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2018 (3) TMI 811

he payee had been withdrawn subsequent to the date of contribution by the assessee. Hence no disallowance u/s 35(1)(ii) of the Act could be made in the instant case. - There is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. As decided in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018 (2) TMI 1220 - SUPREME COURT OF INDIA) held that the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Honíble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, 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 .....

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)(ii) of the Act through various brokers in lieu of commission. Bogus donations are received through cheques/RTGS and thereafter cash is returned to the donors after deducting commission. • Statements of key persons like secretary/Treasures/President and other persons recorded during the survey has confirmed the above bogus activity by these institutions. • Statement of auditor recorded during the course of survey clearly shows lacunas in the audit done by them. • 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 c .....

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quested to cross examine the parties who have given adverse statements. • It was also mentioned that in view of the judicial cases, where any donation is made by an assessee to an approved institution and claimed deduction, the subsequent withdrawal of the approval of such institution would not entitle the department to disallow the deduction to the assessee. • It was also submitted by the assessee that merely on submission made by the done trust during the course of their income tax proceedings, 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 furt .....

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lowing deduction shall be allowed- ii) any sum paid to a scientific research association which has its objects the undertaking of scientific research or to a university, college, or other institution to be used for scientific research: Provided that such association, university, college or institution is for the time being approved for the purposes of this clause by the prescribed authority by notification in the official gazette. From the above, it is clear that any 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 fil .....

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its of the case, it becomes incumbent upon me to decide whether assessment done in gross violation of principles of natural justice can stand the test of law or not. I find that apart from other judgments relied upon by the AR or the appellant the judgment of the Apex court in the case of M/s Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II bearing civil appeal No. 4228 of 2006 dated 02.09.2015 is squarely fitting into the facts 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 .....

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llant, Neither at the time of issuing the show cause notice dated 29.01.2016 nor before the completion of assessment u/s 143(3) of the Act the statements were furnished or cross-examinations were allowed to the appellant. It is further observed that the appellant was never allowed any opportunity to appear either before the concerned DDIT (Inv) or before the AD to contradict the statements of the aforesaid persons recorded. 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 .....

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ntroverted any of the submissions of the appellant. The AO has not been able to prove that the evidences filed by the appellant in this regard are either false or bogus or not genuine by conducting any enquiry. The facts mentioned in the reply filed by the appellant in response to the show cause notice are not under challenge by the AO. The appellant explained that the donations to these concerns were made purely on the 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 .....

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g the statement of brokers/ entry .operators etc, I fail to find any person with name "ABHIJIT". Thus this part of the allegation by the AO remains unsubstantiated. However at page 29 the AO has relied upon statement of one Shri Avijit Sinha Roy, recorded by the DDIT (Inv) on 13.04.2015. Even if it is presumed that "ABHIJIT" is the same person as Shri Avijit Sinha Roy, then also from the perusal of statement 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 .....

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any scientific research work. The evidences filed by the appellant have not been found to be false or incorrect. 5.5 It has been brought to my notice that vide notification No. 82/2016 dated 15.09.2016 and notification No. 79/2016 dated 06.09.2016 the registration of SHG&PH & HHBHRF respectively has been cancelled by CBDT. Thus there remains no doubt that these concerns were engaged in the improper utilization of moneys received 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 str .....

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the withdrawing the approval granted to these concerns from retrospective effect itself is without jurisdiction and thus the benefit of claim of weighted deduction cannot be denied to the appellant. 5.7 I find that the AO has observed that that-the appellant has made payment of donation at the fag end of the year after fully knowing the profits of the financial year and the payments of the- Donation through RTGS further 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 appel .....

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mut of assessment order, statements recorded by the DDIT(Inv), written submissions as well as the paper book and the decisions relied upon by the AR of the appellant the disallowance made by AO is directed to be deleted in full. This ground of appeal is allowed. 7. Aggrieved, the revenue is in appeal before us on the following grounds:- 1. "That on the facts & circumstances of the case and in law, the 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 o .....

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y the Central Board of Direct Taxes (CBDT in short), Ministry of Finance, Government of India, u/s 35(1)(ii) of the Act. 8.1. The brief fact pertaining to SGHPH are as under:- a) SGHPH was recognized vide Gazette Notification dated 28.1.2009 issued by the Central Board of Direct Taxes (CBDT in short), Ministry of Finance (Department of Revenue), Government of India, u/s 35(1)(ii) of the Act. b) SGHPH was also recognized as a scientific industrial research 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 instituti .....

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[2002] 5 SCC 685. 24. In other words, the order, which can be modified or rescinded by applying Section 21, has to be either executive or legislative in nature whereas the order, which the CIT is required to pass under Section 12A of the Act, is neither legislative nor an executive order but it is a "quasi judicial order". It is for this reason, Section 21 has no application in this case. 25. The general power, under Section 21 of the General Clauses Act, 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 .....

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