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TMI Blog2017 (11) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... da Polymers A.Yr.2013-14 4. The brief facts of this issue is that the assessee is a partnership firm engaged in the business of trading in polymers, master batch & plastic granules and also acting as commission agent. The return of income for the Asst Year 2013-14 was filed by the assessee on 20.9.2013 disclosing total income of Rs. 29,96,220/-. The ld AO observed that the assessee claimed donation of Rs. 24,50,000/- (being 175% of Rs. 14,00,000/-) u/s 35(1)(ii) of the Act for the donation made to The Herbicure Healthcare Bio-Herbal Research Foundation (HHBRF in short). A survey operation u/s 133A of the Act was conducted on 27.1.2015 in the case of HHBRF by the Directorate of Investigation, Kolkata. It was noticed that HHBRF is a non-profit organization which is registered as a private company limited by shares and licensed u/s 25 of the Companies Act, 1956. The organization is registered u/s 12AA of the Act. It was also approved u/s 35(1)(ii) of the Act as a scientific research organization for the purpose of deduction of account of expenditure on scientific research. The founder director of the said organization is Shri Swapan Ranjan Dasgupta. Pursuant to the survey, it came to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 without making his independent inquiries, and merely relying on the report of the Investigation Department. The disallowance made on such basis is bad in law and therefore the same be reversed. 5. We have heard the rival submissions and perused the materials available on record. The brief facts pertaining to HHBRF are as under:- a) HHBRF was registered u/s 12AA of the Act by the ld DIT(Exemptions), Kolkata with effect from 26.12.2003. b) HHBRF was registered u/s 6(1)(a) of the Foreign Conribution (Regulation) Act, 1976 on 26.2.2008 vide registration no. 147120804. c) HHBRF was also recognized in the year 2006-07 as a scientific industrial research organization (SIRO) by Ministry of Science & Technology, Governmetn of India. ITA No.333/Kol/2017 Rajda Polymers A.Yr.2013-14 d) HHBRF was recognized vide Gazette Notification No. 35/2008 dated 14.3.2008 issued by the Central Board of Direct Taxes (CBDT in short), Ministry of Finance, Government of India, u/s 35(1)(ii) of the Act. 5.1. We find that the assessee had explained about its commercial objective for association with such an accredited institution apart from getting an immediate tax benefit via ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected". 5.3. We find that similar views were taken in the following decisions :- a) Decision of Hon'ble Bombay High Court in the case of H R Mehta vs CIT reported in 387 ITR 561 (Bom) b) Decision of Hon'ble Delhi High Court in the case of CIT vs Ashwani Gupta reported in 322 ITR 396 (Del) c) Decision of Hon'ble Delhi High Court in the case of CIT vs SMC Chare Brokers Ltd reported in 288 ITR 345 (Del) d) Decision of Hon'ble Supreme Court in the case of Prakash Chand Nahta vs Union of India reported in 247 ITR 274 (SC) e) Decision of Hon'ble Jurisdictional High Court in the case of CIT vs Eastern Commercial Enterprises reported in 210 ITR 103 (Cal) f) Decision of Hon'ble Kerala High Court in the case of P.S.Abdul Majeed vs Agricultural Income Tax & Sales Tax Officer & Ors reported in 209 ITR 821 (Ker) 5.4. We find that the ld AO did not provide the material rather he merely allowed the assessee to read the statement. This, in our considered opinion, was not justified. The assessee cannot be expected to give reply to the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... express provisions of the Act cannot be ignored thereon. There cannot be any malafide that could be attributed on the assessee herein. We find that the assessee was under the bonafide belief and had made proper due diligence before granting donation to HHBRF which was duly recognized u/s 35(1)(ii) of the Act at the time of giving donation. We hold that if the subsequent notification cancelled the registration u/s 35(1)(ii) of the Act, the same does not affect the donation made by the assessee when the said notification was in force. The bonafide belief of the assessee donor at the time of granting donation to an institution on the basis of recognition then available, cannot be disturbed by subsequent event. This is more clearly spelt out in the provisions of the Act itself by way of an Explanation to Section 35(1) of the Act. Hence even as per the provisions of the Act, the denial of deduction u/s 35(1)(ii) of the Act is not in order. We also find that the Hon'ble Jurisdictional High Court in the caes of B.P.Agarwalls & Sons Ltd vs CIT reported in 208 ITR 863 (Cal) and Jai Kumar Kankaria vs CIT reported in 251 ITR 707 (Cal) had held that there was no power to cancel the regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain portion as their commission and intermediaries' commission. This is only a general statement given by Swapan Ranjan Dasgupta about the modus operandi carried out by HHBRF. But nowhere in the said statement or in the subsequent enquires / investigation , it came to light that the assessee herein had indeed received back the cash in lieu of cheque donations given to HHBRF. This serves as a clinching missing evidence in the entire gamut of this case. 5.7. Now let us come to yet another legal aspect as to whether any addition / disallowance could be made merely based on statement recorded during survey which is not backed by any other supporting material. It would be pertinent to note that the sworn statement recorded during survey does not have any evidentiary value. In this regard, ITA No.333/Kol/2017 Rajda Polymers A.Yr.2013-14 the decision of the Hon'ble Madras High Court in the case of S.Khader Khan (2008) 300 ITR 157 (Mad) assumes significance, wherein it was held that :- "An admission is an extremely important piece of evidence , but it cannot be said that it is conclusive and it is open to the person , who made it, to show it has incorrectly been made and the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in CIT Vs. S. Kader Khan Son (2013) 352 ITR 480 (SC). In any case, if the AO was of the opinion that the statement of Shri Swapan Ranjan Dasgupta, the founder Director of M/s. Herbicure has adversely affected the veracity of the donation made by the assessee then he was duty bound to summon Shri Swapan Ranjan Dasgupta and allowed the assessee to have cross examined him, failing which the statement of Shri Swapan Ranjan Dasgupta could not be used against the assessee trust as held by the Hon'ble Supreme Court in Andaman Timbers Ltd. Vs. Commissioner of Central Excise 62 Taxman 3. We note that the AO had in fact, recorded the fact that the partners of the assessee firm desired to cross examine the founder Director of M/s. Herbicure Shri Swapan Ranjan Dasgupta regarding the purported deposition made at the time of survey. However, AO did not grant him that opportunity to cross examine Shri Swapan Ranjan Dasgupta. We also note that the AO issued notice u/s. 131 of the Act to the partners of the assessee firm and has recorded their statement on oath on 28.12.2015. We note for question no. 14 as to how the partner knew about M/s. Herbicure, the partner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom our records that following donations were received by us from M/s. Saimed Innovation, the assessee in the financial years mentioned against each: F.Ys Amount Mode of transaction Date Receipt No. 2012-13 7,51,000/- RTGS:UTRNo. BARBH13074606758 15.03.2013 HHBHRF/15-03- 13/004 2012-13 7,51,000/- RTGS:UTR No BARBH 13085899500 26.03.2013 HHBHRF/26-03-13/004 Further, it is submitted for your kind record that no money was refunded to the above named assessee against donations given by them. Meantime, I may submit that I am critically indisposed due to acute lumber scoliosis and am not able to move. I am under strict medical supervision. As such, my personal appearance may kindly be waived on compassionate ground. I am attaching the current medical prescription/advice along with MRI reports for your kind record. However, the information as submitted above may please recorded as my witness." 10. Thus we note from the entire facts and circumstances, that the AO got swayed away with the statement recorded on oath of Mr. Swapan Ranjan Dasgupta during survey conducted at the premises of M/s. Herbicure. We have reproduced Question no. 22 and 23 and answers given by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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