TMI Blog2020 (12) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... onation was given acting upon the registration when it was valid and operative. On a perusal of the aforesaid statutory provision i.e Sec. 35(1)(ii) of the Act, as well as the ratio laid down in the aforesaid judicial pronouncements it can safely be concluded that if the assessee acting upon a valid registration/approval granted to an institution had donated the amount for which deduction is claimed, then, such deduction cannot be disallowed if at a later point of time the registration is cancelled. - Accordingly, we set aside the order of the CIT(A) and vacate the disallowance of the assesse s claim for deduction under Sec.35(1)(ii) - Decided in favour of assessee. - ITA Nos.1252 And 1253/Mum/2019 - - - Dated:- 14-12-2020 - Shri M. Balaganesh, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : Shri Pi yush C hhajed, A.R For the Respondent : Ms. Shreekala Pardeshi, D.R ORDER PER RAVISH SOOD, JM The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(A)-22, Mumbai dated 11.12.2018 for A.Y. 2011-12 and A.Y. 2012-13. As the issues involved in the captioned appeals are inextricably i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal at/or before the time of hearing. 2. Briefly stated, the assessee company which is engaged in the business of a consignment agent, indenting agent and trading in chemicals had e-filed its return of income for A.Y. 2011-12 on 31.08.2011, declaring its total income at ₹ 16,62,71,740/-. Original assessment was framed by the A.O vide his order passed u/s 143(3), dated 30.03.2014 and the income of the assessee company was assessed at an ₹ 17,21,52,510/-. Further, on the basis of a rectification order passed u/s 154 of the Act, dated 25.09.2017 the assessed income of the assessee was scaled down to an amount of ₹ 16,64,58,212/-. Observing, that the Ministry of Finance vide its notification No. 279/2016/F.No.203/135/2007/ITA.II, dated 06.09.2016 had withdrawn the approval that was earlier granted u/s 35(1)(ii) of the Act on 14.03.2008 to M/s Herbicure Healthcare Bio-Herbal Research Foundation (for short HHBRF ), the A.O for the purpose of withdrawing the deduction of ₹ 1,05,00,000/- that was claimed by the assessee u/s 35(1)(ii) in respect of a donation of ₹ 60 lac stated to have been given to HHBRF reopened its case u/s 147 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned the matter to 29.11.2007, however, adopting a non-cooperative attitude even on the said date the assessee failed to comply with the aforesaid direction of the A.O. Observing that the assessee by adopting a lackadaisical approach had evaded putting up an appearance before him and also failed to corroborate the genuineness of the impugned donation given to HHBRF, the A.O held a conviction that authenticity of the aforesaid transaction had remained unproved. Also, it was observed by the A.O that the assessee company and its directors had made donations to alleged trusts during similar period which by no means could be held to be a coincidence. It was further observed by the A.O that a survey operation was conducted by the Directorate of Investigation (Kolkata) under Sec. 133A of the Act on 27.01.2015 at the registered/administrative offices of HHBRF, which revealed, that the said institution had indulged into providing accommodation entries of bogus donations to the donors through a network of brokers and accommodation entry providers. As observed by the DIT(Inv.) the bogus donations were being taken vide cheques/RTGS and the same after deduction of commission were routed back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served by the A.O that the latters auditor had admitted that he had prepared the audit report on the basis of the trial balance and the bills vouchers were checked by his boys or assistants/interns without obtaining any confirmation from any of the donors and the other parties. Further, Shri. Manoj Kumar Kothary, CA of the HHBRF who was maintaining the books of accounts of the research organization at his office had stated that the coded list and broker wise list was being maintained on the instructions of Shri. Swapan Ranjan Dasputa, founder director of HHBRF. It was further observed by the A.O that one Shri Anand Krishan Maitin, former director of HHBRF was queried as regards the reasons for having resigned after serving for the period 2003 to 2011. In reply, it was stated by him that he had resigned for the reason that the research organisation was carrying out certain unethical practices.Further, it was observed by the A.O that Shri. Kalipada Bhattacharaya, auditor of HHBRF had stated that they had never taken any independent third party confirmation and most of the audit was done on the basis of the bank statement itself. Further, as stated by him no physical verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the documents supporting the donations given to HHBRF in the course of the regular assessment that was framed by the A.O vide his order passed u/s 143(3), dated 30.03.2014, therefore, the A.O had wrongly assumed jurisdiction u/s 147 of the Act after lapse of a period of four years from the end of the relevant assessment year. Also, the assessee assailed the validity of the reassessment on the ground that the same was based on a mere change of opinion which was not permissible under law. However, the CIT(A) not finding any merit in the contentions advanced by the assessee in context of the validity of the jurisdiction assumed by the A.O u/s 147 of the Act, therein, rejected the same. On merits, the CIT(A) was not impressed with the claim of the assessee that on a withdrawal of exemption of the aforesaid research organization, viz. HHBFR the assessee s claim for deduction u/s 35(1)(ii) could be dislodged. It was observed by the CIT(A) that the key personnel of the research organization, viz. HHBRF had in their statements recorded on oath admitted in the course of the survey proceedings conducted against the research organization that the latter was involved in the bogus don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration. As such, the assessee assailed the very assumption of jurisdiction by the A.O u/s 147 of the Act. On merits, it was averred by the ld. A.R that at the time when the assessee had given the donation to the aforesaid research institution viz. HHBRF, the latter had a valid registration certificate granted under the Act. Accordingly, it was the claim of the ld. A.R that the subsequent cancellation of the registration certificate would not invalidate the assessee s claim for deduction under Sec. 35(1)(ii) of the Act. In order to drive home his aforesaid claim, it was submitted by the ld. A.R that from a perusal of the Explanation to Sec. 35(1)(ii) of the Act, it could safely be gathered that a benefit taken under the said section could not be denied on account of a subsequent withdrawal of approval granted to the institution. In support of his aforesaid contention the ld. A.R had placed reliance on the judgment of the Hon ble Supreme Court in the case of CIT Vs. Chotatingrai Tea (2003) 126 taxman 399 (SC). Apart from that, it was submitted by him, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a bogus institution that was not doing any research activity but was in fact laundering ill-gotten money of the donors, therefore, the A.O/CIT(A) had rightly declined the assesse s claim for deduction under Sec. 35(1)(ii) of the Act. Also, it was submitted by the ld. D.R that subsequently the approval granted to the said research institution was also withdrawn by the CBDT. In order to fortify his aforesaid claim that the assessee was not entitled for deduction under Sec. 35(1)(ii) of the Act the ld. D.R took us through the statements of the directors/ex-director/auditors of the research institution, viz. HHBRF, wherein the fact that the institution was involved in the racket of providing bogus donations was clearly admitted by them. Also, it was submitted by the ld. D.R that the fact that the aforesaid research institution, viz. HHBRF had in the course of the proceedings before the Settlement Commission admitted its involvement in the organised bogus donation racket by producing an affidavit on its own therein proved to the hilt that the latter was providing accommodation entries in the garb of bogus donations. 6. We have heard the authorized representatives for both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of an approval granted by a prescribed authority would not lead to invalidation of the assessee s claim of deduction. On a similar footing, we find, that the Hon ble High Court of Bombay in the case of National Leather Cloth Mfg. Co. Vs. Indian Council of Agricultural Research (2000) 100 Taxman 511 (Bom) while dealing with an identical issue of denial of deduction under Sec.35(1)(ii) of the Act due to a subsequent withdrawal of approval with retrospective effect, had observed, that such retrospective cancellation of registration will have no effect upon the deduction claimed by the donor since such donation was given acting upon the registration when it was valid and operative. On a perusal of the aforesaid statutory provision i.e Sec. 35(1)(ii) of the Act, as well as the ratio laid down in the aforesaid judicial pronouncements it can safely be concluded that if the assessee acting upon a valid registration/approval granted to an institution had donated the amount for which deduction is claimed, then, such deduction cannot be disallowed if at a later point of time the registration is cancelled.. We have perused the aforesaid judicial pronouncements relied upon by the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 granted to the 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.‖ 7. Similarly, the another co-ordinate Bench of this Tribunal, Jaipur Bench, in the case of P.R. Rolling Mills Pvt. Ltd. vs. DCIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing grounds of appeal before us : 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (A) erred in confirming the assessing officer's action of issuing Notice u/s.148 dated 02.03.2017 for AY 2012-13 which is bad in law since the original assessment was completed u/s.143(3) on 18.03.2015. 2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (A) erred in passing the order without appreciating that the Assessing Officer failed to provide the copies of Statements Recorded from third party and no opportunity given to the appellant company to cross-examine and hence the process of natural justice was not followed. 4. On the facts and circumstances of the case, Id. Commissioner of Income Tax (A) erred in confirming the assessment order passed u/s 143(3) r.w.s. 147 without issuance of notice u/s 143(2). 5. On the facts and circumstances of the case, the Id. Commissioner of Income A) failed to appreciate that at the time when the donation of ₹ 15,00,000/ - was made by the appellant company the proper Approvals/Exemptions were in force and in favour of the said Trust i.e. School of Human Genetics and Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the records, it was noticed by him that the assessee had paid a donation of ₹ 15 lac to a Kolkata based institution, viz. M/s School of Human Genetics and Population Health and had claimed deduction under Sec. 35(1)(ii) of the Act @ 175% on ₹ 15 lac which worked out to ₹ 26,25,000/-. On being called upon to substantiate the basis for claim of such deduction, it was stated by the assessee, that the donation to the aforesaid party was genuine and was given on the basis of exemption certificates issued by the Income tax Department. However, the assessee neither produced any of the parties/persons for verification nor appeared personally for examination. Accordingly, summons u/s 131 were issued by the A.O on 16.11.2007 to both the directors of the assessee company for verifying the genuineness and veracity of the aforesaid donations. But then, the assessee failed to comply with the aforesaid summons and did not put up an appearance before the A.O. Another opportunity given to produce the directors for examination was also not availed on the ground that Shri. G.D Shah, director was an old person and it was requested that in his place the other director, viz. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ac) may not be withdrawn and subjected to tax. Observing, that the CBDT, New Delhi vide its order, viz. F.No. 203/09/2015/ITA-II, Govt. Of India, Ministry of Finance, Department of Revenue, North Block, New Delhi, dated 15.09.2016 had withdrawn the notification u/s 35(1)(ii) for the aforesaid research organization, viz. SHG PH, the A.O, was of the view that the aforesaid research organization, viz. SHG PH had not carried out any genuine activities and was only engaged in the business of issuing bogus donation receipts u/s 35(1)(ii) of the Act. Accordingly, it was observed by the A.O that the aforesaid research organization, viz. SHG PH had received huge number of donations on which it had earned service charges and after deducting the same had refunded the balance in cash to the donors. Also, it was observed by the A.O that as the assessee had failed to comply with the summons which were issued to it u/s 131 of the Act, therefore, it had failed to prove the genuineness of the impugned donations given to SHG PH. In the totality of the aforesaid facts the A.O disallowed the assessee s claim for deduction u/s 35(1)(ii) of ₹ 26,25,000/- and added back the same to the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the CIT(A). Apart from assailing the assessment order on merits the assessee challenged the validity of the jurisdiction assumed by the A.O for dislodging the concluded assessment that was earlier framed by him u/s 143(3), dated 18.03.2015 by reopening its case u/s 147 of the Act. However, the CIT(A) not finding any merit in the contentions advanced by the assessee in context of the validity of the jurisdiction assumed by the A.O u/s 147 of the Act, therein rejected the same. On merits, the CIT(A) was not impressed with the claim of the assessee that on the basis of a retrospective withdrawal of exemption of the aforesaid research organization, viz. SHG PH the assessee s claim for deduction u/s 35(1)(ii) could be dislodged. It was observed by the CIT(A) that the key personnel of the research organization, viz. SHG PH had in their statements recorded on oath admitted in the course of the survey proceedings conducted against the research organization that the latter was involved in the bogus donation scam for earning commission. It was further noticed by the CIT(A) that the factum of the research organization, viz. SHG PH of being involved in bogus donation racket wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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