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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is an appeal preferred by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.03.2023 for the AY 2012-13. 2. The appeal as per report of the Registry is time barred by 51 days. The Ld. Counsel appearing on behalf of the Department filed an Affidavit for condonation of delay which is as follows:
The Ld. A/R did not raise any objection in condoning the delay. Keeping in view, the catena of decision of Hon’ble Apex Court that the case should be decided on merit not on technical issue and considering the condonation petition, delay is hereby condoned and the case is taken up for hearing.
Brief facts of the case of the assessee are that the assessee is a company engaged in the business of construction, filed its return of income for AY 2012-13 declaring total income of Rs. 51,40,573/-. The case was accordingly processed u/s 143(1) accepting Assessment Year: 2012-13 Kanya Kumari Properties Ltd. the returned income and refund was raised at Rs. 3,94,030/- which was paid to the assessee. The case of the assessee was selected for scrutiny, notice u/s 143(2) was issued and thereafter the assessment proceedings were completed u/s 143(3) of the Act determining the total income of the assessee as per normal provisions at Rs. 4,88,90,573/- against the declared income i.e Rs 51,40,573/-.
The said order has been challenged by the assessee before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed as the Ld. CIT(A) allowed the appeal of the assessee in respect of allowances of the deduction claimed u/s 35(1)(ii) of the Act i.e. the addition of Rs. 4,37,50,000/-.
Being aggrieved by and dissatisfied the department has preferred the present appeal.
The Ld. Counsel for the department challenged the impugned order of the Ld. CIT(A) thereby submitting that the Ld. CIT(A) has erred in allowing the appeal of the assessee only based on paper documents furnished by the assessee and ignoring the fact that Herbicure Health Care Bio-Herbal Research Foundation in short HHBRF was in providing accommodation entry in lieu of commission and for this act CBDT withdrew his approval in respect of HHBRF during 2016. The Ld. Counsel further submits that the Ld. CIT(A) has further erred in ignoring the fact that during the course of assessment proceedings, the assessee itself withdrew its bogus claim by filing written submission before the AO. The Ld. Counsel has pointed out the written submission of the assessee before the AO in which the assessee had voluntarily withdrawn the claim.
Contrary to that the ld. Counsel appeared on behalf of the assessee supports the impugned order of the Ld. CIT(A) by placing several decisions of the High Court. The Ld. Counsel submits that the assessee had initially claimed this deduction in its return of income, obliging the AO to allow if it was legally permissible. The Ld. Counsel submits that in fact the assessee was misled and pressurize into withdrawing the claim by filing return of income and according to him, the law established that the AO cannot act on an assessee’s claim made by letter, such changes can only be made by filing a Assessment Year: 2012-13 Kanya Kumari Properties Ltd. revised return. The Ld. Counsel further submits that the Ld. CIT(A) has discussed all these facts and after that allow the appeal of the assessee and there is nothing wrong I the order. The Ld. Counsel cited following decisions: i) Goetze (India) Ltd. vs. CIT (2006) 157 Taxman 1 (SC) ii) CIT vs. Bhaskar Mitter [1994] 73 Taxman 437, 442(Cal-HC) iii) SAIL DSP VR Employees Association 1998 vs. Union of India [2003] 262 ITR 6381 (Cal-HC)
Upon hearing the submission of the counsel of the respective parties and going over the record it admits of no doubt that during the assessment proceedings, the assessee has furnished written reply along with revised computation of income by stating thus:
“In the Return of Income for the AY 2012-13 we have claimed a deduction u/s 35(1)(ii) of the Act, amounting to Rs. 2,50,00,000/- plus additional claim of Rs. 1,87,50,000/- u/s 35(1)(ii) of the Act. However, now during the course of assessment proceedings, u/s 143(3), we voluntarily withdraw the same and accordingly filing a revised computation after duly withdrawing such claim of deduction. We request you to compute the income of the assessee considering the revised computation.” We have gone through the decision filed of the assessee and finds that in a case of Goetz India Ltd. (supra) it has been held thus:
“The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30-11-1995, by the appellant for the assessment year in question. On 12-1-1998, the appellant sought to claim a deduction by way of a letter before the assessing officer. The deduction was disallowed by the assessing officer on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.
Assessment Year: 2012-13 Kanya Kumari Properties Ltd. The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. There shall be no order as to costs.” Further the Hon’ble Calcutta High Court in the case of CIT vs. Bhaskar Mitter (supra), the Court has held thus:
“8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be a figure lower than that returned by the assessee. The principles for determining the annual letting value under Section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estopple by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. The Tribunal, therefore, in our view did not commit any error in directing to fix the correct annual letting value of the premises in question, in accordance with the provisions of Section 23 of the said Act with reference to the municipal valuation, although such sum was lower than the figure shown by the assessee in his returns of total income.” Further the Hon’ble Calcutta High Court in the case of SAIL DSP VR Employees Association 1998 (supra), the Court has held thus:
“No estoppel in law 17. The question of estoppel because of option exercised with eyes open to the subsequent modification cannot be sustained. What is not otherwise taxable cannot become taxable because of admission of the assessee. Nor there can be any waiver of the right otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section, which needs to be strictly construed. Referring to the decision in CIT v. Bhaskar Mitter (1994) 73 Taxman 437 (Cal) at p. 442 (paragraph 8), we had occasion to so hold in the decision in Maynak Poddar (HUF) v. WTO (IT Appeal No. 84 of 1998, dated 24-2-2003) (sic).” Keeping in view, the citation as discussed above, we do not find any force in the argument of the Ld. Counsel for the D.R that withdrawal of the claim during assessment
Now, coming to the merit of the case, it appears to that the assessee filed return of income for Ay 2012-13 after claiming deduction of Rs. 4,37,50,000/- u/s 35(1)(ii) of the Act for donation made to M/s Herbicure Health Care Bio Herbal Research Foundation (in short HHBFR) an approved institution for a sum of Rs. 2,50,00,000/-. In support of the above facts the assessee filed following evidences: i) Registration Certificate of HHBRF u/s 12AA, 80G of IT Act (page 1-2) ii) CBDT approval to HHBRF u/s 35(1)(ii) of the IT Act (page 3) iii) Letter of renewal to HHBRF, under the scheme of SIRO (page 4-5) iv) Ledger, Bank Book & Bank Statement for donation payment (page 6-9) v) Money receipts of HHBRF for donation of Rs. 2,50,00,000/-.
Going over the above documents, the following points have been emerged: i. M/s HHBRF, the donee, was a trust registered u/s 12AA of the IT Act w.e.f. 26.12.2003. The Institute was also having registration u/s 80G(5)(vi) of the IT Act. Further, the Institute was granted registration u/s 6(1)(a) of Foreign Contribution (Regulation) Act, 1976 on 26.02.2008. ii. The said HHBRF was recognized in 2006-07 as a scientific & Industrial Research Organization (SIRO) by the Ministry of Science & Technology, Government of India and covered by CBDT notification no. 35/2008 dated 14.03.2008 u/s 35(1)(ii) of the I.T. Act. Further the Department of Scientific & Industrial Research had renewed its recognition under the Scheme of Recognition of SIRO, 1988 from 01.04.2009 to 31.03.2012 on 27.01.2010.” We further find that during the assessment proceedings, the assessee made detailed explanation about the donation with the help of corroborative document namely Central Govt. approval, bank statement and audited account reflecting such donation. It is pertinent to mention herein that the AO did not find any defect or deficiency in these documents. We further find that the assessee requested the AO to call the institute respective personnel during its presence in the assessment proceedings and also to provide adverse materials which the AO proposed to relax including opportunity to Assessment Year: 2012-13 Kanya Kumari Properties Ltd. cross-examine of the directors of the research institution. But the AO instead of giving any opportunity to the assessee denied to do so and pressurized the assessee to withdraw the claim as Investigation Wing of the Department had reported that the donee institute was a bogus organization after survey proceedings. We further find from the submission and documents filed by the assessee that the assessee is a company registered under the Companies Act, 1956 and engaged in the business of development of real estate. The submission of the A.R is that the assessee realized that success in the business of bio- herbal products substantially depending upon continuous upgradation in the technology which can be accessed only by tie up with an accredited research organization. The assessee identified the research institution namely HHBRF but happened to be scientific research in the field of bio-herbal technology. The assessee donated a sum of Rs. 2,50,00,000/- via RTGS which is apparent from the documents filed by the assessee i.e. the ledger, bank book and bank statement. So, it is apparent that the assesse did not make payments to an unknown person but to an organization approved by the Central Government u/s 35(1)(ii) of the Act. All the payments were duly covered by the money receipts of the donor. I tis also made clear that the payment of Rs. 2,50,00,000/- was also disclosed in the audited accounts and deduction u/s 35(1)(ii) of the Act for Rs. 4,37,50,000/- was claimed in the return. As we have discussed in precedent paragraph that AO did not find any fault in documents submitted by the assessee regarding the payment.
The Hon’ble Calcutta High Court in the case of PCIT vs. J P Financial Services Pvt. Ltd. in ITAT/153/2023 IA No:GA/2/2023 dated 2.08.2023 discussed the issue regarding the deduction claimed u/s 35(1)(ii) of the Act for donation to HHBRF, and dismissed the appeal of the revenue. The judgment of the Calcutta High Court is essential to reproduce here in below :
“This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated November 13, 2019 in as well as the order in M.A. No. 4/Kol/2021 dated May 27, 2022 for the assessment year 2015-16. The revenue has raised the following substantial questions of law for consideration :-
Assessment Year: 2012-13 Kanya Kumari Properties Ltd. A. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in allowing the deductions claimed under Section 35(1)(ii) of the Act by the assessee company for donation to the M/s. Herbicure Healthcare Bio-Herbal Research Foundation is perverse considering that there were ample evidence on the contrary and placed on record where it is clearly evident that such transactions were carried out by the assessee firm were I the nature of bogus donations made with the sole intention to evade taxes ? B. Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in giving relief to the assessee by allowing the claim of bogus donations under Section 35(1)(ii) by stating that the CBDT had recognized such bogus entry providing concerns namely M/s. Herbicure Healthcare Bio-Herbal Research Foundation under section 35(1)(ii) whereas on the contrary such approval and recognition had been withdrawn by the CBDT vide Gazettee Notification S.O. 2882(E) dated 6th September, 2016 and O.M. vide F. No. 203/09/2015/ITA.II dated 21st September, 2016 considering the nature of unscrupulous activities carried on by these donee concerns ? We have heard Mr. Om Narayan Rai, learned standing counsel along with Mr. Soumen Bhattacharjee, learned Advocate for the appellant/revenue. The short issue which falls for consideration in this appeal is whether the Tribunal was right in allowing the deductions claimed by the assessee under Section 35(1)(ii) of the Act for the donation to a organization who initially enjoyed a registration under Section 35(1) of the Act, which was subsequently withdrawn with retrospective effect. The learned Tribunal followed the decision of a co-ordinate Bench of the Tribunal dated 27.07.2018 in the case of Narbheram Vishram in I.T.A. Nos. 42&43/Kol/2018. Apart from certain factual similarities the Tribunal in the said decision has also taken note of the decisions of the Hon'ble Supreme Court holding that there is no provision for withdrawal of recognition under Section 35(1)(ii) of the Act. The view taken by the learned Tribunal in the impugned order is supported by the decision of the Hon'ble Division Bench of this Court in the case of Commissioner of Income Tax Versus General Magnets Ltd. ; (2002) 256 ITR 471 wherein the Court after taking note of various decisions namely CIT v. Ethelbari Tea Co.(1931) Ltd., [2002] 256 ITR 470 (Cal), B.P. Agarwalla and Sons Ltd. v. CIT [1994] 208 ITR 863 (Cal), K.M. Scientific Research Centre v. Lakshman Prasad [1998] 229 ITR 23, Seksaria Biswan Sugar Factory Ltd.v. IAC [1990] 184 ITR 123, CIT v. Bhartia Cutler Hammer Co.[1998] 232 ITR 785, Chotatingrai Tea Estate Pvt. Ltd. v. CIT [1999] 236 ITR 644, held that for the mistake committed by the department the assessee should not suffer. The withdrawal of approval to the society for retrospective effect is itself bad and no assessee should suffer for the mistake of the department. The department has power of withdrawal but in such cases withdrawal can be only with prospective effect. Further it was held that if the donation to the approved society is genuine, in that case withdrawal with retrospective effect does not affect the right of the assessee for deduction of the amount which has accrued to the assessee on the basis of the payment to an approved society under Section 35CCA of the Act. In the light of the above, the order passed by the learned Tribunal does not call for any interference.
Assessment Year: 2012-13 Kanya Kumari Properties Ltd. In the result, the appeal is dismissed and the substantial questions of law are answered against the revenue. The stay application being GA/2/2023 is also dismissed.” Going over the facts of the case as well as judgment of Hon’ble Calcutta High Court, we do not find any merit in the argument of the ld. Counsel for the Department. We see no reason to interfere in the order of the CIT(A). Accordingly, the appeal of the revenue is dismissed. In the result, the appeal of the revenue is dismissed. Order is pronounced in the open court on 27th November, 2024
Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 27th November, 2024 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- ITO, Ward-10(2), Kolkata 2. Respondent – M/s Kanya Kumari Properties Ltd., 49, A. N. Saha Road, Kolkata-700048 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)