & Research Trust had held as under: "39. We are aware of the facts that a large number of orders "39. We are aware of the facts that a large number of orders "39. 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 been passed in favour of the assessee by ITAT and some of those 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 were upheld by Hon'ble High Courts also. We have extracted one were upheld by Hon'ble High Courts also. We have extracted one of the orders from Hon'ble Gujarat High Court. The Hon'ble of the orders from Hon'ble Gujarat High Court. The Hon'ble of the orders from Hon'ble Gujarat High Court. The Hon'ble Supreme Court in the case of CIT vs. Batanagar Education & Supreme Court in the case of CIT vs. Batanagar Education & Supreme Court in the case of CIT vs. Batanagar Education & Research Trust reported in 129 taxmann.com 30, whose copy has rch Trust reported in 129 taxmann.com 30, whose copy has rch Trust reported in 129 taxmann.com 30, whose copy has been placed on the record by the Id. CIT(DR), has considered the been placed on the record by the Id. CIT(DR), has considered the been placed on the record by the Id. CIT(DR), has considered the identical material, which has been placed before us also. In the identical material, which has been placed before us also. In the identical material, which has been placed before us also. In the case of Batanagar Education & Research Trust, the facts are that case of Batanagar Education & Research Trust, the facts are that case of Batanagar Education & Research Trust, the facts are that during the course of survey at the premises of SHG&PH, and in ng the course of survey at the premises of SHG&PH, and in ng the course of survey at the premises of SHG&PH, and in post survey inquiry statement of Shri Ramendra Lahiri, Managing post survey inquiry statement of Shri Ramendra Lahiri, Managing post survey inquiry statement of Shri Ramendra Lahiri, Managing Trustee of the assessee, i.e. Batanagar Society was recorded. The Trustee of the assessee, i.e. Batanagar Society was recorded. The Trustee of the assessee, i.e. Batanagar Society was recorded. The Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Moumita Raghavan of SHG&PH have categorically deposed in a Raghavan of SHG&PH have categorically deposed in a Raghavan of SHG&PH have categorically deposed in their statements that source of income of SHG&PH was the money their statements that source of income of SHG&PH was the money their statements that source of income of SHG&PH was the money received in the form of donations from Corporate Bodies as well as received in the form of donations from Corporate Bodies as well as received in the form of donations from Corporate Bodies as well as from individuals. The assessee Batanagar Society was selected by from individuals. The assessee Batanagar Society was selected by from individuals. The assessee Batanagar Society was selected by the brokers, who have arranged the donations to SHG&PH as a s, who have arranged the donations to SHG&PH as a s, who have arranged the donations to SHG&PH as a conduit for receiving the donations from SHG&PH. This donation conduit for receiving the donations from SHG&PH. This donation conduit for receiving the donations from SHG&PH. This donation was to be returned back to those Corporate Houses and was to be returned back to those Corporate Houses and was to be returned back to those Corporate Houses and individuals in cash after layering the transaction and the individuals in cash after layering the transaction and the individuals in cash after layering the transaction and the Batanagar Education & Research Batanagar Education & Research Trust would also retain Trust would also retain commission income for such an activity. On the basis of that, its commission income for such an activity. On the basis of that, its commission income for such an activity. On the basis of that, its registration was cancelled by the Id. Commissioner (Exemption) by registration was cancelled by the Id. Commissioner (Exemption) by registration was cancelled by the Id. Commissioner (Exemption) by exercising the powers under section 12AA(3). This order was exercising the powers under section 12AA(3). This order was exercising the powers under section 12AA(3). This order was upheld by the ITAT. However, on further upheld by the ITAT. However, on further appeal. Hon'ble High appeal. Hon'ble High Court has reversed this order but Hon'ble Supreme Court restored Court has reversed this order but Hon'ble Supreme Court restored Court has reversed this order but Hon'ble Supreme Court restored this order, in other words upheld the cancellation of the this order, in other words upheld the cancellation of the this order, in other words upheld the cancellation of the registration to Batanagar Education & Research Trust. In this registration to Batanagar Education & Research Trust. In this registration to Batanagar Education & Research Trust. In this judgment, Hon'ble Supreme Court has made referenc judgment, Hon'ble Supreme Court has made referenc judgment, Hon'ble Supreme Court has made reference to the outcome of the survey at SHG&PH coupled with the post survey outcome of the survey at SHG&PH coupled with the post survey outcome of the survey at SHG&PH coupled with the post survey enquiry conducted upon Batanagar Society and satisfied that it enquiry conducted upon Batanagar Society and satisfied that it enquiry conducted upon Batanagar Society and satisfied that it was an organized fraud to misuse the status of a charitable entity. was an organized fraud to misuse the status of a charitable entity. was an organized fraud to misuse the status of a charitable entity. This judgment has been pronounced on 02.08.2021. After This judgment has been pronounced on 02.08.2021. After This judgment has been pronounced on 02.08.2021. After this judgment, a judgment of the Hon'ble Calcutta High Court in the judgment, a judgment of the Hon'ble Calcutta High Court in the judgment, a judgment of the Hon'ble Calcutta High Court in the case of Mackaw Corporation has been passed, which has been case of Mackaw Corporation has been passed, which has been case of Mackaw Corporation has been passed, which has been relied upon by the Id. Counsel, but in this decision, Hon'ble High relied upon by the Id. Counsel, but in this decision, Hon'ble High relied upon by the Id. Counsel, but in this decision, Hon'ble High Court has not considered the judgment of the Hon'ble Supreme Court has not considered the judgment of the Hon'ble Supreme Court has not considered the judgment of the Hon'ble Supreme Court, because the judgment of the Hon'ble Supreme Court in the ourt, because the judgment of the Hon'ble Supreme Court in the ourt, because the judgment of the Hon'ble Supreme Court in the case of Batanagar Education & Research Trust was not cited by case of Batanagar Education & Research Trust was not cited by case of Batanagar Education & Research Trust was not cited by both the parties. both the parties.
The Id. Counsel for the assessee, Shri Soumitra Chowdhury, 40. The Id. Counsel for the assessee, Shri Soumitra Chowdhury, 40. The Id. Counsel for the assessee, Shri Soumitra Chowdhury, during the course of argument submitted that in th during the course of argument submitted that in th during the course of argument submitted that in the decision rendered on 26.04.2022 in the case of Commissioner of Income rendered on 26.04.2022 in the case of Commissioner of Income rendered on 26.04.2022 in the case of Commissioner of Income Tax (Exemption), Kolkata vs. Tax (Exemption), Kolkata vs.- Sanskriti Sagar, this judgment of the Sanskriti Sagar, this judgment of the Hon'ble Supreme Court was considered. Hon'ble Supreme Court was considered.
We find that in this case, the assessee was recipient of a small 41. We find that in this case, the assessee was recipient of a small 41. We find that in this case, the assessee was recipient of a small donation of Rs.85,000/ of Rs.85,000/- from Herbicure and on the basis of receipt from Herbicure and on the basis of receipt of this donation, its registration was sought to be cancelled. The of this donation, its registration was sought to be cancelled. The of this donation, its registration was sought to be cancelled. The Hon'ble High Court has propounded that the decision in the case of Hon'ble High Court has propounded that the decision in the case of Hon'ble High Court has propounded that the decision in the case of Batanagar Education & Research Trust is not applicable on the Batanagar Education & Research Trust is not applicable on the Batanagar Education & Research Trust is not applicable on the facts of that case because Sanskriti Sagar has neither given any cts of that case because Sanskriti Sagar has neither given any cts of that case because Sanskriti Sagar has neither given any donation to this Trust and claimed deduction under section 35(1)(ii) donation to this Trust and claimed deduction under section 35(1)(ii) 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 nor it has returned the money in cash out of a small donation 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' received by it from Herbicure, a similar Trust to SHG&PH. Hon' 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 High Court has held that Tribunal has rightly set aside the order High Court has held that Tribunal has rightly set aside the order passed by the Id. Commissioner vide which registration was passed by the Id. Commissioner vide which registration was passed by the Id. Commissioner vide which registration was cancelled. In our opinion, it is purely a fact cancelled. In our opinion, it is purely a fact-based decision without based decision without laying down any particular proposition of law, rather an laying down any particular proposition of law, rather an laying down any particular proposition of law, rather an inference could be drawn from it that if there is no element of fraud could be drawn from it that if there is no element of fraud could be drawn from it that if there is no element of fraud committed by an assessee, then such an assessee does not committed by an assessee, then such an assessee does not committed by an assessee, then such an assessee does not deserve to be punished. This case cannot buttress any of the deserve to be punished. This case cannot buttress any of the deserve to be punished. This case cannot buttress any of the contentions of the appellants before us. contentions of the appellants before us.
It is also pertinent to 42. It is also pertinent to note that it is not a simple case of note that it is not a simple case of claiming deduction on fulfillment of conditions under section claiming deduction on fulfillment of conditions under section claiming deduction on fulfillment of conditions under section 35(1)(ii) of the Income Tax Act, rather it is a case where Revenue 35(1)(ii) of the Income Tax Act, rather it is a case where Revenue 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 has disproved this claim and proved that, with a criminal mind all has disproved this claim and proved that, with a criminal mind all such donors have layer such donors have layered their transaction in such a manner ed their transaction in such a manner which apparently appears to be genuine, but in reality not which apparently appears to be genuine, but in reality not which apparently appears to be genuine, but in reality not genuine. They took such a step to commit fraud, an economic genuine. They took such a step to commit fraud, an economic genuine. They took such a step to commit fraud, an economic offence against the economy of the country. offence against the economy of the country.
The bonafide of the assessees can be appreciated if 43. The bonafide of the assessees can be appreciated if 43. The bonafide of the assessees can be appreciated if they have demonstrated that they have given the donations in the past or demonstrated that they have given the donations in the past or demonstrated that they have given the donations in the past or subsequent periods to some Institution of national importance, subsequent periods to some Institution of national importance, subsequent periods to some Institution of national importance, such as Tata Research Centre, certain Hospitals, etc. but none of such as Tata Research Centre, certain Hospitals, etc. but none of such as Tata Research Centre, certain Hospitals, etc. but none of them has given such a donation except a small amount them has given such a donation except a small amount them has given such a donation except a small amount of few thousand in the case of Abhilasha Tradecom Pvt. Limited. The thousand in the case of Abhilasha Tradecom Pvt. Limited. The thousand in the case of Abhilasha Tradecom Pvt. Limited. The moment Assessing Officers have dispelled onus discharged by the moment Assessing Officers have dispelled onus discharged by the moment Assessing Officers have dispelled onus discharged by the assessee, then it was their duty to prove the genuineness of their assessee, then it was their duty to prove the genuineness of their assessee, then it was their duty to prove the genuineness of their claim with circumstantial evidence as pointed out by the claim with circumstantial evidence as pointed out by the claim with circumstantial evidence as pointed out by the Id. Commissioner in the case of Tarasafe International Pvt. Limited, Commissioner in the case of Tarasafe International Pvt. Limited, Commissioner in the case of Tarasafe International Pvt. Limited, i.e. what was the purpose of the donation; whether such donation i.e. what was the purpose of the donation; whether such donation 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 has been given to the School in the past or in the future; whether has been given to the School in the past or in the future; whether the Corporate Houses have discussed in the meeting and the Corporate Houses have discussed in the meeting and the Corporate Houses have discussed in the meeting and the Management Committee passed the Resolution for giving the Management Committee passed the Resolution for giving the Management Committee passed the Resolution for giving the donations; what influenced the assessee to give this donation to donations; what influenced the assessee to give this donation to donations; what influenced the assessee to give this donation to the Institution other than deduction under section 35(1)(ii) etc. the Institution other than deduction under section 35(1)(ii) etc. the Institution other than deduction under section 35(1)(ii) etc. 44. 44. It is also pertinent to observe that recently Hon'ble . It is also pertinent to observe that recently Hon'ble . It is also pertinent to observe that recently Hon'ble Jurisdictional High Court has examined the issue of bogus capital Jurisdictional High Court has examined the issue of bogus capital Jurisdictional High Court has examined the issue of bogus capital gain claim made by a large number of assessees in Kolkata. This gain claim made by a large number of assessees in Kolkata. This gain claim made by a large number of assessees in Kolkata. This issue has been examined in the case of Swati Bajaj & Others issue has been examined in the case of Swati Bajaj & Others issue has been examined in the case of Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022. A (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022. A (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022. A large number of assessees have claimed long e number of assessees have claimed long-term capital term capital gain/loss. gain/loss. gain/loss. The The The Income Income Income Tax Tax Tax Department Department Department has has has carried carried carried out out out search/survey upon different entities, which unearthed that search/survey upon different entities, which unearthed that search/survey upon different entities, which unearthed that certain companies and professionals were providing such claim in certain companies and professionals were providing such claim in certain companies and professionals were providing such claim in the shape of accommodatio the shape of accommodation by manipulating the stocks of certain n by manipulating the stocks of certain shell companies. The Hon'ble Court has made a detailed analysis shell companies. The Hon'ble Court has made a detailed analysis shell companies. The Hon'ble Court has made a detailed analysis of the material found during the course of search and survey on of the material found during the course of search and survey on 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 the premises of third entities and set aside the orders of the ITAT the premises of third entities and set aside the orders of the ITAT in a group of appeal in a group of appeals by holding that such claim by the assessees s by holding that such claim by the assessees for long-term capital gain was a bogus claim. The Hon'ble Court term capital gain was a bogus claim. The Hon'ble Court term capital gain was a bogus claim. The Hon'ble Court has considered the material collected by the Investigating Wing of has considered the material collected by the Investigating Wing of has considered the material collected by the Investigating Wing of the Department on the premises of certain companies, who were the Department on the premises of certain companies, who were the Department on the premises of certain companies, who were manipulating the manipulating the stocks or indulging any accommodation entry stocks or indulging any accommodation entry
business. If we apply the ratio of this judgment upon these cases, business. If we apply the ratio of this judgment upon these cases, 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) then it would reveal that the benefit of claim under section 35(1)(ii) 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 is outcome of an organized fraud with the help of certain is outcome of an organized fraud with the help of certain manipulators. Th manipulators. Therefore, we do not find any material in the first erefore, we do not find any material in the first- fold of arguments raised by the Id. Counsels for the assessees. fold of arguments raised by the Id. Counsels for the assessees. fold of arguments raised by the Id. Counsels for the assessees. The appellants are not entitled for deduction under section 35(1)(ii) The appellants are not entitled for deduction under section 35(1)(ii) The appellants are not entitled for deduction under section 35(1)(ii) of the Income Tax Act." of the Income Tax Act." 5.6 In the instant case, the appellant had made 5.6 In the instant case, the appellant had made 5.6 In the instant case, the appellant had made donation of Rs.15,00,000/ Rs.15,00,000/- to School of Human Genetics and Population to School of Human Genetics and Population Health and claimed weighted deduction of Rs.26,25,000/ Health and claimed weighted deduction of Rs.26,25,000/ Health and claimed weighted deduction of Rs.26,25,000/- u/s 35(1)(ii) of the Act. The Government of India had withdrawn its 35(1)(ii) of the Act. The Government of India had withdrawn its 35(1)(ii) of the Act. The Government of India had withdrawn its approval granted to School of Human Genetics and Population approval granted to School of Human Genetics and Population approval granted to School of Human Genetics and Population Health vide notification dated 15.09.2016. Further, on perusal of alth vide notification dated 15.09.2016. Further, on perusal of alth vide notification dated 15.09.2016. Further, on perusal of the return of income filed by the appellant, it is observed that the the return of income filed by the appellant, it is observed that the the return of income filed by the appellant, it is observed that the appellant had not made any donation during previous assessment appellant had not made any donation during previous assessment appellant had not made any donation during previous assessment year year year or or or subsequent subsequent subsequent assessment assessment assessment year year year except except except the current the the current current assessment year. Further, the said institution before the ment year. Further, the said institution before the ment year. Further, the said institution before the Settlement Commission for the assessment years 2012 Settlement Commission for the assessment years 2012 Settlement Commission for the assessment years 2012-13, 2013- 14 and 2014- -15 had accepted that it did not carry out significant 15 had accepted that it did not carry out significant research work in the fields for which it was granted approval and research work in the fields for which it was granted approval and research work in the fields for which it was granted approval and the alleged donations received from the donors were refunded. In donations received from the donors were refunded. In donations received from the donors were refunded. In view of the above facts and circumstances of the case, respectfully view of the above facts and circumstances of the case, respectfully view of the above facts and circumstances of the case, respectfully following the decisions of Hon'ble ITAT (supra), I am of the following the decisions of Hon'ble ITAT (supra), I am of the following the decisions of Hon'ble ITAT (supra), I am of the considered view that the deduction claimed by the appellant is considered view that the deduction claimed by the appellant is considered view that the deduction claimed by the appellant is merely an adjustment entry availed by the appellant to evade tax adjustment entry availed by the appellant to evade tax adjustment entry availed by the appellant to evade tax and concealment of income as pointed out by the AO in his order. and concealment of income as pointed out by the AO in his order. and concealment of income as pointed out by the AO in his order. Therefore, the addition made by the AO by making disallowance of Therefore, the addition made by the AO by making disallowance of Therefore, the addition made by the AO by making disallowance of deduction of Rs.26,25,000/ deduction of Rs.26,25,000/- claimed u/s 35(1)(ii) of the Act is claimed u/s 35(1)(ii) of the Act is confirmed. Accordingly, the ground of appeal raised by the ed. Accordingly, the ground of appeal raised by the ed. Accordingly, the ground of appeal raised by the appellant is dismissed.”
4. Before us, learned Counsel for the assessee strongly relied on: Before us, learned Counsel for the assessee strongly relied on: Before us, learned Counsel for the assessee strongly relied on:
(i) The decision of the Hon’ble Supreme Court in The decision of the Hon’ble Supreme Court in The decision of the Hon’ble Supreme Court in CIT v. Chotatingrai Tea [(2002) 258 ITR 529], wherein it was held that [(2002) 258 ITR 529], wherein it was held that Chotatingrai Tea once statutory conditions are fulfilled, the donor cannot be once statutory conditions are fulfilled, the donor cannot be once statutory conditions are fulfilled, the donor cannot be held responsible for utilisation of donation by the donee held responsible for utilisation of donation by the donee held responsible for utilisation of donation by the donee institution, and subsequent withdrawal of approval cannot institution, and subsequent withdrawal of approval cannot institution, and subsequent withdrawal of approval cannot prejudice the donor. prejudice the donor.
(ii) The order of ITAT Mumbai in of ITAT Mumbai in ACIT v. Ashitkumar Gunvantrai ACIT v. Ashitkumar Gunvantrai Shah and in and in Ravindra Reshamwala Ravindra Reshamwala & others, where deduction u/s 35(1)(ii) on donations to & others, where deduction u/s 35(1)(ii) on donations to & others, where deduction u/s 35(1)(ii) on donations to SHG&PH was allowed since the institution had valid approval SHG&PH was allowed since the institution had valid approval SHG&PH was allowed since the institution had valid approval at the time of donation. at the time of donation. (iii) It was argued that the assessee had acted bona fide, donation that the assessee had acted bona fide, donation that the assessee had acted bona fide, donation was made when approval was subsisting, and therefore was made when approval was subsisting, and therefore was made when approval was subsisting, and therefore deduction u/s 35(1)(ii) could not be denied. deduction u/s 35(1)(ii) could not be denied.
We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the material available on record. perused the material available on record.
5.1. It is an admitted position that the approval granted to SHG&PH s an admitted position that the approval granted to SHG&PH s an admitted position that the approval granted to SHG&PH by the prescribed authority stood withdrawn by Notification dated by the prescribed authority stood withdrawn by Notification dated by the prescribed authority stood withdrawn by Notification dated 15.09.2016. Further, as recorded by the Settlement Commission 15.09.2016. Further, as recorded by the Settlement Commission 15.09.2016. Further, as recorded by the Settlement Commission and noticed in the and noticed in the Tarasafe International (supra) (supra) decision, the institution tution tution had had had itself itself itself admitted admitted admitted that that that it it it was was was engaged engaged engaged in in in accommodation entries, refunding donations to the so-called donors accommodation entries, refunding donations to the so accommodation entries, refunding donations to the so in cash after retaining commission. Thus, the transaction was not in cash after retaining commission. Thus, the transaction was not in cash after retaining commission. Thus, the transaction was not one of genuine scientific research but part of an organised fraud. one of genuine scientific research but part of an organised fraud. one of genuine scientific research but part of an organised fraud.
5.2. The Jaipur Bench of the Tribunal in he Jaipur Bench of the Tribunal in P.R. Rolling Mills (P.) Ltd. v. P.R. Rolling Mills (P.) Ltd. v. DCIT (171 ITD 683) has categorically held that once the Revenue (171 ITD 683) has categorically held that once the Revenue (171 ITD 683) has categorically held that once the Revenue demonstrates, through cogent material, that the donation was a demonstrates, through cogent material, that the donation was a demonstrates, through cogent material, that the donation was a mere accommodation entry, the onus shifts to the assessee to mere accommodation entry, the onus shifts to the assessee to mere accommodation entry, the onus shifts to the assessee to establish genuineness of the transaction. Failure to do so disentitles stablish genuineness of the transaction. Failure to do so disentitles stablish genuineness of the transaction. Failure to do so disentitles the assessee from weighted deduction u/s 35(1)(ii). Similarly, in the assessee from weighted deduction u/s 35(1)(ii). Similarly, in the assessee from weighted deduction u/s 35(1)(ii). Similarly, in Tarasafe International Pvt. Ltd. Tarasafe International Pvt. Ltd. (supra), after analysing the Hon’ble (supra), after analysing the Hon’ble Supreme Court’s decision in Supreme Court’s decision in CIT v. Batanagar Educa CIT v. Batanagar Education & Research Trust [129 taxmann.com 30], the Tribunal held that donations to [129 taxmann.com 30], the Tribunal held that donations to [129 taxmann.com 30], the Tribunal held that donations to SHG&PH were tainted by fraud and could not be the basis for SHG&PH were tainted by fraud and could not be the basis for SHG&PH were tainted by fraud and could not be the basis for deduction.
5.3. As regards reliance placed by the assessee on 5.3. As regards reliance placed by the assessee on Chotatingrai Tea Chotatingrai Tea (supra), we find that the ratio of th (supra), we find that the ratio of that case is distinguishable. In at case is distinguishable. In Chotatingrai Tea, the assessee had fulfilled all statutory conditions , the assessee had fulfilled all statutory conditions , the assessee had fulfilled all statutory conditions under section 35CCA and there was no finding of fraud or under section 35CCA and there was no finding of fraud or under section 35CCA and there was no finding of fraud or accommodation entry. The issue there was whether subsequent accommodation entry. The issue there was whether subsequent accommodation entry. The issue there was whether subsequent withdrawal of approval could retrospec withdrawal of approval could retrospectively affect a genuine tively affect a genuine donation. In the present case, however, material unearthed by donation. In the present case, however, material unearthed by donation. In the present case, however, material unearthed by investigation, investigation, investigation, admissions admissions admissions of of of SHG&PH SHG&PH SHG&PH before before before Settlement Settlement Settlement Commission, and the decision of the Hon’ble Supreme Court in Commission, and the decision of the Hon’ble Supreme Court in Commission, and the decision of the Hon’ble Supreme Court in Batanagar Education & Research Trust Batanagar Education & Research Trust clearly establish clearly establish that the so- called donations were not genuine but were part of a systematic called donations were not genuine but were part of a systematic called donations were not genuine but were part of a systematic device to launder unaccounted money. Therefore, the ratio of device to launder unaccounted money. Therefore, the ratio of device to launder unaccounted money. Therefore, the ratio of Chotatingrai Tea (supre) (supre) does not advance the assessee’s case. does not advance the assessee’s case.
5.4. Likewise, reliance on certain ITAT Mumbai orders allowing 5.4. Likewise, reliance on certain ITAT Mumbai orders al 5.4. Likewise, reliance on certain ITAT Mumbai orders al deduction is misplaced, as those decisions either did not have deduction is misplaced, as those decisions either did not have deduction is misplaced, as those decisions either did not have benefit of the Supreme Court’s pronouncement in Batanagar benefit of the Supreme Court’s pronouncement in benefit of the Supreme Court’s pronouncement in Education & Research Trust or were rendered on different fact or were rendered on different fact- Education & Research Trust situations where no adverse material was available. Once the apex situations where no adverse material was available. Once the apex situations where no adverse material was available. Once the apex Court has upheld cancellation of registration of such institutions on Court has upheld cancellation of registration of such institutions on Court has upheld cancellation of registration of such institutions on the ground of organised fraud, any contrary coordinate Bench the ground of organised fraud, any contrary coordinate Bench the ground of organised fraud, any contrary coordinate Bench decision cannot be applied. decision cannot be applied. Moreover, in the instant case the AO Moreover, in the instant case the AO made enquiry u/s 133(6) for verification of the done but notice made enquiry u/s 133(6) for verification of the done but not made enquiry u/s 133(6) for verification of the done but not retuned back unserved. When this fact was brought to the retuned back unserved. When this fact was brought to the retuned back unserved. When this fact was brought to the knowledge of the assessee, the onus shifted to the assessee to knowledge of the assessee, the onus shifted to the assessee to knowledge of the assessee, the onus shifted to the assessee to establish genuineness of the transaction, particularly when the ld establish genuineness of the transaction, particularly when the ld establish genuineness of the transaction, particularly when the ld AO also brought to notice of assessee that donee itself admitted AO also brought to notice of assessee that donee itself admitted AO also brought to notice of assessee that donee itself admitted return of cash to the donors including the assessee. return of cash to the donors including the assessee. return of cash to the donors including the assessee.
In view of the above discussion, and respectfully following the In view of the above discussion, and respectfully following the In view of the above discussion, and respectfully following the coordinate Bench of the Jaipur Tribunal in coordinate Bench of the Jaipur Tribunal in P.R. Rolling Mills (P.) Ltd. P.R. Rolling Mills (P.) Ltd. (supra) and the Kolkata Bench in (supra) and the Kolkata Bench in Tarasafe International Pvt. Tarasafe International Pvt. Ltd. (supra), we hold that the donation made by the assessee to (supra), we hold that the donation made by the assessee to (supra), we hold that the donation made by the assessee to SHG&PH was not a genuine contribution towards scientific SHG&PH was not a genuine contribution towards scientific SHG&PH was not a genuine contribution towards scientific research research research but but but part part part of of of an an an organised organised organised accommodation accommodation accommodation entry entry entry mechanism.
6.1 Accordingly, the disallowance of deduction of Accordingly, the disallowance of deduction of ₹26,25,000/- Accordingly, the disallowance of deduction of made by the Assessing Officer and confirmed by the learned CIT(A) the Assessing Officer and confirmed by the learned CIT(A) the Assessing Officer and confirmed by the learned CIT(A) is upheld. The grounds raised by the assessee fail and are is upheld. The grounds raised by the assessee fail and are is upheld. The grounds raised by the assessee fail and are dismissed.
In the result, the appeal of the assessee is In the result, the appeal of the assessee is dismissed dismissed.
Order pronounced in the open Court on nounced in the open Court on 28/0 /08/2025.