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Income Tax Appellate Tribunal, “H” Bench, Mumbai
THE INCOME TAX APPELLATE TRIBUNAL “H” Bench, Mumbai Shri Shamim Yahya (AM) & Shri Pavankumar Gadale (JM)
I.T.A. No. 550/Mum/2020 (Assessment Year 2012-13)
Vs. DCIT-12(3)(1) Krossover Entertainment Pvt. Ltd. Aayakar Bhavan Flat No. 1503, G-Wing M.K. Road Jade Garden, MIG Colony Mumbai-400020. Ghandhi Nagar, Bandra-E Mumbai-400 051.
PAN : AADCK8786D (Appellant) (Respondent)
Assessee by Shri Rajiv Khandelwal Department by Shri Garbinder Singh Date of Hearing 27.07.2021 Date of Pronouncement 05.10.2021
O R D E R Per Shamim Yahya (AM) :- This appeal by the assessee is directed against the order of learned CIT(A)-dated 13.11.2019 pertains to assessment year 2012-13.
The grounds of appeal read as under :- “The following grounds of appeal are independent of, and without prejudice to, one another: 1. The Commissioner of Income-tax (Appeals) - 20, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Deputy Commissioner of Income-tax-12(3)(1), Mumbai (hereinafter referred to as the Assessing Officer) in issuing notice under section 148 of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the issue of notice under section 148 is without jurisdiction, and hence, bad in law and consequently, the assessment order ought to have been quashed by the CIT(A). The appellants further, contend that the reasons recorded by the Assessing Officer are vague, insufficient and without application of mind and hence, the CIT(A) ought to have quashed the notice under section 148 and thereby the consequent assessment order.
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The CIT(A) erred in upholding the action of the Assessing Officer in disallowing Rs 35,00,000, being the claim of weighted deduction of 175% under section 35(l)(ii), on the ground that donation receipt of Rs 20,00,000 is not submitted. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have confirmed the action of the Assessing Officer in making the impugned disallowance of the claim of deduction under section 35(l)(ii) of the Act inasmuch the CIT(A) has not appreciated that the letter dated 29th March, 2012 of the scientific research institution acknowledges receipt of Rs 20,00,000 by RTGS to their bank account (details mentioned therein) and has enclosed the necessary documents and hence, the said disallowance requires to be deleted.
Brief facts are that for the AY 2012-13, the assessee filed its return of income on 28.09.2012 declaring total income at Rs,4,48,03,337/-. The return was processed u/s.143(l) of the Act, Subsequently, an order u/s.l43(3) was passed on 16.02.2015 determining total income at Rs.4,48,14,849/-. Subsequently, the AO received information from Directorate of Income Tax (Investigation), Kolkata that an institution approved u/s.35(i) namely M/s. Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF) was providing accommodation entries to beneficiaries in the nature of bogus donation that the modus operandi of HHBHRF was to receive the bogus donations by cheque and then return money to the donors in cash after deduction of commission; that the assessee had taken an accommodation entry from HHBHRF for bogus donation of Rs. 20,00,000/- and had made a bogus claim of deduction of Rs.35,00,000/- u/s. 35(l)(ii) of the Act. Therefore, the AO had reason to believe that income to the extent of Rs. 35,00,000/- had escaped assessment. Based on the information, the Assessing Officer reopened the assessment u/s. 147 of the Act after obtaining approval from Pr. Commissioner of Income Tax-12, Mumbai and issued a notice u/s. 148 of the Act on 30.03.2018. The Assessing Officer also provided the reasons recorded for reopening to the assessee. By its letter dated 09.05.2018, the assessee objected to the reopening of the assessment. The Assessing Officer passed an order dated 14.06.2018 rejecting the objections raised by the assessee. On 21.06.7018, the assessee filed its return of income in response to the notice
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u/s. 148 declaring total income at Rs.4,48,03,340/- which was declared in the original return of income. Thereafter, Assessing Officer issued notice u/s. 143(2) of the Act on 25.09.2018. Thereafter, the Assessing Officer passed an order u/s.143(3) r.w.s. 147 of the Act on 29.10.2018 determining the total income of the assessee at Rs.4,83,14,850/-. In that order, the Assessing Officer rejected the claim of deduction u/s.35(l) of the Act and added the same to the total income of the assessee.
Aggrieved, by the said order, the assessee has filed this appeal. Before learned CIT(A) the assessee challenged both the issues of reopening and merits of addition. Both were rejected by learned CIT(A).
On the issue of reopening learned CIT(A) noted following submission by the assessee :-
"1) The regular scrutiny assessment u/s.l43(3) was completed by the assessing officer in March, 2015 itself, accepting the returned income as assessed income, after verification of alt supporting documents, including the documents of the subject under appeal. Hence reo-opening the case for the matter which was already discussed during the assessment proceedings is itself bad in low.
2) The re-opening of the said case was duly objected to by the appellant Company. The appellants contend that the Assessing Officer has made the impugned addition merely relying on the information received from the Investigation Wing and no independent inquiries are conducted by the Assessing Officer and no evidences are brought on record to prove that the contribution made by the appellants is non-genuine.
3) The appellants further, contend that the assessment has been made in utter disregard to the principles of nature justice in as much as the Assessing Officer has not provided the statements on oath of persons searched, on which he has placed reliance and hence, there was no opportunity to the appellants to rebut the request for an opportunity to cross-examine the said persons.
4) Further, the Assessing Officer only on presumption and without bringing any evidence on record has alleged that cash has been returned to the appellants. The appellants have denied that cash has been received! by them. Under such circumstances, it was incumbent upon the Assessing Officer to bring evidences on record that cash has been received by the appellants.
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5) The appellants further would like to submit that how "b payment", made through "banking channels" can form a belief that it is a bogus transaction, which tantamount to "income" and which has "escaped assessment". Thus, there is no reason to believe that income chargeable to tax has escaped assessment which is the sine qua non for issuing a notice under section 148."
However learned CIT(A) rejected the same by holding as under :- “4.4.1 I have considered the rival contentions. In this case the AO receive specific information from Directorate of income Tax (Investigation), Kolkata that the appellant had claimed bogus donation and deduction u/s. 35(ii) of the Act. Therefore, the AO had the reason to believe that income of Rs. 35,00,000/- had escaped assessment. The appellant's contention that the AO did not make enquiry before reopening the assessment is not tenable because under the Scheme of the Act the AO has little power to make enquiry when proceedings are not pending before him.
4.4.2 The appellant has contended that the AO did not provide the statements on which he had placed reliance and did not give opportunity to the appellant to cross examine the persons who made those depositions. The appellant's contention has no merit because the Act does not envisage giving opportunity to the assesses to rebut the evidences before the assessment is reopened.
4.43 The appellant has also contended that before the reopening the assessment, the AO ought to have established that the donation paid had been received back by the appellant. This contention of the appellant is not correct. For reopening the assessment, it is not necessary for the AO to conclusively prove that income had actually escaped assessment. Mere existence of reason to believe that income has escaped is sufficient for the AO to reopen the assessment.
Apropos issue of addition for donation :
In this case the Assessing Officer noted that a survey action was conducted in the HHBHRF by the Kolkata Directorate of the Investigation wing wherein it was found that the said entity did no conduct any research activity or any such activity which can be considered as scientific in nature or for the purpose for which the section 35 was incorporated in the Act. On the contrary the investigation wing opined that the said entity was more involved in providing assistance to tax evaders by offering their services on account of obtaining funds through other than cash and after deducting a commission returned the amount to the beneficiary in cash.
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Thereafter the Assessing Officer referred to the modus operandi found by the investigation team and also the reply of the founder director of the said institution. By referring to it, the Assessing Officer made following conclusion:-
“The said faces clearly proved that the contributions to the said entity was not a donation or payment made for scientific research or any purpose mentioned in section 35 of the Act but merely a transaction created to give the effect of a donation wherein the chequc/RTGS transfer was created as the evidence and for a small commission obtained a certificate of contribution as another evidence to benefit from the tax benefit provided by the relevant section;. The said investigation findings had resulted in most of the entities withdrawing their claim, and offering the income evaded under the IDS scheme 2016. However the assessee still sought to get refuge with the evidence it had created of a cheque payment and a certificate. The records of the assessee indicated that there was no such philanthropy or scientific concern in earlier years or subsequent year of such magnitude, it was further seen that the assessee is throughout based in Mumbai and does not have any major business in other places especially in Kolkata. Accordingly the affinity for a Kolkata teased organisation, when you have so many registered genuine organization in Mumbai is not explained from the record of the assessee.”
He noted the submission of the assessee and also referred to two ITAT, Kolkata decision, but did not accept the same. He noted as under :-
“During the course of present reassessment proceeding the assessee was required to provide a genuine explanation to the said facts to prove that its contribution, was out of genuine concern for scientific research unlike the hundreds of others who merely made the payment to get the benefit of a certificate of donation to claim the deduction .The assessee had in reply vide letter dated 9th July 2018 provided the receipt of the donation and other supporting, including the registration for exemption u/s.80G(5)(vi) and u/s 12AA and the publication made in the Gazette of India. The assessee also enclosed copies of two judgment rendered by the Kolkata with respect to the donation to the very same organization. However notwithstanding the fact that the decisions are not of the Jurisdictional ITAT and consequently not binding, the ITAT is a fact finding Authority also and the Honorable ITAT may have in that case found the appellant to be a genuine philanthropist and having a scientific concern etc and may have decided in favor of the appellant. Besides the documents created for the sole purpose of defeating the intention of the Government cannot in itself be the final evidence to absolve the payment made by the assessee to be different from that explained by the Founder Director of the said organization.”
He proceeded to make the disallowance.
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Upon assessee’s appeal learned CIT(A) proceeded to confirmed the Assessing Officer’s order by observing as under :-
5.4.1 1 have considered the rival contentions, I find that the present appeal is against disallowance of Rs.35,00,000/- representing deduction claimed u/s, 35(1) of the Act towards donation made to HHBHRF, The AO rejected the submissions of the appellant and disallowed the claim of the appellant relying on the findings of the Directorate of income Tax (Investigation), Kolkata from the Survey conducted on 27.01.2015. I also find that the approval u/s 35(1)(ii) of the Act had been subsequently withdrawn only vide Notification No.79/2015/F.No.203/135/ 2007/ITA.II dated 06th September. 2016. Notification dated 6lh September, 2016 is reproduced below:
"S.O. 2882(E)- In exercise of the powers conferred under clause (ii) of subsection (1) of section 35 of the Income-tax Act, 1961 read with rides 5C and 5E of the Income-tax Rules 1962, the Central Government hereby rescinds the notification of the Government of India, Ministry of finance, Department of Revenue number 35/2008 dated 14th March, 2008 published in the Gazette of India, Part II. Section 3, Subsection (II) vide S.O. 798 dated I4lh March, 2008 with effect from 1st April, 2007 and shall be deemed that the said notification has not been issued for any (ax benefits under the Income- tax Act, 1961 or any Other law of the time being in force. "
5.4.3 I find that the appellant's claim is not acceptable for another reason. The appellant has claimed that it paid Rs.20,00,000/- to HHBHRF as donation which was eligible for deduction u/s.35(1)(ii). In the course of the appellate proceedings, the appellant has produced a "receipt" in support of its claim. On going through the "receipt" produced, which is in the form of a letter, I find that the "receipt” acknowledges appellant's letter to HHBHRF sanctioning donation of Rs.20,00,000/-, The relevant portion of the letter reads as under:
"We acknowledge with thanks your letter dated 29.03.2012 sanctioning therein a donation of sum of Rs.20,00,000/-(Rupees Twenty Lacs only) through RTGS to our IDBI Bank Account No,0060102000117470 on 29.03.2012 for Scientific Research and Other Allied Activities related to application of science. " (emphasis supplied),
5.4.4 Thus, I find that the so called receipt is acknowledgment of appellant's letter dated 29.03.2012 and not a receipt for money. Thus, I find that the appellant has failed to furnish the receipt in support of its claim of donation. A mere letter acknowledging a correspondence regarding donation cannot be treated as proof of donation. Therefore, no deduction u/s35(l)(ii) can be allowed on the basis of the said letter.
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5.4.5 The case laws cited by the appellant mentioned in para 5.3.1 above does not help appellant’s cause because the appellant had failed to produce a valid receipt.”
Against the above order the assessee is in appeal before us.
We have heard both the parties and perused the records. Learned Counsel of the assessee submitted that the issue is duly covered in favour of the assessee by several decisions as under :-
1 Chotatingrai Tea (2002) 258 ITR 529 (SC) 2 National Leather Cloth Manufacturing Co (2000) 241 ITR 482 (Bom) 3 Urnish Jewellers ITA No. 1583/Mum/20I9 (Mum-Trib) 4 Shirish Lakhamshi Keniya (HUF) ITA No. 5385/Mum/2018 (Mum-Trib) 5 Thakkar Govindbhai Ganpatlal (HUF) Tax Appeal No 881 of 2013 (Guj) 6 Raj da Polymers ITA No. 333/Kol/2017 (Kol-Trib) 7 Maco Corporation (India) Pvt Ltd. ITA No. 16/Kol/2017 (Kol-Trib)
Per contra learned Departmental Representative relied upon the order of authorities below.
Upon careful consideration we note that the notice for reopening in this case reads as under :-
“Reasons for reopening Entertainment Private Limited PAN: AADCK8786D A.Y. 2012-13 The Assessee, M/R Crossover Entertainment Private Limited, PAN: AADCK8786D is in the business of Talent & Event Management, sponsorship/allied promotions and branding activities.
The assesses company tiled, its return of income for A.Y. 2012-13 on 28.09.201 2 declaring of Rs. 4,48,03,337/-. The return was processed u/s. 143(1) of the I.T. Act.
As per the information, received from Kolkata Directorate of investigation, the institution-Herbicure Healthcare Bio-Herbal Research Foundation was providing accommodation entries to beneficiaries in the nature of bogus donation in lieu of commission. As per the modus operandi, the bogus donations were returned buck 10 the donors in the lieu of commission.
The assessor company i.e. M/s Krossover Entertainment Private Limited has been identified as one of the beneficiaries of such syndicate. I have perused the information received and case records of the assessee. It is noticed that
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the assesses company during A.Y. 2012-13 has shown donation of Rs. 20,00,000/- to the above institution and has claimed deduction of Rs. 35,00,000/- under section 35(l)(ii) of the Income Tax act 1961.
Further, vide notification No. 79/20 16/F. No. 203/135/2007/ITA, II, Central government has rescinded approval issued vide notification number 35/2008 dated 14.03.20U8 to Herbicure Healthcare Bio-Herbal Research Foundation u/s 35(1)(ii) of the Income Tax Act, 1961 retrospectively w.e. from 1st April 2007. Notification reads as it shall be deemed that the said notification has not been issued for any tax benefits under Income Tax Act, 1961 or any other law of the time being in force.
In view of the above, the claim of deduction made by the assesses u/s. 35(1)(ii) of Rs. 35,00,000/- is non genuine. Therefore, 1 have a reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly nil material facts, income of Rs. 35,00,000/- , chargeable to tax for A.Y. 2012-13 has escaped assessment. Hence, it is a fit case for issue of notice u/s. 148 of the I.T, Act, 1961.”
We note that the assessee has made following submission the Assessing Officer in its objection to reopening :-
“The assessee, on receipt of the recorded reasons, hereby raises its formal objection on disputing the re-opening of the completed assessment and erroneous issue of notice u/s.148 of the Act on understated reasons:-
a. In the reasons recorded for re-opening the assessment, it is merely stated that Kolkata Directorate of Investigation has given information of an institution viz. Herbicure Healthcare Bio-Herbal Research Foundation (HHBRF), which was providing accommodation entries to beneficiaries, and it is alleged that the assessee Company is one of the beneficiaries. There is no supporting document provided to the assessee, for which we request your good selves to serve the relevant document on the assessee Company.
Further we submit that the case is being reopened by just merely relying on the report of the investigation department without making any independent inquiries which is bad in law.
b. We further would like to submit that how "a payment", through "banking channels" can form a belief that it is a bogus transaction, which tantamount to "income" and which has "escaped assessment". Thus, there is no reason to believe that income chargeable to tax has escaped assessment which is the sine qua non for issuing a notice under section 148.
Assessee had made the payment of Rs. 20,00,000/- through RTGS from its bank account of State Bank of India, Bandra (East) branch, Mumbai, directly to their IDBI Bank account, which has been duly acknowledged vide their letter dt 29.03.2012. This payment is also reflecting in the bank statement of the assessee.
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c. Further, your good selves has very wrongly stated and alleged that the funds have been paid back to the assessee company.
d. Your good selves have further stated in the notice u/s. 148 that:
Further, vide notification No. 79/2016/F. No. 203/135/2007/ITA. II. Central government has rescinded approval issued vide notification number 35/2008 dated 14.03.2008 to Herbicure Healthcare Bio-Herbal Research Foundation u/s 35(1 )(ii) of the Income Tax Act. 1961 retrospectively w.e.f. 1st April 2007. Notification reads as it shall be deemed that the said notification has not been issued for any tax benefits under Income Tax Act. 1961 or any other law of the time being in force.
We respectfully submit that the statute itself, i.e., the Income Tax Act, 1961, has provided as follows:
"The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee. the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn"'
The date on which donation was given, the notification u/s 35(1)(ii) was in force and valid and therefore the deduction claimed by the assessee was in order and as per the explanation, subsequent cancellation of notification does not affect the claim made. We believe notification does not over-rule the Act.
Last but not the least, an order u/s. 143(3) has been passed for the said assessment year, wherein all relative details are on record, and which the Assessing officer then, has inspected the details and supporting documents filed, and allowed the deduction.
Hence, in lieu of the above submissions and in the said circumstances, the re-opening of the said case is bad in law.
A humble prayer is made to drop the re-assessment proceeding for which the assessee shall ever remain grateful and oblige. Hope the above information is to your full satisfaction.”
In disposing off the objection the Assessing Officer only mentioned to the modus operandi found by the investigation wing in the case of said entity. There is no whisper that anything specific was found with reference to this particular assessee. The Assessing Officer has inferred the following in the case of assessee :-
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“The assessee was also found to have given such purported donations of Rs.20 lacs and from the return of income it was seen that it had claimed deduction u/s. 35(l)(ii) of Rs.35 lacs on such bogus donation which has been given the colour of contribution towards the noble cause of scientific research. The earlier and subsequent returns of the assessee did not indicate and such consistent philanthropic activity.”
The Assessing Officer also disposed off the objection that earlier the assessment was completed under section143(3) by holding as under :-
“The final argument advanced by the assesses is that the assessment was completed earlier u/s. 143(3) and consequently the issue was examined by the then Assessing Officer for allowing the claim. However the assessee has not provided any supporting to prove that the Assessing Officer was aware of the actual activity conducted by IIHBRF which was unearthed consequent to investigation by the Kolkata Directorate. Accordingly there is no justification in the said contention of the assessee that the matter was examined in detail including in the light of the present findings by the Kolkata Directorate. In view of the same the argument of the assessee on this ground is also not acceptable.”
We note that in the case assessment was earlier completed under section 143(3) of the Act. Subsequently on information from the investigation wing at Kolkata that M/s. Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF) was engaged in providing accommodation entries the case of the assessee was reopened. In this regard it is noted that there is nothing on record that any specific information regarding the assessee was received. Consequently, upon reopening on the basis of the same information the Assessing Officer made the assessment disallowing the payment. There is no further material brought on record by the Assessing Officer. The assessee has submitted the payment evidence. The same was through banking channel. At the time of payment the said entity was very much eligible of the deduction.
We further note that the ITAT in the case of Sopariwala Exports Pvt. Ltd. (ITA No.2039/Mum/2018 vide order dated 17.6.2021) has decided the identical issue in favour of the assessee by observing as under :-
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Upon careful consideration we note that identical issue was decided in favour of the assessee in the aforesaid decisions of the ITAT. We may refer to the decision in the case of Kitchen Essentials (supra) as under :-
“We have heard the rival submissions and perused the material on record including the decisions cited by the Id. AR. The undisputed facts are that the assessee has made donations of Rs.50 lakhs to the "The School of Human Genetics and Population Health" and claimed deduction u/s.35(1)(ii) of the Act equal to Rs.87,50,000/- being 175% of the amount paid. A survey was conducted at the office premises of the school namely, "The School of Human Genetics and Population Health" u/s.133A of the Act on 27.01.2015 and it was observed by the survey team that this institute in connivance with donors, brokers and accommodation entry providers has indulged in a duvious scheme of tax evasion, under which bogus donations were received from donors and money used to be returned back to the donors in lieu of commission, even while the donor availed of deductions u/s.35(1)(ii) of the Act. The registration of the institution was cancelled by the Government of India with retrospective effect and it was held that the institution has misused the exemption. However, under similar facts and circumstances, various coordinate benches have taken the view that mere admission on the part of the office bearers of the body/trust, the assessee cannot be penalized and the amount of donations claimed by the assessee on account of payment to the said school cannot be denied. In the case of Narbheram Vishram Qua, ITA No.42&43/Kol/2018, order dated 27.07.2018, the Kolkata Bench of the Tribunal under similar circumstances and facts has held as under:-
"13 we have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assesses has challenged disallowance of weighted deduction of Rs.4,81,25,0007- for A.Y. 2013-14 and disallowance of weighted deduction of Rs.10,50,00,000/-, for A.Y. 2014-15, claimed by him under section 35(l)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' (hereinafter referred to as 'Matrivani') and 'The School of Human Genetics and Population Health' (hereinafter referred to as 'SHG'). The Assessee Firm in A.Y. 2014-15, made donation of Rs,2,00,00,000/ to Matrivani and Rs,4,00,00,000/ to SHG and claimed weighted deduction of Rs.10,50,00,000 under section 35(l)(ii) of the Income Tax Act, 1961, being 175% of the aggregate sum of Rs.6,00,00,000/-(Rs,2,00,00,000 + Rs,4,00,00,000) donated to these two institutes which were approved by the Central Government for the purposes of section 35(1) (ii) of the Act read with Rule 5C and SE of the Income Tax Rules, 1962. In the assessment year 2013-14, the assessee claimed weighted deduction of Rs.4,81,25,000/- under section 35(1) (ii) of the Act, which is 175% of the amount of donation being the sum of Rs.2,75,00,0007- in respect of the donation given to 'The School of Human Genetics and Population Health'. We note that the Notifications to this effect, that these two
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institutions viz. 'Matrivani' and 'SHG', were approved by the Central Government for the purpose of section 35(1)(ii) of the Act, was published in the Gazette of India. However, the deduction claimed by the assessee was denied by the Assessing Officer on the basis of the allegations contained in the report of the Investigation Wing of Kolkata that the said donations were bogus. The reasons stated therein, in short, were that statements of some key persons of these two donee institutions were recorded by the Investigation authority in course of survey proceedings in their cases. The said key person, in their statements, accepted to have received donations from various entities in lieu of cash returned to them after deducting commission there from.
We note that, during the course of hearing, before us, the Id Counsel for the assessee submitted that, the sums paid to "Matrivani and "SHG, were genuine donations and both of the Institutions were admittedly registered under section 12A of the Income Tax Act, 1961. We note that both of the said two Institutions viz, "Matrivani" and "SHG", are Scientific Research Association approved as such by Central Government under section 35(l)(ii) of the Income Tax Act, 1961 vide Notification, bearing No. 229/2007 (F.N0.203/135/2007/ITA-II) dated 21.08.2007 and Notification No. 4/2010 (F. No. 2B/A/2009,/ITA-II dated 28.01.2010 respectively, published in Official Gazette of India. The assessee categorically denied that it ever received back the amounts of donations in cash or in kind from the said Institutions and from any person whatsoever in lieu of the various amounts donated to these two institutions, we note that in the statements, of key persons and alleged brokers recorded by the Investigation Wing in course of survey proceedings, in their cases and the extracts of which was provided to the assesses in the show cause notice, the name of the assessee firm does not appear anywhere. It is to be noted that none of those persons implicate the assessee to have made bogus donations and that cash was paid to the donors assessee in lieu of the alleged bogus donation after deducting their commission.
We note that the statements of the various parties and persons were recorded behind the back of the assessee and the Assessing Officer did not allow opportunity of cross examination. We note that in absence of opportunity of cross-examination no reliance could be made on such statements to draw any adverse inference against the assessee firm. The assessee firm denied its knowledge of the statements made by these institutes which were relied on by the Investigation Wing and the Assessing Officer. We note that not providing the opportunity of cross- examination is against the principle of natural justice and for that we rely of-the judgment of Hon'ble Delhi High Court in the case of CIT vs. Dharam Pal Prern Chand Ltd. [2007] 295 ITR 105, 108 (del). We note that on identical facts, the similar proposition was upheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, ITA No.333/Kol/2017for Assessment Year 2013-14 wherein it was held as follows:-
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"10. ....Thus we note from the entire facts and circumstances, that the AO got swayed away with the statement recorded on oath of Mr. Swapan Ranjan Dasgupta during survey conducted at the premises of M/s. Herb/cure. We have reproduced Question no. 22 and 23 and answers given by Shri Swapan Ranjan Dasgupta, wherein he admits to provide accommodation entries in lieu of cash. This information we should say can be the tool to start an investigation when the assessee made the claim for weighted deduction. The general statement of Shri Swapan Ranjan Dasgupta against donation made the claim of assessee for deduction suspicious. However, when the AO investigated, Shri Swapan Ranjan Dasgupta has confirmed that M/s. Herb/cure was in receipt of the donation and it has not given any refund in cash, then the sole basis of disallowance of claim as a matter of fact disappeared. It should be remembered suspicion howsoever strong cannot take the place of evidence. The confirmation from Shri Swapan Ranjan Dasgupla fortifies the claim of the assessee for weighted deduction u/s. 35(1 )(ii) of the Act. The sole basis of the addition/disallowance based on statement recorded on oath during survey cannot be allowed as held by Hon'ble Supreme Court in Kader Khan & sons (supra). Moreover, we note that if the AO was hell bent determined to disallow the claim of the assessee, then he should have granted an opportunity to cross examine Shri Swapan Ranjan Das Gupta and Shri Kishan Bhawasingka as held by Hon'ble Supreme Court in Andaman Timber (supra).
In the light of the aforesaid facts and circumstances, we cannot sustain the order of the authorities below. Therefore, we set aside the impugned order and direct the AO to allow the deduction of Rs.26,28,500/- u/s. 35(l)(ii) of the Act.
Now, we deal with the arguments of Id DR for the Revenue. We note that the solitary grievance of the Id DR for the Revenue is that since the registration had been cancelled by the CBDT, with retrospective effect that is, with effect from 1sl April 2007, by issuing notification dated 06.09.2016, for both the institutions viz: 'Matrivani' and 'The School of Human Genetics and Population Health', therefore these institutions are not entitled to claim benefit under section 35 (1) (ii) of the Act.
We note that the withdrawal of recognition u/s 35(l)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assesses herein for claim of weighted deduction u/s 35(1 )(ii) of the Act, for that we rely on the judgment of the Coordinate Bench, Kolkata, in the case of M/s Maco Corporation India (P) Ltd, ITA No.l6/Kol/2017, for Assessment Year 2013-14, wherein it was held as follows:
"29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration fill
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01.10.2004; and lastly. Section 21 of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred on the CIT by Section I2AAC3) of the Act w.e.f. 01.10.2004.
We hold that the ratio decidendi of the aforesaid judgement of the Hon'ble Apex Court would squarely be applicable to the facts of the instant case. In fact the assessee's case herein falls on a much better footing than the facts before the Hon'ble Apex Court. In the case before Hon'ble Apex Court, the power of cancellation of registration us 12A of the Act was conferred by the Act on the Id CIT w.e.f. 1.10.2004 and the Hon'ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(l)(ii) of the Act. Hence we hold that the withdrawal of recognition u/s 35(l)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(H) of the Act."
16.1n view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we direct the Id AO to grant deduction u/s 35(1 )(ii) of the Act, in the sum of Rs. 4,81,25,000/- for A. Y, 2013-14 and in the sum of Rs. 10,50,00,000/-, for A. Y. 2014-15, as claimed by him under section 35(l)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' and The School of Human Genetics and Population Health'. Accordingly, the Grounds 1 to 4 raised by the assessee for A.Y. 2013-14 and the Grounds 1 to 5 raised by the assessee for A. Y. 2014-15 are allowed."
Similarly in various other decisions the issue has been decided by the Tribunal in favour of the assessee by disregarding the revenue's contentions that the registration of the school has been cancelled by the CBDT with retrospective effect by issuing Notification and, therefore, the assessee is not entitled to benefit u/s.35(1)(ii) of the Act. The facts before us being materially same involving the same school, namely, "The School of Human Genetics and Population Health", we, therefore, respectfully following the decisions of the coordinate benches of the Tribunal, hold that the deduction u/s. 35(1)(ii) of the Act cannot be denied to the assessee. Accordingly, we direct the AO to grant deduction u/s. 35(1)(ii) of the Act. Appeal of the assessee for the assessment year 2013-2014 (ITA No.6672/Mum/2017) is hereby allowed.”
We note that facts in the present case are identical. The withdrawal of the approval to the payee has taken place subsequent to the payment by the
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assessee. The assessee’s case duly follows under section 35(1)(ii) of the Act which read as under :-
Section 35(1)(ii) : an amount equal to one and one half 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 (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government : Provided further that where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid;
Hence the payee was duly approved when the payment was done. By no stretch of imagination it can be said that the assessee could have done the impossible and known that subsequently the approval will be withdrawn. Accordingly, following the above said precedent and noting that it is not the case that Hon'ble Bombay High Court has reversed the decision, we set aside the order of authorities below. The assessee is therefore held to be eligible for deduction under section 35(1)(ii) of the Act.”
Respectfully following the precedent as above we set aside the order of the authorities below and decide the issue in favour of the assessee.
Since the issue has been decided on merits in favour of the assessee adjudication on reopening is only academic interest the same is not being gone into.
In the result, appeal filed by the assessee is allowed. Pronounced in the open court on 5.10.2021.
Sd/- Sd/- (PAVANKUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated : 05/10/2021
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Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai