M/S HYPACK INDUSTRIES,MUMBAI vs. ACIT 26 (1), MUMBAI

These two appeals by the assessee are directed against the order of Commissioner of Income Tax(Appeals)-38, Mumbai [in short 'the CIT(A)’] for the assessment years 2012-13 and 2014-15. Both the impugned order are of even date i.e. 02/01/2018. Since, grounds raised by the assessee in both the appeals are identical they are taken up together for adjudication and are decided by this common order.

Shri Piyush Chhajed appearing on behalf of the assessee submitted at the outset that assessee in ground No.1 of appeal has assailed reopening of assessment. The assessee does not want to press this legal ground.

The ld. Authorized Representative of the assessee submitted that ground No.2 to 4 of appeal are on merits of addition. The solitary issue raised in this appeal by the assessee is against disallowance of donation of Rs.2,00,000/- made to School of Human Genetics & Population Health, Kolkata. The ld.Authorized Representative of the assessee submitted that assessee had made donation to the aforesaid Trust on 21/02/2012 and claimed benefit of deduction under section 35(1)(ii) of Income Tax Act,1961 ( in short 'the Act'). The same was allowed to the assessee. Thereafter, the assessment for assessment year 2012-13 in the case of assessee was reopened to disallow the assessee’s claim of deduction under section 35(1)(ii) of the Act on the ground that during the course of survey action in the case of School of Human Genetics & Population Health, it was found that the aforesaid institution had indulged in money laundering activities. It was alleged that the assessee is one of the beneficiary from money laundering activities carried out by the aforesaid institution. The ld.Authorized Representative of the assessee vehemently submitted that there is no evidence on record to suggest that the donation made by the assessee to School of Human Genetics & Population Health was a bogus transaction. On the date of donation the said institution was having valid approval for exemption. The survey under section 133A of the Act took place in the case of School of Human Genetics & Population Health on 27/01/2015 i.e. much after the date of donation on 21/02/2012 in the period relevant to assessment year 2012- 13. The approval under section 35(1)(ii) of the Act was withdrawn by Government in respect of above institution vide O.M dated 21/09/2016. The assessment in the case of assessee was reopened on 27/10/2016.The ld.Authorized Representative

On the other hand, Shri Sushil Kumar Mishra representing the Department vehemently defended the action of CIT(A) in upholding disallowance of donation made by assessee to School of Human Genetics & Population Health. The ld.Departmental Representative submitted that a survey action was carried out in the case of School of Human Genetics & Population Health and it was found that the institution is engaged in providing bogus donation entries. The assessee is one of the beneficiaries of such bogus entries. The approval granted under section 35(1)(ii) of (A.Y 2012-13) ITA NO.5714/MUM/2019(A.Y 2014-15)

Both sides heard, orders of authorities below examined. The solitary issue raised in the present appeal is disallowance of weighted deduction under section 35(1) of the Act to the assessee. The assessee had made donation of Rs.2,00,000/- on 21/02/2012 to School of Human Genetics & Population Health and has claimed weighted deduction of Rs.3,50,000/- under section 35(1) of the Act in the return of income for assessment year 2012-13. On 27/01/2015 a survey action was carried out in the case of School of Human Genetics & Population Health, consequently, approval under section 35(1)(ii) of the Act allowed to School of Human Genetics & Population Health was withdrawn by the Department on 21/09/2016. Undisputedly, on the date of donation institute was holding valid approval under section 35(1)(ii) of the Act. The assessee has made donation to the institute through banking channel against receipt. The assessee’s claim of deduction in return of income was accepted by the Department. The withdrawal notification by the Revenue in 2016 would not operate retrospectively to disallow assessee’s claim of deduction under section 35(1) of the Act in A.Y.2012-13. Hence, the assessee would be eligible for benefit of weighted deduction under section 35(1)(ii) of the Act in assessment year 2012-13. Subsequent withdrawal of approval under section 35(1)(ii) of the Act from the institution by the Department would not prejudice the assessee’s claim of donation in the impugned assessment year.

The Hon'ble Supreme Court of India in the case of CIT vs. Chotatingrai Tea & Ors.(supra), where the assessee had claimed deduction under section 35CCA of the Act and the same was withdrawn by the Department on the ground that approval granted by the prescribed authority to the society to whom assessee had made donations was withdrawn with retrospective effect, the Hon’ble Court dismissing

Thus, in the light of facts of the case and the law expounded by Hon’ble Apex Court, the findings of CIT(A) on assessee’s claim of deduction under section 35(1) of the Act are set-aside and ground No.2 to 4 of the appeal are allowed.

In ground No.1 of appeal, the assessee has challenged validity of notice issued under section 148 of the Act. The ld. Authorized Representative of the assessee made a statement at Bar that he is not pressing ground No.1 of the appeal. As a result, ground No.1 of assessee’s appeal is dismissed as not pressed.

In the result, appeal by the assessee is partly allowed in the terms aforesaid.

Both sides are unanimous in stating that the facts in assessment year 2014-15 are identical to facts in 2012-13. The assessee’s claim under section 35(1)(ii) of the (A.Y 2012-13) ITA NO.5714/MUM/2019(A.Y 2014-15)

Since, the facts germane to withdrawal of assessee’s claim of weighted deduction under section 35(1)(ii) of the Act in both these appeals are identical, the findings given while deciding appeal of the assessee in assessment year 2012-13 would mutatis mutandis apply to the present appeal. For the detailed reasons given while deciding appeal of the assessee for assessment year 2012-13; the present appeal is partly allowed.

To sum up, appeals of the assessee for 2012-13 and 2014-15 are partly allowed.