TMI Blog2020 (4) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, in view of the said facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct and justifiable - Decided against revenue - I.T.A. No.5385/Mum/2018, CO. No.188/Mum/2019 (Arising out of ITA. No. 5385/Mum/2018) - - - Dated:- 29-1-2020 - Shri Rajesh Kumar, AM And Shri Amarjit Singh, JM For the Assessee : Shri B. V. Jhaveri (AR) A. Gopalkrishanan For the Revenue : Shri S. Michael Jerald (DR) ORDER PER AMARJIT SINGH, JM: The Revenue as well as assessee have filed the above mentioned appeal as well as cross-objection against the order dated 20.07.2018 passed by the Commissioner of Income Tax (Appeals)-37, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2013-14. ITA. NO.5385/M/2018 2. The revenue has filed the present appeal against the order dated 20.07.2018 passed by the Commissioner of Income Tax (Appeals)-37 Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2013- 14 3. The revenue has raised the following grounds: - 1. On the facts and in the circumstances of the case and in w, the Ld. CIT(A) has erred in deleting the addition made by the AO to the tune o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS. Notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. The assessee is an individual and during the year under consideration, the assessee derived income from business or profession as well as income from other sources. On verification, it was found that the assessee has debited an amount of ₹ 1,44,00,000/- to the Profit Loss Account admissible u/s 35 of the Act and claimed deduction of ₹ 2,52,00,000/-. The assessee claimed deduction u/s 35 of the Act amounting to ₹ 1,44,00,000/-. The assesse was asked to verify their claim and to produce the donation receipts. The assessee submitted the copy of receipts for ₹ 41,00,000/- from School of Human Genetics, ₹ 51,00,000/- to Shri Arvindo Institute of Applied Scientific Research Trust, ₹ 31,00,000/- from Herbicure Healthcare Bio-Herbal Research Foundation and ₹ 21,00,000/- Matrivani Institute of Experimental Research and Education. Thereafter, an information was received from the DDIT(Inv.) Unit-4(1), Kolkata addressed to the ACIT-25(2), Mumbai dated 27.01.2016 in which it was convey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, Rule 46A(1) puts fetters on the right of the appellant to produce before the Commissioner of Income-tax (Appeals) any additional evidence, not previously raised before the Assessing Officer. However, the Court has clarified that putting fetters on the right of appellant in the matter of producing additional evidence before the Commissioner of Income-tax (Appeals), clarified the Court, does not mean affecting in anyway the powers of the first appellate authority conferred by sub-rule (4) and section 250 of the Act. The relevant part of the said order is as under: 3. .....On a plain reading of rule 46A, it is clear that this rule is intended to put fetters on the right of the appellant to produce before the MC any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the IT() except in the circumstances set out therein. It does not deal with the powers of the MC to make further enquiry or to direct the ITO to make further enquiry and to report the result of the same to him. This position has been made clear by sub-rule (4) which specifically provides that the restrictions placed on the production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that- In fact, receiving new material by the Appellate Assistant Commissioner cannot be equated with receipt of additional evidence as contemplated in Order 41, rule 27 of the Code of Civil Procedure or even at the stage of second appeal by the Tribunal. . (P. 376)- Thus, a conjoint reading of section 250(4) and, (5) of the Act and rule 46A(1) and (4) of the Rules clarifies that only restriction is imposed on the appellant's right to produce additional evidence before the Commissioner of Income-tax (Appeals). 6.4 In the decision rendered in the case of K. Ravindranathan Nair reported at 184 CTR (Ker) 46, the Kerala High Court took cognizance of the decision in the case of Prabhavati S. Shah and further specified that if the provisions of r. 46A sub-rule (1) thereof is held to be mandatory that will go against the provisions of section 250 of the Act conferring power on the first appellate authority to enquire into the matter and pass appropriate orders. In other words, rule 46A without sub-rule (4) will be open to challenge as ultra vires section 250 of the Act . The Kerala High Court, in the instant case, accordingly held that in spite of the restrictive provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- 54,25,000/- Matrivani Institute of Experimental Research Education 21,00,000/- 36,75,000/- Total 93,00,000/- 1,62,75,000/- 6.8 The AO received an information from DDIT(Inv), Kolkata that appellant has taken bogus donations from above mentioned parties. Further, the A.O. observed that during the recordings of the statement u/s.131 of I.T. Act of the treasurer of the School of Human Genetics Population Health (SHG PH) stated that the source of the institution is mainly out of donation received through cheques or RIGS and simultaneously they are returning back the amounts to the donors by bogus billing after deducting commission of 7 to 8%. Further trustees admitted that they are operating through brokers who are mediating the donation between SHG PH and the donors and also making arrangements for bogus billing and returning back the money to the donors. The survey team also observed that the Institute has violated Rule 5C, 5D and 5E of Income Tax Rules to be followed as an institution approved U/s. 35(1)(ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer during the course of assessment proceedings had issued a show cause to the appellant. The appellant has submitted copy of Donation receipts issued by SHG PH, certificate issued by the Registrar of Firms, Societies and non-trading corporation west Bengal certifying that SHG PH is registered under the West Bengal Societies Act 1961 and extract from The Gazette of India wherein it was notified for general information that SHG PH has been approved by the Government of India for the purpose of Clause (ii) of Sub Section (1) of Section 35 of the Income Tax Act read with Rules 5C and SE of the Income Tax Rules 1962 during the assessment proceeding. Further, appellant has submitted registration certificate U/s. 12A of the Act issued by Director of Income Tax (Exemptions) Kolkata dated 27.10.2004, renewal of approval U/s. 80G(5)(vi) by the ITO(Exem) Kolkata dated 08.02.2012 and letter from the Secretary, the School of Human Genetics and Population Health, West Bengal as regards renewal of recognition of Scientific and Industrial Research Organizations (SIRos). 6.10 The appellant had also given donation of ₹ 31,00,000/- to the Herbicure Healthcare Bio-He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gazette of India wherein it was notified for general information that HHBRF has been approved by the Government of India for the purpose of Clause (ii) of Sub Section (1) of Section 35 of the Income Tax Act read with Rules 5C and SE of the Income Tax Rules 1962, letter from the Secretary, the School of Human Genetics and Population Health, West Bengal as regards renewal of recognition of Scientific and Industrial Research Organizations (SIROs), registration certificate U/s. 12A of the Act issued by Director of Income Tax (Exemptions) Kolkata dated 7.3.89, renewal of approval U/s. 80G(5)(vi) by the DIT(Exem) Kolkata dated 12.07.2007 and Registration under Foreign Contribution (Regulation) Act 1976 issued by Ministry of Home Affairs, Government of India dated 27.12.2004. 6.12 The appellant further submitted comments on remand report that the A.O. has reproduced the relevant extracts from the statement recorded U/s. 131 in the case of Shri Paras Mal Daga. The same extracts has been given to the appellant during the course of assessment proceedings along with the show cause notice. The same has been considered by the assessing officer during the course of assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as may be prescribed. d) Such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government. 6.14 After perusal of submissions of appellant, it is found that the conditions prescribed u/s. 35(1)(ii) have been complied with by the appellant in respect of donations to all the above mentioned institutes. The only issue that arises out of the assessment order in this case is as to whether the appellant should have been granted deduction under section 35 of the I.T. Act on the basis of the certificate granted by the Institutions. In support of the same, the appellant has filed necessary documents filed before the assessing officer during the course of assessment proceedings. The list of documents submitted clearly establish the fact that activities carried out by the institutes to which donations were given by the appellant is in accordance with the provisions of section 35(1)(ii) of the Act, i.e. scientific research. Hence it is evident that the appellant after obtaining all the relevant certificates/documents/verification has given the donation and subsequently claimed deduction u/s. 35( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court decision in the case of State of Maharashtra v. Suresh Trading Co. [1998] 109 STC 439, in the instant case, there was no escapement of income of the assessee as a result of the allowance of deduction under section 35CCA in the previous year relevant to the assessment year under consideration 6.17 In the case of State of Maharashtra v. Suresh Trading Co. [1998] 109 SIC 439, the controversy before the Supreme Court was that whether the retrospective cancellation of the certificate of registration granted to a purchasing dealer under the Bombay Sales-tax Act, 1959 would affect any person who had acted upon the strength of such certificate when it was current. The Honorable Supreme Court has held as under: 5. In our view, the High Court was right A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current The argument on behalf of the department that it was the duty of persons dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable Trust and receives donations from donors and has utilized the Donations for charitable purpose. In the given facts and circumstances, it cannot be concluded that the assessee is not carrying out its objects or that the assesses activities are not genuine. 6.20 It has been also held the Calcutta High Court in the case of CIT v. Borbheta Estate Pvt. Ltd. 252 ITR 0379 (Cal) that when the donation was given to the society and the society was approved by the Department for the purpose of deduction u/s 35CCA of the Act. Assuming that by mistake of the department, the department has wrongly approved the society for the purpose of deduction u/s 35CCA, but for mistake of the department why should the assessee suffer. The claim of the deduction cannot be withdrawn on the basis of withdrawal of the approval to the society by a subsequent order as has been done in this case. Further, the Hon'ble Income Tax Appellate Tribunal - Kolkata in the case of Vikas lagwayan, Kolkata vs. PCIT, Kolkata, I.TA No. 1813/Ko1/2017. A. Y. 2014-2015 - dated 17.06.2018.has discussed this issue. In the case of the appellant apart from others, donations were given to the same institute as well an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of donations cannot be doubted in the instant case, particular in the absence of any material to support the view taken by the AO. Hence we agree with the contentions of Id A. R. that the AO was not justified in rejecting the claim of weighted deduction. We further notice that the Id CIT(A) has placed reliance on the cancellation of registration granted u/s. 12AA of the Act to Ails. Bioved Research Society M/s. Vora Financial Services P. Ltd. with retrospective effect The registration granted u/s. I2AA of the Act and the approval granted u/s.35(1)(ii) of the Act operates on different field. Hence we are of the view that the Ld. CIT(A) was not justified in placing reliance on the order of cancelation of registration u/s. 12AA of the Act Even if the approval is cancelled subsequently with retrospective effect, various case laws discussed above bring out the ratio that the weighted deduction claimed by the assessee u/s.35(1)(ii) of the Act cannot be denied, if there was valid and subsisting approval when the donation was given. In the instant case, it is the contention of Ld. A.R. that the approval was not cancelled till date. Before us, the revenue did not furnish a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion such other materials or information as are available with the Assessing Officer contained in s. 158BB of the IT Act, 1961, would (not) include the materials gathered during the survey operation under s. 13324, vide CIT vs. G. K Senniappan 284 Iii? 220 ('Mad); (iv) The material or information found in the course of survey proceeding could not the a basis for making any addition in the block assessment, vide decision of this Court in Tar Case (Appeal) No. 2620 of 2006 ( between CIT vs. S. Ajit Kumar); (v) Finally the word may used in s. 133A(3)(iii) of the Act, viz., record the statement of any person which may be useful for, or relevant to, any proceeding under this Act , as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under s. 133A are not conclusive piece of evidence by itself 6.23 The Hon'ble ITAT Mumbai has decided this issue in the case of Unitex Products Ltd. vs. ITO 22 SOT 429 and it is held that statement taken during course of survey has no evidentiary value; it is simply an information which can be used for corroboration purpose for deciding any issue in favour or against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a S. Shetty v. A.C.I.T. (1999) 69 ITD 336 (Born) held as under: Undisclosed income has to be determined on the basis of evidence, documents, material and information found during search and it has to be authentic, reliable and verifiable information - Held Yes. Whether additions based on conjectures and surmises or estimates and presumptions not supported by any evidence documents, etc. found in search have to be deleted - Held Yes. Whether papers seized from premises of assessee when he was not in city could not be said to have been found from possession or control of assessee and hence even if at all provisions of Sec. 132(44) were applicable to assessment of income. No presumptions that it should be assessee transactions or assessee handwriting could be drawn against assessee- Held Yes. Further appellant has relied on the following decisions of the Honourable Mumbai ITA T and submitted that these additions be deleted. 6.27 From the assessment order, it transpires that the AO has solely relied upon the report of Investigation and did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, appellant is eligible for deduction of ₹ 1,62,75,000/- u/s.35(1)(ii) of I.T. Act. This ground of appeal is allowed. 6. On appraisal of the above mentioned finding, we noticed that the CIT(A) has relied upon the documentary evidence on record which has been produced by assessee. The AO declined the claim of the assessee on the basis of non submission of the record. However, the CIT(A) has placed reliance upon the number of decisions but on the similar facts and circumstances, the Hon ble ITAT has also given the finding in the case of Kitchen Essentials Vs. ACIT in ITA Nos. 6672 6673/Mum/2013 for A.Y. 2013-14 and 2014-15, Urnish Jewellers Vs. ACIT (2019) 107 taxmann.com 19, Vora Financial Services Pvt. Ltd. Vs. ACIT in ITA. No.532/M/2018 for A.Y.2014-15, Narbheram Vishram Vs. DCIT in ITA. No.42 43/Kol/2018 for A.Ys. 2013-14. The said law was relied by the Ld. Representative of the assessee. The facts are not distinguishable at this stage. We nowhere found any reason to interfere with the finding of the CIT(A), therefore, in view of the said facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct and justifiable which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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