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Income Tax Appellate Tribunal, C/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-5, Chennai dated 27.06.2017 pertaining to assessment year 2013-14.
2. The assessee has raised the following grounds for adjudication.
1. The learned Commissioner of Income-tax (Appeals) erred in sustaining the order of the assessing officer in disallowing the appellant’s claim of deduction under section 35(1 )(ii) on the donation made to a scientific research association.
The appellant submits that it has paid a donation of Rs. 7,50,000 to M/s Herbicure Healthcare Bi-Herbal Research Foundation, Kolkatta, which is an approved scientific research association duly approved by the Central Board of Direct Taxes uis 35(1)(ii) by cheque duly supported by the certificate issued by the Institution and has satisfied all the conditions laid down in section 35(1)(ii) for its claim of weighted deduction u/s 35(1)(ii). 3. The assessing officer denied the exemption based on the alleged inspection report conducted in the hands of the Institution to deny the exemption in the hands of the donor which is contrary to the provisions of the Act. 4. The appellant submits that all the alleged enquiries conducted by the department were behind the back of the appellant and the appellant was not provided with any specific document or material to suggest that the donation made by it was ) bogus and thus the entire assessment is devoid of merit and without affording reasonable opportunity and fair play. 5. The learned Commissioner of Income-tax (Appeals) failed to consider the Explanation to section 35(1 )(ii) which clearly stipulates that the deduction to which an assessee is entitled in respect of any sum paid to a research association shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval of such association has been withdrawn. 6. The appellant submits that it is not even the case of the department that the approval of the scientific association to which donation was made by the appellant was withdrawn subsequently and even if it is so, the deduction claimed by the appellant cannot be denied at all.
The learned Commissioner of Income-tax (Appeals) erred in holding that the appellant did not furnish any material to establish that the institution was approved and was specified in the Notification when the approval of the CBDT approving the institution as a scientific association u/s.35(1 )(ii) was submitted before him.
The learned Commissioner of Income-tax(Appeals) erred in holding that there was no evidence produced by the appellants that it had requested the assessing officer to provide an opportunity to cross examine the donor. It is well settled rule of taxation that when anevidence is relied on against the assessee, it is the bounden duty of the assessing officer to provide such evidence to the assessee for rebuttal without any request by the assessee. In fact according to the assessement order the Assessing officer has not made any enquiry with the trust and relied only on the information received from some source which is not acceptable as per Delhi High Court Judgement in the case of Pnnicipal Commissioner of Income tax v RMG Polyvinyl (I) Ltd, S Murlidhar and Ms Pratiba M Singh (2017) 83 Taxmann 348(Delhi) 9. The learned Commissioner of Income-tax (Appeals) also erred in holding that the appellant did not file any confirmation from the donee . The receipt issued by the institution acknowledging the receipt of the donation through banking channel would itself tantamount to confirmation of the receipt of the donation.
The appellant submits that the Commissioner of lncome-tax(Appeals) dismissed the appeal on irrelevant grounds and the deduction daimed by the appellant under section 35(1 Xii) is fully supported with all documents required to claim the deduction.
The appellant therefore prays that the Hon’ble Income-tax Appellate Tribunal may be pleased to grant weighted deduction u/s 35(1 )(ii) of the Act on the donation made to M/s Herbicure Bio-Herbal Research Foundation and render justice.
The brief facts of the case are that the assessee is a firm carrying on business in dealers of pharmaceuticals and surgical equipments. For the assessment year 2013-14, it filed a return of income on 29/9/2013 admitting an income of Rs, 27,45,690/-. The assessment was taken up for scrutiny and the scrutiny assessment was completed under section l43(3) on 21/03/2016 determining the total income at Rs.44,85,730/- after making the certain additions to the income returned.
3.1 The issue in dispute raised in its appeal relating to a Donation of Rs 7,50,000/- was paid by assessee-firm through cheque No 935492 dated 08.02.2013 drawn on Indian Bank, Sowcarpet Branch, Chennai in favour of ‘Herbicure Healthcare Bio-Herbal Research Foundation (hitherto referred to as Donation) and claimed weighted deduction on the said donation at 175% under section 35(1)(ii) amounting to Rs. 13,12.500/-. The donations were made through cheques and deposited in the bank account of the above Trust. The trust was approved by Income Tax Department vide notification (S.O798) 35/2008 published in part II dt.14.03.2008 section 3 sub section (i) by CSDT MOF, Government of India Gazette Copy of IT Notification already submitted. The certificate issued to the Trust as an approved institution under section 35(1)(ii was also submitted.
Based on the said documentary evidence the assessee claimed the weighted deduction. The assessing officer made enquiries about the payment and was confirmed by the Trust and subsequently due to communications from DGIT(lnvestigation) wing the donations to this trust was termed as bogus and denied the exemption claimed.
Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A).
3.2 Before Ld.CIT(A), the submission of the assessee was that all the enquiries were made by the assessing officer behind the back of the assessee, which cannot be formed the basis of an assessment.
The assessee was not given any opportunity to cross examine the persons concerned. According to Ld.CIT(A), the AO had admitted that the donations were made and received by a Trust called Herbicure Healthcare Bio-Herbal Research Foundation and the amount was also received in the bank account of the said Trust.
Ld.CIT(A) further observed that the Assessing officer has got confirmation from the trust, Certificate in the name of the trust under section 35(1)(ii) was also filed. It was submitted by the assessee that its claim for weighted deduction under section 35(1)(ii) was fully supported by documentary evidence a donor could produce and therefore, the AO may have granted the deduction claimed.
According to ld.A.R, the provisions of section 35(1)(ii) clearly protect the donors and allow the deduction even in cases where the approval is withdrawn to the Scientific association. When such being the legal provisions, the assessing officer is not justified in denying the deduction claimed under section 35(1 )(ii) of the Act. It is not the case of the assessing officer that the approval granted to the Trust was withdrawn by the Government. The donations having been made to the Trust by cheque as per the directions given and duly supported by the receipt and the approval granted, the denial of deduction is not justified.
3.3. The Ld.CIT(A) observed that as a result of survey that the transactions were given the colour of legitimacy by rouging it through the banking channels. It is proved in the survey u/s.133A conducted by DGIT(Inv.) Wing Kokotta that the transactions were not genuine as the funds received in the banking channels were routed back to the donors through bogus bills, accommodation entries and in the form of cash involving multiple layers. Hence, Ld.CIT(A) endorsed the view of the ld. Assessing Officer. Against the order of Ld.CIT(A), now the assessee is in appeal before us.
Before us, at the outset, the ld.A.R argued that no opportunity of cross examination of third parties has been given to the assessee and the assessee was not provided with any specific document or material to suggest that the donations made by it for bogus and just entire assessment to be scrapped. Admittedly, in this case, the AO relied the following documents while framing the assessee.
Sl. Name & details of Relevant No,. of the questions Remarks No. the persons whose and answers statement was recorded & date 1 Mr.Swapan rajan Answers to question No.22 & He admitted to having Das gupta 23 received donation dt.27.1.15. incheques from various Founder director persons including and overall control yourself and thereafter and supervision of returning the amount in the foundation cash through various which accepts the intermediaries. The donation modus operandi of various transactions was also discussed. He also accepted that the entire accommodation entries of bogus donations were facilitated by Mr.Kishan Bhawa Singka who in turn had charged commission to the extent 5 to 8% for facilitating the said accommodation entires. Answers to Q.No. 12,13,14,17 Has deposed that he 2 Mr.Sankar Kumar Khetan of Kolkata- was close to Mr.Das Entry Operator Gupta, Director-HHBRF statement and used to take recorded on cheques from HHBRF 16.5.15 and return back the same amount in cash for commission @ .08%. These sums received incheque were later passed on for another accommodation entry to benefit people who wanted share capital, LTGG, unsecured loan etc. Thus he got commission from two parties viz. the foundation as well as beneficiaries who have taken bogus. 3 Mr.Kishan Bhawa Answers to question Depsosed that he used
Singka of Kolkata, No.7,10,11 to work directlyunder Broker cum Mr.Swapan ranjan Das Operator, Gupta, Founder director, statement HHBRF and that his recorded on main soruce of income 17.04.2015 was from arranging accommodation entry/jamakharchiwork, raising bogus bills for various beneficiaries/parties. Evidence of more than Rs.40 crore billing under his name was found from the data backup of HHBRF. 4 Mr.Mahesh Kumar Answers to Q.No. When confronted with 14,15,1,6,17,18 Singhania, entry the various evidences operator/bogus he has deposed under biller statement oath all the transactions recorded on made byhis 29.05.2015 proprietorship concerns and the name and style Swantana Syndicate, supreme traders, sreema enterprise, Mahesh singhania with HHBRF are bogus transaction made for providing accommodation entries with the help of people like SanjayBajoria a well known market broker for accommodation entry and Jamakharachiworks. He also confirmed that he was assisted by his son in law shri Jitendra singh was a dummyproprietor of Mannat Traders, he also explained modus operandi also. 5 Mr.Rama Kanth Answers to Q.No. 14 Accepted that he has Pansari Director of created bogus supply to M.s.Shree shyam HHBRF without any in organics Pvt physical delivery of Ltd., Bogus biller chemicals. Since no statement chemicals were actually recorded on purchased by HHBRF 23.2.15 there was no research carried on by it. 6 Mr.Kailash kumar Answers to He deposed that Rungta, Bogus Q.No..6,10,13,14,1,5,16,17,20 through the seven biller statement companies he controlled recorded on he had provided bogus 17.8.15 bills in view of commission to HHBRF. He had explained in details the modus operandi has to how the sums received by RTGS/cheque from HHBRF were layer and accommodation entires were provided and parallyand bogus bills were issued to HHBRF 7 Mr.Anand Krishna Answers to Q.No.10,12,13 He had deposed that he Maitin past director resigned from HHBRF of HHBRF as its Director on account of unethical practices carried by on HHBRF and movement of suspicious funds. He categorically admitted that HHBRF was taking donations in view of commission and routed back the money to the donors. 8 Mr.Kalipadi Answers to Q.No.16,17 Has deposed that he Bhattacharya, had never taken any Auditor of HHBRF independent third party statement confirmation, most of recorded on dt the audit was done from 24.2.15 the Bank statement itself without any verification for genuineness of the transactions as such as not audited V as required by his as an auditor.
9 Shri Debanjan Answers to Q.No.9,12 He deposed that books of accounts were not Mukhopadyay, maintained at the employee of registered office premises by HHBRF HHBRF, statement recorded on 27.1.15 Answers to Q.No.16,18 10 Smt.sujata Ghosh He has categorically admitted that she had Dastidar, Director signed the papers and HHBRF statement documents as its Director, based on the recorded on directions of shri 27.1.15 Swapan Ranjan Das gupta the founder director. She was also aware that the donations from various parties were return back to them with the help of brokers through paper companies. Answers to Q.No.11& 12 11 Smt.Shahnaz Ali, Had admitted the books of accounts were not employee of maintained by HHBRF HHBRF statement recorded on 27.1.15 12 Shri Vikash Answers to Q.No.5 He deposed that he does not know anything Bajpayee, about HHBRF but employee of the maintained entries of HHBRF in Tally office of Shri software as instructed Manoj Kothary & by Mr.Manoj Kothary without any supporting Co. statement evidences. recorded on 27.1.15 Whenever the AO placed reliance on the above documents, and when he has taken adverse view on the basis of such statement of third party, the person affected should be afforded a reasonable opportunity of cross –examination, if requested for. It was not at all offered to the assessee. I, therefore by placing reliance on the judgement of the Supreme Court in the case of Kishinchand Chellaram Vs. CIT in [1980] 125 ITR 713 (SC) and also the judgement of Delhi High Court in the case of CIT Vs. SMC SHARE BROKERS LTD. in [2007] 288 ITR 345 (Del) wherein held that the ld. Assessing Officer cannot take an adverse view on the basis of the statement of the third parties. If the statement of the third parties are discarded or ignored while considering the evidences on record, there is no other material before the AO to take an adverse view. Further, this view is fortified by the judgement of Delhi High Court in the case of CIT Vs. ARUN MALHOTRA in [2014] 363 ITR 195 (Del). Being so, it is an appropriate to give an opportunity to the assessee to cross- examine the parties whose statements are relied upon, which are not provided in this case in hand. Accordingly, the issue is remitted to the file of ld. Assessing Officer to give an opportunity of cross examination and to decide thereupon. Since, I have remitted the issue to the file of ld. Assessing Officer for providing an opportunity to cross examination of the parties, whose statements are relied upon, I refrain from going into other grounds raised by the assessee.
In the result, the appeal of assessee is partly allowed for statistical purposes. Order pronounced on 07th November, 2017.