SANTOSH SURESH KUMAR AGARWAL ,KOLKATA vs. ACIT, CIRCLE - 36, KOLKATA , KOLKATA

The sole issue that arises for my consideration is the disallowance of Rs.11 Lakhs, made by the Assessing Officer in respect of a donation of Rs.11 Lakhs made by the assessee to “The School of Human Genetics and Population Health”, an institute approved by the Central Government vide Notification No. 4/2010 dated 28th January, 2009. The Assessing Officer as well as the ld. CIT(A), did not allow this claim of the assessee for the various reasons given at pages 24 to 31 of the ld. CIT(A)’s order. The reasons given by the revenue authorities in this case is the same as in the case of the Narbheram Vishram vs. DCIT in & 43/Kol/2018; Assessment Year 2013-14 & 2014-15, orderdt. 27/07/2018

After hearing rival contentions, we find that an identical issue has been considered by the ‘B’ Bench of this Tribunal in the case of Narbheram Vishram vs. DCIT in & 43/Kol/2018; Assessment Year 2013-14 & 2014-15, orderdt. 27/07/2018, wherein an identical claim made of a donation to “The School of Human Genetics and Population Health”, was disallowed by the Assessing Officer and the ld. CIT(A), upheld the same. The Tribunal at para 13 onwards held as follows:-

“13 We have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assessee has challenged disallowance of weighted deduction of Rs.4,81,25,000/- 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(1)(ii) of the Act in respect ofthe amounts of donations made to two Institutions viz. ‘Matrivani Institute ExperimentalResearch & Education’ (hereinafter referred to as ‘Matrivani’) and ‘The School of HumanGenetics and Population Health’ (hereinafter referred to as ‘SHG’). The Assessee Firm in A.Y. 2014-15, madedonation 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(1)(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 bythe Central Government for the purposes of section 35(l)(ii) of the Act read with Rule 5C and5E 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.2,75,00,000/- in respect of the donation given to ‘The School of HumanGenetics and Population Health’. We note that the Notifications to this effect, that these two 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 theGazette 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. 14.We note that, during the course of hearing, before us, the ld 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 Sctentific Research Association approved as such by Central Government under section 35(1)(ii) of the Income Tax Act, 1961 vide Notification, bearing No. 229/2007 (F.No.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 assessee 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 Assessment Year: 2011-12 Santosh Suresh Kumar Agarwal 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 Prem Chand Ltd. [2007] 295 ITR 105, 108 (del).We note that on identical facts, the similar proposition wasupheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, Assessment Year 2013-14 wherein it was held as follows: “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. Herbicure. 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. Herbicure 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 Dasgupta 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 KishanBhawasingka 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(1)(ii) of the Act.

The Tribunal in the case of Rajda Polymers vide order dated 08.11.2017 at page 7 has held as follows :- "5.6. We find that the ld CITA 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 is always the prerogative 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 businessman 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 HHBRF 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 check the veracity of the confirmation 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 the said statement, Swapan Ranjan Dasgupta may have deposed to the fact that HHBRF were in receipt of various donations from various persons in 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 said statement or in the subsequent enquires / investigation , it came to light that the assessee 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.

Consistent with the view taken therein, we allow this appeal of the assessee and direct the Assessing Officer to grant the necessary deductions.

In the result, appeal of the assessee is allowed.