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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri S.S.Godara & Dr. A.L. Saini
O R D E R
PER S.S.Godara, Judicial Member:
- This assessee’s appeal for assessment year 2013-14 arises against the Commissioner of Income Tax (Appeals)-4, Kolkata’s order dated 29.06.2018 passed in case No. 1444/CIT(A)-4/2015-16, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Case called twice. None appears at the assessee’s behest. The registry has already sent the assessee an RPAD notice dated 27.08.2018 for today’s hearing. We therefore proceed ex parte against the assessee. The case is now taken up adjudication on merits.
The assessee’s sole substantive grievance challenges correctness of both the lower authorities action disallowing its sec. 35(1)(ii) deduction claim of donation of ₹8.75 lac made to School of Human Genetics and Population Jediv Cargo Management Pvt. Ltd. Vs. DCIT, Cir-12(`1), Kol. Page 2 Health (SHPGH) in the course of assessment as upheld lower appellate proceedings vide its following detailed discussion:- “6. Ground No. 1 is regarding disallowance of Rs. 8, 75,000/- being donation and subscription paid u/s. 35(1)(ii). The AO has passed a detailed order in this issue. 6.1. Some of the salient feature of the Assessment Order on the issue of donation is as under: I) Donation has been paid to School of Human Genetics and Population Health (SHPGH) on which survey was carried out by Investigation Wing on 27.01.2015 where it was found that concern is providing entry for bogus donation to various parties. ii) The-Assessee has not shown the donation made in Row 15A of the Tax Audit Report and it was shown as NIL. iii) During survey it was found that SHG&PH is providing entry for donation and is taking commission for the same. The commission rate has been found to have been 12 per cent to 18 per cent where 8 to 10 per cent commission is retained by SHG&PH and 2 to 8 per cent commission is charged for broker. iv) More than Rs. 724 crore of bogus donation was given to three institutes between 2011 and 2015. v) Statement of persons like Secretary, Treasurer, President are as under- "Statements of key persons like secretary/Treasurer/President and other persons recorded during the survey and confirming the above in modous operandi was enclosed in the Survey Report. Statements of the auditors of these institutes are enclosed in the Survey Report which clearly shows lacunas in the audit done by them. Most of the audit is clone from the bank statement. A number of brokers/ entry operators have admitted that they have clone bogus billing or accommodation entries for these institutions which clearly establish the modus operandi of the institute. Statements of Brokers/ entry operator are enclosed in Survey Report Annexures. . • Most of the expense side parties of these institutes were issued notices. The register dales has return back as not found/ address insufficient etc. Pre- survey and post survey physical inquiries have found that most of the expense side parties of these institutes are paper & bogus concerns which has raised bogus bills in lieu of commission. • The bank statements of these institutes show clear pattern of donation coming and going vide above modous operandi. Most of the debit entries are in name of shell companies and paper concerns, which are found to be non-existing . • SHG&PH have gone in settlement commission admitting that in lieu of service charge they have provided accommodation entries of donation to the donors. • The books of accounts were not there at their registered offices. In case of SHG&PH there are broker wise ledgers of commission. In this cases, no purchase bills were found at their premises related to F. Y 2014-15. Documents relate to commission were found and impounded.
Jediv Cargo Management Pvt. Ltd. Vs. DCIT, Cir-12(`1), Kol. Page 3 • They do have some person with good C. V. on their board. On inquiry it is found that these persons are associated with these institutes only in honorary position and they are not involved in the day to day activities of the institutes. Some of them are relatives of the key person of the institute. • The research work they are showing is just reproduction of the published material. Even just one or two person has education qualification to be a researcher. The institutes were asked to produce the list of researcher along with their educational qualification, research contribution in last three years for the institute, expenses on their research, amount paid to researchers by the institutes in lieu of research. No details were filed. • These institutions have miniscule presence and their contribution to scientific research is too negligible for the kind of donation they have received. Any independent valuation of their research work will reveal that it is nothing but copy, plagiarism and mixing/ editing of the various published articles. The research facilities like instruments, lab. skilled staff, storage facilities etc are near about absent at these institutes. The institute approved u/ s 35(1)(ii) have to follow Rule 5C, 5D and 5E of Income Tax Rules. These institutes have blatantly violated the concerned income tax rules. On perusal of the survey report it is seen that the nature of work of the above stated research institution is bogus. Further, statements of many persons shown to have hold different positions in the institute were taken and. recorded during the course of the survey action. The statement of broker who has acted as liaison between the parties and the institute was also recorded. The following managerial staff of the assessee company related parties, broker having admitted that most of the research work is fabricated, copied and what is known as cut-paste research and on paper only and confirming the same through their statements are as under: 1. Smt. Samadrita Mukherjee Sardar (Secretary of BHG&PH) 2. Smt. Moumita Raghauan (Treasurer of SHG&PH) 3. Shri Pinaki Pal/Accountant of (SHG&PH) 4. Shri Prolay Banedee Statement 5. Shri Aruind Tewari (Auditor of (SHG&PH) 6. Shri Vijay Kumar Agarwal Broker cum Entry Operator of SHG&PH) 7.Shri Gupta, (Dummy Director of Vijay Kumar Agarwal) 8. Shri Nirmal Kumar Jhunjhunwala, (Dummy Director of Vijay Kumar Agarwal) 9. Disclosure of Income by Vijay Kumar Agarwal 10. Shri Yogesh Agarwal (SHG&PH) 11. Shri Sailesh Gupta (SHG&PH) 12. Shri Sailesh Agarwal (SHG&PH) 13. Sing Nauin Kumar Chhawchharia (SHG&PH) 14. Shri Gouind Rain Chauclhcuy (SHG&PH) 15. Shri Makhanial Satnaliwala (SHG&PH) 16. Sint. Rupee Khetnka (SHG&PH) 17. Shri Bikash Kumar Roy (SHG&PH) 18. Shri Sin ha Roy (Broker of (SHG&PH) 19. Shri Akash Agarwal 20. Shri Swill Kumar Agarwal (SHG&PH) 21. Shri Vijay Kumar Gupta (SHG&PH)"
Jediv Cargo Management Pvt. Ltd. Vs. DCIT, Cir-12(`1), Kol. Page 4 (vi) The AO has also noted that assessee has no idea about the activity of the donee. The AO has also noted that the Assessee could not produce the person at whose reference the donation was made. The statement of Secretary of SHG&PH was recorded. In answer to the Question No. 10 (Reproduced in Assessment Order) he has admitted that bogus expenses have been booked. He has also stated that the Assessee gets a commission of 3 per cent to 8 per cent on the bogus donations. He has also stated that back dated appeal letters are made to the donors and the money is returned to the donors after deducting the commission. The treasurer of SHG&PH has also stated on oath where he has admitted that the organization gets 7 to 8 per cent commission on the donation amount. He has also stated that services of brokers have been taken for the bogus donation.. (vii) Statement of Mr. Pinaki Pal, Accountant was also recorded and he has also admitted about the use of Commission agents for the bogus donation and use of bogus expenditure to match the accounts. (viii) Statement of Shri Vijay Kumar Agarwal, Broker cum entry operator was also recorded he has admitted that he has given bogus bills of 111.88 crore to the Assessee. He has also explained the modus operandi of issuing bogus bills to the Assessee. (ix) The entire modus operandi has been explained by the AO, through pictorial chart. In view of these voluminous evidences collected. by the AO] there is not an iota of doubt, the assessee has given donation to SHG&PH which are bogus in nature. It may be noted that assessment proceedings are based on the theory of preponderance of probability and in this case the AO has collected sufficient evidence to show that the donations made are bogus in nature. Regarding Id AR's reliance on some of the Tribunal's cases. In this case AO has discussed the findings of survey in detail to establish that the donations are bogus given through middlemen who charge commission and return the money to the donees. So much evidence was not gathered in other cases. Therefore other. cases cant have precedential value on this issue. Hundreds of donors have surrendered their donation as income In Voluntary disclosure scheme launched by department. In view of the above discussion, Ground No. 1 is Dismissed.”
We have given our thoughtful consideration to Revenue’s supporting contentions of the impugned disallowance. Learned Departmental Representative points out that CBDT has cancelled the recipient’s registration as well as registered body entitled to receive contribution. We find no merit in Revenue’s instant arguments. This tribunal’s co-ordinate bench’s decision in Tushar Chawda vs. ITO in decided on 21.03.2018 for Jediv Cargo Management Pvt. Ltd. Vs. DCIT, Cir-12(`1), Kol. Page 5 the very assessment year has deleted identical disallowance qua the recipient entities as follows:- “5. After hearing rival contentions, I am of the view that the assessee cannot suffer on account of withdrawal of notification given to M/s School of Human Genetics and Population Health, Kolkata granting approval u/s. 35(1)(ii) of the Act. This recognition was originally granted on 28th January, 2010 and renewed on 17th June, 2010 by Government of India. Ministry of Science and Technology. In response to letter dated 03.02.2014 given by M/s School of Human Genetics and Population Health, to the assessee, donation of rs.15,00,000/- was made on 31.03.2014 by the assessee. The said amount was given to the donee on 31.03.2014 and withdrawal was on 15.09.2016 i.e. after 17 months from the date of donation made in March, 2014. Such withdrawal in my view cannot take away the vested right of the assessee for claiming deduction under Section 35(1) of the Act.
The Tribunal in the case of Rajda Polymeers vide order dated 08.11.2017 at page 7 has held as follows: ‘5.6 We find that the ld CIT(A) had made an observation which has been heavily relied upon by the ld DR that the assessee’s line of business has got nothing to do even remotely with the healthcare or herbal healthcare industry much less in the area of research thereon and accordingly there was no need for the assessee to give donation of Rs.14,00,000/- to HHBRF. We find that this aspect has been duly addressed by the assessee by stating that one Cardiologist Doctor had introduced the assessee to HHBRF and donations were given after due satisfaction of the assessee based on personal visits to the two research centres of HHBRF and activities carried on by them. Moreover, it is well settled that it was always the prerogrative of the assessee to give or not to give any donation to a particular institution, which wisdom cannot be questioned by the revenue. The question of business expediency of an expenditure had to be viewed from the point of view of the busman and not from the view point of the revenue. The businessman knows his interest best. However, it cannot be denied that this donation paid to HHBRF is free from any suspicion. It definitely leads to further probe by the revenue, which has been carried out by the revenue by summoning the Director of HHBRF. The said Director Shri Swapan Ranjan Dasgupta, though could not appear in person before the ld AO for cross-examination (which was sought by the assessee) but had confirmed in writing that the donations given by the assessee to HHBRF were genuine in nature and had further confirmed that HBRF had not paid any cash back to assessee in lieu of cheque donations paid to them. The revenue had left the matter at this stage itself and did not further probe into it to cheque the veracity of the confirmations ITA No.2362/Kol/201 Tushar Chawda AY 2014-15 made by Shri Swapan Ranjan Dasgupta. Therefore the ld AO proceeded to make the addition only based on the statement recorded from Swapan Ranjan Dasgupta at the time of survey. It may be true that in respect to he said statement, Swapan Ranjan Dasgupta may have deposed to the fact that HHBRF were in receipt of various donations from various persons sin cheques and the same were routed back to the donors in cash after retaining certain portion as their commission and intermediaries commission. This is only a general statement given by Swapan Ranjan Dasgupta about the modus operandi carried out by HHBRF. But nowhere in the aid statement or in the subsequent enquiries/investigation, it came to light that the as herein had indeed received back the cash in lieu of cheque donations given to HHBRF. This serves as a clinching missing evidence in the entire gamut of this case.