TMI Blog2018 (3) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) of the Act. - Decided in favour of assessee - I.T.A No. 16/Kol/2017 - - - Dated:- 14-3-2018 - Hon ble Shri M.Balaganesh, AM And Hon ble Shri S.S.Viswanethra Ravi, JM] For the Appellant : Shri S. Dasgupta, Addl. CIT(DR) For the Respondent : Shri Miraj D Shah, AR ORDER Per M.Balaganesh, AM 1. This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-4, Kolkata [in short the ld CIT(A)] in Appeal No.10687/CIT(A)- 4/Circle-12(1)/16-17 dated 24.10.2016 against the order passed by the DCIT, Circle- 12(1), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 28.03.2016 for the Assessment Year 2013-14. 2. The only effective issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance made u/s 35(1)(ii) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statements of number of brokers/entry operators recorded in course of survey proceedings have confirmed the bogus billing or accommodation entries from these institutions. Pre survey post survey enquiries have found that most of the expense side parties are paper bogus concerns. The Bank statements of these institutions show clear pattern of donation coming and going vide the above modus operandi. SHG PH have gone in settlement commission admitting that in lieu of service charge they have provided accommodation entries of donation to the donors. The books of accounts were not there at the registered offices. In case of SHG PH there are broker wise ledgers of commission. No purchase bills were found for financial year 2014-15. Documents related to commission were found and impounded. These institutions have few persons with good CV who are associated only in honorary position and they are not involved in the day to day activities. The research work shown is just reproduction of published material. Details in respect of research work could not be furnished by these institutions. These institutions have miniscule presence and their contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company should not be denied the benefit of deduction as on the date of the donation the donor trust was carrying on activities based on which recognition was given by the Income Tax authorities. If further stated that assessee company should be given an opportunity to cross examine the done trust before making any disallowance on the presumption that the donation is bogus. 5. The ld AO observed that the donations made through banking channel reflected the urgency in making the arrangement and donation being made towards the fag end of the financial year wherein the actual profit earned during the financial year 2012-13 had become crystal clear. The ld AO further relied on the survey report and observed that the assessee company s name appear at serial number 301 of the survey report amongst the list of names furnished by the DDIT (Inv.) Unit 4(1), Kolkata in the case of SGHPH reflecting bogus donation transaction of the assessee company. The ld AO also observed that from the broker wise list of bogus donation for FY 2012-13 reproduced in his order that the assessee had indulged in this transaction through mediator Abhijit . The ld AO then extracted the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee can claim deduction u/s 35(1)(ii) of the Act provided it gives donation to any undertaking which has its objects of scientific research and such undertaking is approved for the purposes of this clause by the prescribed authority. As far as eligibility of the appellant is concerned there is no doubt expressed by the AO in the entire assessment order that the appellant is not eligible to claim weighted deduction of donations paid u/s 35(1)(ii) of the Act. Briefly stated facts of the case are that the appellant is engaged in the business of import export of machinery machinery spare, equipment component and project execution work. For the assessment year under consideration the appellant has filed its return of income on 29.09.2013 declaring total income at ₹ 32,41,51,490/-. In course of the assessment proceedings the AO noted that the appellant has claimed a sum of ₹ 3,06,25,000/- u/s 35(1 )(ii) of the Act. In support of its claim the appellant has filed copies of donation receipts, notification issued u/s 35(1 )(ii) in favour of the donee institutions; etc. The AO disallowed the2claim of the appellant entirely on the ground that these' inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this case. It was held by the apex court as follows: According to us 1 not allowing the assessee to cross-examine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea was total/y untenable. The Tribunal has simply stated that cross- examination of the said dealers could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded. In my considered view in any assessment principles of natural justice plays most important role and no addition or disallowance can be made without following such principles. Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental. I find that the purpose of following the principles of natural justice is the prevention of miscarriage of justice. No one should be condemned unheard. I find that the AO has relied upon 20 person's statement in the case of SHG PH and 13 persons in the case of HHBFR. The extracts of the. statements have been reproduced in the assessment order at various places. The contents of such statements were never shared with the .appellant in course of the proceedings before the DDIT (Inv) or in course of assessment proceedings, hence there is no doubt that there has been gross violation of principles of natural justice and thus I have no hesitation in holding that the assessment-is devoid' of natural justice and the same is held to a nullity. 5.3 Without prejudice to the findings given at para 5.2, I now proceed to decide the matter on the merits of the case. In course of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the fact that these concerns were established since long time and engaged in the research activities 'and were also granted registration u/s 35(1)(ii) of the Act. I. find that the AO did not bother to deal with any of the submissions of the appellant re-iterating the fact that the donations paid by the appellant were genuine donations and there was no commission payment made in this respect. The AO did not verify the correctness of such submission. I find that indeed the appellant had been regularly giving donations to several religious; and charitable organizations. The appellant also filed. supporting evidences in respect of claim of donations paid. I also find that the appellant has explained before the AD that the donation was made by the appellant during the -relevant 'assessment year and during this relevant year these concerns were duly approved concerns u/s 35(1 )(ii), therefore, the subsequent withdrawal of approval of such concerns would not entitle the Department to disallow the genuine claim of donation paid by the appellant. The AD has not discussed anything on the reply filed by the appellant. I find that the AD was completely guided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri Avijit Sinha Roy it can be seen that he was involved as a broker for arranging the donation upto the Month of February 2011 only, the appellant has made the aforesaid donation in November, 2012. Therefore, I agree with the contentions of the AR of the appellant that. statement of Shri Avijit Sinha Roy cannot have any applicability in the appellant's case. In respect of HHBHRF no such specific person's name has been mentioned by the AO who has acted as a mediator between the appellant and HHBHRF. 5.4 I find that the appellant has explained that it has paid the donation to SCH PH based on the profile of the organization. The appellant has also explained with documentary evidences that SCH PH was registered as a society under the W.B. Societies Registration Act, 1961 and it was also registered u/s 12AA of the Act. Its scientific research facilities were duly approved u/s 35(1 )(ii) of the Act by the Central Government when the appellant made donation to this institute. Such approval was valid from AY 2008-09 onwards. The appellant has also furnished copy of the notification approving the institute under section 35 (1 )(ii) of the Act. It was also explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by them. If the statements are taken at face value then on perusal of extracts of statements of brokers/mediators/and entry operators as reproduced in the assessment order I find that there remains no doubt that the management of these concerns were directly or indirectly engaged in misappropriating the funds and not utilizing the donation amounts entirely for research related activities. However the connivance of appellant in this scheme of arrangements between these concerns as well as the bogus billing parties is not established either by DDIT,(lnv), Kolkata or by the AD. The allegation that the cash was refunded to the appellant after deducting commission by these concerns remains in serious doubt. It is observed that a suspicion how so ever strong it may be cannot form basis for disallowing any claim of the appellant until any material is brought on record. 5.6 The AR drew my attention to the Explanation attached to section 35(1)(ii) of the Act and the CBDT circular No.1/2007 dated 27.04.2007. According to such circular the Explanation has been introduced in the statute itself so that the deduction to which the donor is entitled in respect of any sum paid to a rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther supports the facts why it has to be done hastily. Otherwise, there is no reason for donation to be paid through RTGS and there is no such requirement that ,it should be paid just before the financial year ends. This simply supports the bogus nature of the donation paid by the assessee. I d that the observation of AO is based on suspicion and surmises only. There is no supporting material for ,this allegation. It is observed that the donation to SHG PH were made in the month of November, 2012 only and not the fag end of the financial year; Thus the allegation of AO that the do s ere made only at the fag end of the financial year is found to be incorrect as far as it relates to SHG PG. I find that the AO has made some enquiries in the bank account of the appellant company in respect of donation paid to HHBRF. After conducting enquiries in the bank statements filed by the appellant in course of the assessment proceedings the AO noted that the donation which were made through RTGS by the appellant to HHBRF got transferred to the account of Top link Dealers Sri Sai Enterprises Ltd on the very same day. The AO has made an analysis of the money trail which is similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A) has erred by deleting the disallowance of deduction u/s. 35(1)(ii) of the Act of ₹ 3,06,25,000/-. 2. That on the facts circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that the A.O. had made enquiries and established the same in the assessment order before making disallowance of deduction u/s. 35(1)(ii) of the Act. 3. That on the facts circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that against the said concern i.e. School of Human Genetics Population Health and Herbicure Healthcare Bio-Herbal Research Foundation, a survey operation was conducted by the Investigation Wing of the Department, Kolkata on 27.01.2015 in the premises of aforementioned concern in which it had been found that the said concern is engaged in providing bogus donation u/s. 35(1)(ii) in the name of various parties so as to enable them to avail 175% deduction u/s. 35(1)(ii) of the IT. Act. 4. That on the facts circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that the name of the assessee company was appearing in Serial No. 272 301 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search organization (SIRO) by Ministry of Science Technology, Government of India. The renewal of recognition as SIRO by the Department of Scientific and Industrial Research under the Scheme on Recognition of Scientific and Industrial Research Organisation , 1988 was made for the period from 1.4.2010 to 31.3.2013 vide communication in F.No. 14/473/2007-TU-V dated 17.6.2010. 8.2. At the outset, we find that the Taxation Laws (Amendment) Act, 2006 with retrospective effect from 1.4.2006 had introduced an Explanation in Section 35 of the Act which reads as under:- Section 35(1)(ii) Explanation The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn. Hence the aforesaid provisions of the Act are very clear that the payer (the assessee herein) would not get affected if the recognition grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, to rescind a notification or order has to be understood in the light of the subject matter, context and the effect of the relevant provisions of the statute under which the notification or order is issued and the power is not available after an enforceable right has accrued under the notification or order. Moreover, Section 21 has no application to vary or amend or review a quasi judicial order. A quasi judicial order can be generally varied or reviewed when obtained by fraud or when such power is conferred by the Act or Rules under which it is made. (See Interpretation of Statutes, Ninth Edition by G.P. Singh page 893). 26. 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No.2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004-2005) because the amendment in question was not retrospective but was prospective in nature. 28. The issue involved in this appeal had also come up for consideration before three High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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