TMI Blog2019 (5) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... statements which are not supported by corroborative evidence. The copies of the statements are not furnished nor was the assessee given a chance of cross-examination. Evaluating the evidence relied upon by the parties, we uphold the contention of the assessee that he is entitled to deduction u/s 35(1)(ii) - Decided in favour of assessee. - I.T.A. No. 2346/Kol/2018 - - - Dated:- 8-5-2019 - Sri J. Sudhakar Reddy, Accountant Member For the Appellant : Shri Anil Kochar, Advocate For the Respondent : Shri Robin Choudhury, Addl. CIT, Sr. DR ORDER PER J. SUDHAKAR REDDY :- This is an appeal filed by the assessee directed against the order of the ld. Commissioner of Income Tax (Appeals) - 10, Kolkata (hereinafter the ld. CIT (A) ), passed u/s 250 of the Income Tax Act, 1961 (the Act ), dated 03/09/2017. 2. The assessee is an individual and is in the business of general order supplier of machinery and spare-parts. He filed his return of income on 25.03.2014 declaring total income of ₹ 5,43,712/-. The return was processed u/s 143(1) and later it was reopened u/s 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% of the total amount. One of such donor is the present assessee i.e. Shri Raj Karan Dassani who had donated ₹ 5,00,000/- to the said organization and claimed ₹ 8,75,000/ (175% of ₹ 5,00,000/-) as deduction u/s 35(1)(ii) of the Act. In reply to the show cause notice dated 01.12.2016, the assessee denied the fact of the bogus billing, which is not accepted in the context of Statements of the persons mentioned above. 9. In the light of the above mentioned facts of the case and also considering the submission of the assessee's I am of the opinion that the assessee has made bogus donation u/s 35(1)(ii) of the I.T Act, made to M/s Heribicure Healthcare Bio Herbal Research Foundation (HHBRF) to the tune of ₹ 5,00,000/-.Hence, the same is disallowed and added back to the total income of the assessee. 5. Aggrieved, the assessee carried the matter in appeal. The first appellate authority considered the submissions of the assessee as well as the findings of the Assessing Officer. Thereafter at Para 12 onwards he applied the theory of human probabilities and relied on the decisions of the Hon ble Supreme Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what this organization, HHBRF, would do with the money donated to it. (d) That the registration was valid and in force when he has made a donation and hence he is entitled to deduction. (e) That none of the copies of the statements referred to and relied upon by the Revenue have been given/confronted to the assessee. (f) That the assessee was not given any opportunity of crossexamination of any of with these persons. (g) That there is no proof that the assessee had received back the money in question. For this proposition he relied on the judgment of the Hon ble Gujarat High Court in the case of Pr. CIT Surat vs. Tejua Rohit Kumar Kapadia judgment dated 18/09/2017.He relied on the decisions of the Kolkata B Bench of the Tribunal in the case of Tushar Chawda vs. ITO; ITA No.2362/Kol/2017 order dated 23.03.2018, Kolkata SMC Bench of the Tribunal in the case of Santosh Suresh Kumar Agarwal vs. ACIT; ITA No.1162/Kol/2018 order dated 05.09.2018. 7. The ld. Counsel also relied on the order in the case of Rajda Polymers vs. DCIT in ITA No.333/Kol/2017 order dated 08.11.2017, wherein a donation of ₹ 24,75,000/- given to HHBRF was considered and the issue was adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... myself, my son and Bhagwat Prasad Agarwal. The registered office of this factory is situated at 21, Hemant Basu Sarani, 3rd Floor, Room No.-318, Kolkats-700001 and factory premises has been taken on rent and Factory address is at 3/4, Forshore Road, Shalimar, Howrah-711103. My daughter-in-law Suruchi Bhawsinghka (House wife), One proprietorship business 'Shree Enterprise is registered in her name and nature of business of this firm is trading of cloths. I have two brothers. One is Vijay Bhawsinghka, he is engaged in business of trading in handicraft in local market in the name of 'Viki Export' situated at 6, Mullick Street, Kolkata-700007 and second is Shyamsunder Bhawsinghka he is engaged in business of cloth merchants which is situated at 196, Jamunalal Bazar Street, Kolkata-700007. Q.6 What is your occupation? Ans. I am working as a broker. My office address is at 7, Mango Lane, 3rd Floor, Room No.-307, Kol-1 and this office is currently managed controlled by my partner Ashok Kumar Sureka. Q.7 What is your source of income? Ans. My main source of income is from brokerage for lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nything about it. I have just introduced some donors to them and have received around Rs. one lakh from donors. Q.13 Kindly go through the statement of Shri Manoj Kothary taken on 27.02.2015. Read question no.22 and the answer. Offer your comment. Ans. I have gone through his statement. I don t agree with him. I have collected money receipts and appeal letter for my donors only. Q.14 I want to remind you, you are on oath. As per S.S. Dasgupta you have arranged bogus donation and bogus expenses on commission. As per Shri Manoj Kothary, you are the one who used to collect money receipts and appeal letters on behalf of HHBRF from his office. Kindly offer your comment. Ans. I don t agree with them. I have done some work for some donors only. (Emphasis ours) Q.15 Kindly go through the donor list of HHBRF for F.Y 2010-11 to 2012-13. Identify your donors. Ans. Sl. No. Donors Name Amount (Rs.) 1 YASH-MAC RESORUCES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose persons. This allegation, as already stated, are denied by Mr. Kishan Bhawasingka. In response to question no.18, Smt. Dastidar states that she has heard that this money being returned back which suggest that she did not have first hand knowledge. Now, I come to the statement of Shri Shankar Kumar Khetan, entry operator. In the statement of Shri Khetan stated that HHBRF had issued cheques to him and that he has given bogus bills and he has returned cash for a commission of 0.8%. This statement does not lead to a conclusion that the money was returned in cash to the assessee. All that it evidences is that HHBRF had booked bogus expenditure. 15. Nowhere in the statement recorded, the name of the assessee is stated, and there is no comment or evidence given against the assessee. What is clear is that donation was received by cheque from HHBRF, when the certificate issued to it by CBDT was still valid. There is no proof that this particular assessee, Shri Raj Karan Dassani, had got back the money in question in cash. On these facts the ratio laid down by the Hon ble Gujarat High Court in the case of Pr. CIT Surat vs. Tejua Rohit Kumar Kapadia (supra) applies.The enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no cross examination of the adverse witnesses. 5.2. We find that on the other hand, the assessee had submitted all the documents pertaining to the claim of deduction u/s 35(1)(ii) of the Act before the ld AO. The undisputed fact before us is that the assessee had paid a sum of ₹ 14,00,000/- vide Cheque No. 786400 dated 28.11.2012 drawn on Canara Bank, Brabourne Road Branch, Kolkata to HHBRF, which has been acknowledged vide letter dated 6.12.2012. This payment of ₹ 14,00,000/- was duly reflected in the bank statement of the assessee. Hence the source for making this payment stood clearly explained and is not in dispute before us. We find that the entire assessment is based upon the statement of directors of HHBRF. It is an undisputed fact that neither a copy of the statement was supplied to the assessee (the assessee was asked to read the same in the presence of the ld AO), nor was any opportunity of cross examination given by the ld AO. In this regard, the reliance placed by the ld AR on the decision of the Hon'ble Apex Court in the case of Andaman Timber Industries Ltd vs Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake of convenience, the said Explanation is reproduced below:- 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. In the instant case, the ld DR argued that the recognition u/s 35(1)(ii) of the Act was withdrawn in the case of HHBRF by the CBDT with retrospective effect. In response to this, the ld AR argued that on the date on which donation was given, the notification u/s 35(1)(ii) of the Act was in force and valid and therefore the deduction claimed by the assessee was in order. We find that the ld CITA had ignored the provisions of the Act (i.e the Explanation to Section 35(1)(ii) of the Act) by merely stating that HHBRF had subsequently declared before the Hon'ble Settlement Commission, Department of Revenue, Government of India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Moreover, it is well settled that it is always the prerogative of the assessee to give or not to give any donation to a particular institution, which wisdom cannot be questioned by the revenue. The question of business expediency of an expenditure had to be viewed from the point of view of the businessman and not from the view point of the revenue. The businessman knows his interest best. However, it cannot be denied that this donation paid to HHBRF is free from any suspicion. It definitely leads to further probe by the revenue, which has been carried out by the revenue by summoning the Director of HHBRF. The said Director Shri Swapan Ranjan Dasgupta, though could not appear in person before the ld AO for cross-examination (which was sought by the assessee) but had confirmed in writing that the donations given by the assessee to HHBRF were genuine in nature and had further confirmed that HHBRF had not paid any cash back to assessee in lieu of cheque donations paid to them. The revenue had left the matter at this stage itself and did not further probe into it to check the veracity of the confirmation made by Shri Swapan Ranjan Dasgupta. Therefore, the ld AO proceeded to make the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the concurrent findings of fact, this civil appeal is dismissed. We find that the sole basis of ld AO making this disallowance of deduction u/s 35(1)(ii) of the Act was on the basis of statement recorded during survey from the Director of HHBRF which does not have any evidentiary value. Hence respectfully following the aforesaid decision of the Hon'ble Madras High Court affirmed later by the Hon'ble Apex Court supra, we hold that there is no case made out by the ld AO for making this disallowance u/s 35(1)(ii) of the Act. 5.8. We also find that similar issue came up before the co-ordinate bench of this tribunal in the case of Saimed Innovation vs ITO in ITA No. 2231/Kol/2016 for Asst Year 2013- 14 dated 13.9.2017, wherein it was held as under:- 9. We note that the sole basis for making the addition is on the basis of the statement recorded on oath during survey at M/s. Herbicure of Shri Swapan Ranjan Dasgupta, other than the said statement there is no other evidence to show that the assessee has received back the donation as suggested in his general statement about providing accommodation entry by Shri Swapan R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 20 they have given the name of the doctor who was a Cardiologist who introduced them to M/s. Herbicure. We note that the AO enquired about Dr. Bhuban Chakraborty's address for which the partner replied that the doctor resides at Kshudiram Sarani, Rathtala, Kolkata. For question no. 21 as to whether they knew about the Directorate of Investigation, Kolkata carried out survey u/s. 133A and that its investigation is found that the activities were not genuine, the partners replied that they were not aware of the survey, however, they added that after their visit of the two centers they were on a bona fide belief that M/s. Herbicure was a competent institute and based on the recommendation of the Cardiologist Dr. Bhuban Chakrabrty they made donation to the said concern. We also note that the AO issued summons to Shri Swapan Ranjan Dasgupta who did not appear for cross examination due to ill health but the said Shri Dasgupta confirmed the donations made by the assessee firm to M/s. Herbicure in writing to the AO and clearly stated that no money was refunded back to assessee firm, which fact has been reproduced by the AO at page 7 of his order as under: Shri Swapa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee for deduction suspicious. However, when the AO investigated, Shri Swapan Ranjan Dasgupta has confirmed that M/s. Herbicure was in receipt of the donation and it has not given any refund in cash, then the sole basis of disallowance of claim as a matter of fact disappeared. It should be remembered suspicion howsoever strong cannot take the place of evidence. The confirmation from Shri Swapan Ranjan Dasgupta fortifies the claim of the assessee for weighted deduction u/s. 35(1)(ii) of the Act. The sole basis of the addition/disallowance based on statement recorded on oath during survey cannot be allowed as held by Hon'ble Supreme Court in Kader Khan sons (supra). Moreover, we note that if the AO was hell bent determined to disallow the claim of the assessee, then he should have granted an opportunity to cross examine Shri Swapan Ranjan Das Gupta and Shri Kishan Bhawasingka as held by Hon'ble Supreme Court in Andaman Timber (supra). 11. In the light of the aforesaid facts and circumstances, we cannot sustain the order of the authorities below. Therefore, we set aside the impugned order and direct the AO to allow the deduction of ₹ 26,28,500/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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