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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)- 3, Chennai in dated 30.08.2017 for assessment year 2013-14.
M/s. Pondicherry Agro Food Pvt. Ltd., is engaged in manufacturing of wheat products. The assessee’s assessment for assessment year 2013-14 was completed u/s. 143(3) on 10.02.2016. Thereafter on the investigation done by the Investigation Wing in Kolkata, the Assessing Officer received information that accommodation entries were made in the grab of donation of scientific research by Herbicure Health Bio Herbal Research Foundation. Its directors and employees admitted it in their sworn statement. Consequently, the approval granted u/s. 31(5)(ii) withdrawn by Government of India w.e.f.
01.04.2007 etc. Based on which, The AO re-opened the assessment to consider the donation of Rs. 25 lakhs claimed to have been made to M/s.
Herbicure Health Bio Herbal Research Foundation and its consequential claim made by the assessee u/s. 35(1)(ii). After considering assessee’s reply etc., the AO refused to allow assessee’s claim of deduction u/s. 35(1)(ii).
Aggrieved, the assessee filed an appeal before the CIT(A).
In this regard the relevant portion of the CIT(A) order is extracted as under:
“4.4 It is trite law that admitted facts need no further explanation. The entire modus operandi of the M/s. HHBHRF has been unearthed by Survey Team. It has been categorically stated by the Managing Director of the Trust that M/s. HHBHRF is indulging in providing accommodation entries. 4.5 In this regard, AC has reproduced the relevant portion of the statement of the Founder Director of the Trust, Mr.Swapan Ranjandas Gupta recorded on 27.01.2015. In the said statement, vide Q.No.23, he has clearly narrated the whole gamut of modus operandi adopted by the Trust. As per his statement, they used to receive cheque from various persons and return the cash after charging commission @ 5% to 8%. His statement was further supported by the Auditor of :-3-: Trust and another Director called in Mr. Anad Kishan Maitan. It is also seen that CBDT vide its order 15.09.2016 has withdrawn its approval granted u/s 35(1)(ii) on the basis of findings of the Survey conducted by Investigation Wing, Calcutta. Therefore, the contentions raised by the Id. AR are nothing but empty recitals without substance. The contemporaneous evidence clearly prove that appellant’s claim was bogus. The preponderance of probability of receiving cash back is heavily loaded against the appellant. When the appellant was asked to avail cross- examination as to whether its donation was bogus or not, the same was not availed by the appellant. It shows that appellant is not in a position to meet the persons of the Trust due to the fear of truth coming out. In my opinion, the contentions raised by the ld. AR are illogical, unsubstantiated, devoid of merits and not supported by evidences. 4.6 Further, the Id. AR has also filed the Xerox copies of Survey Report of M/s. HHBHRF from Page-59 to 171. The fact proves that AC has handed over all the statements recorded during the Survey along with incriminating material to the appellant. Number of opportunities along with supply of incriminating material show that AC has strictly followed the principles of natural justice in appellant’s case. 4.7 In view of the above discussions, I hold that AC has rightly held the claim u/s35(1)(ii) of the appellant as bogus. Therefore, the additions made by the AO are sustained. The grounds taken on this issue are dismissed.”
Aggrieved against the order of the CIT(A), the assessee filed this appeal.
We heard the rival submissions. Similar issue came up before this tribunal in the case of M/s. Megatrends Inc., vs ACIT in & 740/Chny/2017 for assessment years 2012-13 & 2013-14 dated 05.03.2018.
The relevant portion is extracted as under:
“11. Coming to the issue of the donations in respect of which, the assessee has claimed weighted deduction u/s.35(1)(ii) of the Act, it is noticed that the AO has disbelieved the donations on the basis of statement recorded from one Mr.Swapan Ranjan Das Gupta, one of the major shareholders of HHBHRF and on account of a :-4-: CROSS and in respect of M/s.SHGPH on the basis of Survey Report. It is noticed that the onus of proving the genuineness of the donation rests on the assessee. However, the AC has taken up himself the onus to disprove the genuineness of the donation much before the assessee has proved the genuineness of the donation. When an assessee steps forward to give donations of Rs.1.25 Crs, Rs.25.OO lakhs, Rs.1.45 Crs. respectively, the assessee would have adequate reasons to give such donations. Here, it is noticed that the assessee has not been given any opportunity to prove the genuineness but the assessment has been made based on the evidences collected by the Revenue in the course of the survey conducted on the respective organizations. This is not permissible. This being so, in the interest of natural justice, the issue of the genuineness of the donations are restored to the file of the AC for re-adjudication. The AC must keep in mind that the onus of proving the donations are actually donations and not accommodation entries and that the said organizations were eligible for claiming deduction u/s.35(1)(ii) of the Act rests on the assessee. If the AC does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The assessee shall produce the recipients of the donation for examination along with the evidences to prove the receipt of the donation. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. This being so, the issue of the donation in these appeals are restored to the file of the AC for re-adjudication after granting the assessee adequate opportunity to prove the genuineness of the donation.”
Following the above order, the issue of donation in this appeal is restored back to the file of the AO for re-adjudication on the lines indicated above.
Since, the right to exemption must be established by those who seek it, the onus therefore, lies on them. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable to come to a conclusion. (35 ITR 312 (SC)). Hence, the AO shall require the assessee; to establish who, with whom, how and in what circumstances the impugned sums were donated
:-5-: etc., to prove that the impugned donations are actual donations and not accommodation entries, the Healthcare Bio-Herbal Research Foundation is eligible for claiming deduction u/s. 35 etc. The assessee shall comply to the AO’s requirements as per law. On appreciation of all the above aspects, the AO would decide the matter in accordance with law. The AO is also free to conduct appropriate enquiry as deemed fit, but shall furnish adequate opportunity to the assessee on the material etc to be used against it and decide the matter in accordance with law. Certain other grounds are also raised by the assessee , however, they are not canvassed and hence they are treated as dismissed.
In the result, the assessee’s appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 07th May, 2018 at Chennai.