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Income Tax Appellate Tribunal, “C” BENCH,
Before: Dr. Manish Borad & Shri Sonjoy Sarma
Assessment Year: 2013-14 Surendra Kumar Kapur ………. Appellant (PAN: AFXPK4223K) Vs. DCIT, Circle-22, Kolkata ………… Respondent Appearances by: Shri Akkal Dudhwewala, AR appeared for Appellant. Shri Bonnie Debbarma, JCIT, Sr. DR appeared for Respondent. Date of concluding the hearing : 11.06.2024 Date of pronouncing the order : 14.08.2024 ORDER
Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2013-14 is directed against the order passed u/s 250 of the Income Tax Act, 1961 in short the “Act”) by Ld. Commissioner of Income-tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi [in short Ld. “CIT(A)”] dated 12.06.2023 arising out of the assessment framed u/s 143(3) of the Act by DCIT, Circle-22, Kolkata dated 31.03.2016.
A Y: 2013-14, Surendra Kumar Kapur 2. Though Registry has reported that this appeal of the assessee is time barred by 62 days however, considering the date of receipt of the impugned order, we find that there is no delay in filing this appeal. We, therefore, proceed to adjudicate the appeal on merits.
The assessee has raised following grounds of appeal:
1.1 For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of the appellant's genuine and bona fide claim for deduction of Rs. 2,62,50,000 under section 35(1)(ii) of the Income Tax Act, 1961 and his purported findings in that behalf are wholly arbitrary, erroneous, unreasonable and perverse. 1.2 For that the impugned order was passed in gross violation of the principles of natural justice, without granting personal hearing requested for by the appellant, without considering the relevant and admissible materials relied upon by the appellant and by taking into consideration irrelevant and inadmissible materials relied upon by the Assessing Officer. 1.3 For that the disallowance was made in the assessment by ignoring the relevant and admissible materials relied upon by the appellant and by taking into consideration irrelevant and inadmissible materials, which included statements, all collected behind the appellant's back, without even showing or providing copies of such materials to the appellant or affording the appellant any opportunity to controvert the same or cross-examine any witness of the Department. The appellant craves leave to add to, alter, amend and/or modify the grounds taken herein.
Facts in brief are that assessee an individual filed return electronically for AY 2013-14 on 29.09.2013 declaring total income of Rs.5,76,58,888/-. Return processed u/s. 143(1)(a) on 28.03.2015. Thereafter, the case selected for scrutiny under CASS. Notices u/s. 143(2) and 143(1) of the Act were validly issued and served on the assessee. In the course of assessment proceeding, the AO observed that assessee had made donation of Rs. 1.5 Cr. to Herbicure Health Care Bio Research Foundation (in
Page 2 of 7 A Y: 2013-14, Surendra Kumar Kapur short “Herbicure”) and has claimed deduction u/s. 35(1)(ii) of the Act at Rs.2,62,50,000/- being 175% of the donation amount. Ld. AO referring to survey proceeding u/s 133A and also discussing about the report of Investigation Wing came to the conclusion that the alleged donation is bogus and assessee is not entitled to deduction u/s. 35(1)(ii) of the Act. The assessee challenged the said action of the AO before the Ld. CIT(A) placing reliance on various decisions but failed to succeed. Now, the assessee is in appeal before the Tribunal.
Ld. Counsel for the assessee apart from referring to the detail paper book containing 209 pages and also referring to various judgments attached to the case law paper book stated that the assessee’s case stands squarely covered in his favour by the judgment of Hon’ble jurisdictional High Court in the case of PCIT Vs. J. P. financial Services Pvt. Ltd. (ITAT/153/2023) in IA No. GA/2/2023 (Cal HC) dated 02.08.2023 wherein also similar type of issue regarding deduction claimed u/s. 35(1)(ii) of the Act for the donation to the very same Trust namely, Herbicure Health Care Bio Research Foundation was under consideration and the Hon’ble Court decided against the revenue.
On the other hand, Ld. DR has referred to the decision of this Tribunal in the case of Tarasafe International (P) Ltd. Vs. DCIT [2023] 153 taxmann.com 282 (Kol-Trib.) and submitted that such type of donations are given merely to reduce the tax liability and they are not genuine donations and against the cheques given for the donation cash is received by the donor and the commission is given for arranging such type of donation.
Page 3 of 7 A Y: 2013-14, Surendra Kumar Kapur 7. We have heard the rival submissions and carefully gone through the judgments referred and relied upon by the assessee as well as the Ld. DR. We note that the assessee in the instant case has given donation of Rs. 1.5 Cr to “Herbicure”, which is registered as a scientific research institute u/s. 35(1)(ii) of the Act. So far as the decision in the case of Tarasafe International (P) Ltd. (supra) relied on by the Ld. DR is concerned, we note that it was regarding donation given to Human Genetics & Compilation Health and the said research Institute itself went before the Settlement Commission and accepted that it has received bogus donation in lieu of commission and was returned cash in exchange of cheques. However, the said decision of Tarasaf International (P) Ltd. (supra) cannot be applied on the facts of the instant case because we are dealing with other scientific research organisation i.e. “Herbicure Health Care Bio Research Foundation” and the Departmental Representative has not brought on record any fact demonstrating that whether “Herbicure” has gone before the Settlement Commission and has admitted to have been providing accommodation entry in the form of bogus donation. The facts of the case in hand are different from the facts of the case of Tarasaf International (P) Ltd. (supra). Thus, the ratio laid down in the case of Tarasaf International (P) Ltd. (supra) cannot be applied in the instant case.
We further note that the case of the assessee is squarely covered by the judgment of Hon’ble jurisdictional High Court in the case of J. P. Financial Services (P) Ltd. (supra) recently
Page 4 of 7 A Y: 2013-14, Surendra Kumar Kapur pronounced on 02.08.2023 which is after the decision of Tarasaf International (P) Ltd. (supra) dated 07.03.2023. Hon’ble Court in the case of J. P. Financial Services Pvt. Ltd. (supra) has dismissed the revenue’s appeal challenging the order of this Tribunal allowing the deduction claimed u/s. 35(1)(ii) of the Act by the assessee company for donation given to “Herbicure” observing as follows : “The revenue has raised the' following substantial questions of law for consideration :- 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. Page 5 of 7 A Y: 2013-14, Surendra Kumar Kapur 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) ua., [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. 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.”
Respectfully following the ratio laid down by the Hon’ble Court which is squarely applicable in the facts of the instant case and also considering the same and examining the same on the facts of the instant case, we note that Herbicure holds registration u/s. 12AA of the Act vide order dated 03.02.2015 issued by Director of Income Tax (Exemption), which was included in the notification No. SO(718) 35/2009 dated 14.03.2008 and subsequently, its registration has further been renewed by Govt. of India, Ministry of Science & Technology as a Page 6 of 7 A Y: 2013-14, Surendra Kumar Kapur scientific and Research organisation vide order dated 13.08.2012 asserts the fact that the assessee gave genuine donation to “Herbicure” and has rightly claimed the deduction u/s. 35(1)(ii) of the Act . Thus finding of the Ld. CIT(A) is set aside and the disallowance of Rs.2,62,50,000/- is hereby deleted. Grounds of appeal
raised by the assessee are allowed.