MAHESH C THAKKER,MUMBAI vs. ACIT-19(2), MUMBAI

The only common issue in these two appeals of assessee is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of claim of deduction under section 35(1)(ii) of the Act in regard to donation given to School of Human Genetics & Population Health (SHG&PG), which is notified under section 35(1)(ii) of the Act. The issue is common in both the years and facts and circumstances are exactly identical except the quantum. Hence, I will take the facts from AY 2012-13 in ITA No. 5121/Mum/2018. The grounds raised in AY 2012-13 read as under: - “1.1 the Hon’ble CIT(A) -4 erred in facts and in circumstances of the case and in Law in approving dis-allowance of claim of deduction of ₹ 3,50,000/- for donation of ₹ 2,00,000/-, which is covered under section 35(1)(ii) of the Income Tax Act, 1961. 1.2 The donation of ₹ 2,00,000/- given to School of Human Genetics & Population Health (SHG&PH) is notified institution under section 35(1)(ii).”

Briefly stated facts are that the assessee is having income from salary, business, capital gains and other sources. The AO received information from DDIT, Investigation Kolkata that the assessee is beneficiary of bogus claim of donations, wherein deduction was claimed ITAs No.5122 & 5122/Mum/2018 under section 35(1)(ii) in relation to donations given to SHG&PG. The AO noted the fact that in this case a commission was issued u/s 131(1)(d) of the Act to DDIT (Inv.) Kolkata to conduct necessary verification to ascertain genuineness of the claim made by the beneficiaries and also to verify genuineness of the transaction. The DDIT (Investigation) Kolkata in response to the commission issued stated that complaints as also certain credible information was received against two concerns i.e. M/s Herbicure Healthcare Bio-herbal Reserved Foundation ("HHBRF") and M/s School of Human Genetics and Population Health (SHGPH) for accepting donations under section 35(1)(ii) of the Act and thereby providing accommodation entries to the beneficiaries. Accordingly, survey under section 133(A) was carried out on 27.01.2015 at the registered/ Administrative offices of HHBRF and SHGPH by DDIT (Investigation) Kolkata. Consequent to such actions by the DDIT (Investigation) Kolkata information was received through DGIT (Investigation) Mumbai, by the AO that assessee had taken accommodation entries of donations wherein deduction u/s.35(1)(ii) amounting to ₹ 3,00,000/- was claimed by the assessee for A.Y. 2012-13 by claiming a donation of ₹ 3 lacs made to School of Human Genetics and Population Health. It was based on such information received by the AO that reasons were recorded for reopening the assessment and notice under section 148 of the Act dated 28.01.2016 was issued to the assessee.

The AO noted that the assessee has claimed to have given donation of ₹ 3 lacs to SHG&PG and claimed deduction under section 35(1)(ii) of the Act amounting to ₹ 5.25 lacs in the return of income. The AO noted that the evidence is gathered by DDIT investigation Unit 4(1), Kolkata, statements of the directors recorded during investigation and other employees, directors of the Trust, the enquiries conducted in the ITAs No.5122 & 5122/Mum/2018 case of entry operators, examination of bank account statements of the assessee, trust and entry operations, the reply of SHG&PG and noting down the modus operandi of the Trust it is clear that donations received by SHG&PG were never utilized for the purpose of scientific research or for setting up of new infrastructure. Hence, the accommodation entry in the form of donation of ₹ 3 lacs to SHG&PG against which the assessee has claimed deduction of ₹ 5.25 lakh under section 35(1)(ii) of the Act was disallowed. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, assessee came in appeal before Tribunal.

At the outset, the learned Counsel for the assessee filed complete details and stated that it has made donation / contribution to School of Human Genetics and Population Health of ₹ 3 lakhs by Demand Draft No. 504404 of State Bank of India dates 27.03.2012, SHG&PH has issued Receipt No. 933 dated 27.03.2012. Receipt No. 933 dated 27.03.2012 of ₹ 3 lakhs which is enclosed at assessee’s paper book at page 16. Notification under section 35(1)(ii), which is enclosed at page 17. At the time of making donation to the said institution on 27/03/2012, the said Institution was having all the requisite certificates / approvals / recognitions necessary for it being eligible to receive such donation u/s. 35 (1) (ii) of the Act. The learned Counsel stated that in course of the assessment proceeding copies of the receipts, approvals and recognitions were submitted. The recognition / approval as envisaged in the section are not given to all and sundry. There is elaborate procedure laid down for such purpose, which involves, among other, rigorous verification process by the Government / Government Institutions. The concerned Institution has to make application in the prescribed form and in the prescribed mariner to the Central Government. The Central ITAs No.5122 & 5122/Mum/2018 Government, in turn, calls for various details / information / documents and conduct inquiries and it is only after being fully satisfied itself about genuineness of the activities of the Institution that such Institution is notified for the purpose of this section. Besides, in terms of Rule 5C read with 5E of the Income - tax Rules, 1962, before such Institution becomes eligible under this provision, there are various other obligations / conditions to be fulfilled, which include continuous monitoring of the research work undertaken by such Institution. As such, this is not a one- time process but it is a continuing monitoring process. In the present case, it was only after going through such rigorous process of verification that the Donee Institution was granted the registration. SGH&PH is holding following registration and certificates:-