2018 (9) TMI 1827 - AT - Income Tax

Assessee's Appeal Granted for Donation Deductions; Precedents Support Decision

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to grant the deductions for the donation made to 'The School of Human ... Disallowance u/s 35(1)(ii) - donation to “The School of Human Genetics and Population Health” - HELD THAT:- As decided in NARBHERAMVISHRAM GUA VERSUS DCIT, CENTRAL CIRCLE-4 (2) , KOLKATA [2018 (11) TMI 1314 - ITAT KOLKATA] the statements of the various parties and persons were recorded behind the back of the assessee and the AO did not allow opportunity of cross examination. In absence of opportunity of cross-examination no reliance could be made on such statements to draw any adverse inference against the assessee firm. The assessee firm denied its knowledge of the statements made by these institutes which were relied on by the Investigation Wing and the Assessing Officer. We note that not providing the opportunity of cross-examination is against the principle of natural justice and for that we rely of the judgment of CIT vs. Dharam Pal Prem Chand Ltd. [2007 (5) TMI 131 - HIGH COURT, DELHI]. The withdrawal of recognition u/s 35(1)(ii) 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)(ii). As relying on DCIT, CIRCLE-12 (1), KOLKATA VERSUS M/S MACO CORPORATION (INDIA) PVT. LTD. [2018 (3) TMI 811 - ITAT KOLKATA] we direct the AO to grant deduction u/s 35(1)(ii). Also See TUSHAR CHAWDA VERSUS I.T.O., WARD-31 (4) , KOLKATA [2018 (3) TMI 1405 - ITAT KOLKATA] - Decided in favour of assessee. Issues Involved:Disallowance of Rs. 11 Lakhs donation made by the assessee to 'The School of Human Genetics and Population Health' under Section 35(1)(ii) of the Income Tax Act, 1961.Detailed Analysis:1. Disallowance of Donation:The sole issue for consideration was the disallowance of Rs. 11 Lakhs made by the Assessing Officer (AO) concerning a donation to 'The School of Human Genetics and Population Health,' an institute approved by the Central Government. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] disallowed this claim based on reasons similar to those in the case of Narbheram Vishram vs. DCIT.2. Tribunal's Consideration of Identical Issue:The Tribunal referenced an identical issue in the case of Narbheram Vishram vs. DCIT, where donations to the same institute were disallowed. The Tribunal had examined the denial of weighted deduction under Section 35(1)(ii) of the Act, based on allegations from the Investigation Wing of Kolkata that the donations were bogus.3. Assessee's Argument:The assessee argued that the donations were genuine and both institutions were registered under Section 12A of the Income Tax Act. It was contended that the assessee never received back the donation amounts in cash or kind. The statements of key persons recorded by the Investigation Wing did not implicate the assessee, and the AO did not provide an opportunity for cross-examination, violating the principle of natural justice.4. Tribunal's Findings:The Tribunal noted that statements recorded behind the back of the assessee without cross-examination could not be relied upon. The Tribunal emphasized that suspicion, however strong, cannot replace evidence. The Tribunal referenced the Hon'ble Delhi High Court's judgment in CIT vs. Dharam Pal Prem Chand Ltd., which supports the necessity of cross-examination.5. Withdrawal of Recognition:The Tribunal addressed the argument that the Central Board of Direct Taxes (CBDT) had retrospectively canceled the recognition of the institutions. It was held that the withdrawal of recognition under Section 35(1)(ii) of the Act does not affect the assessee's right to claim deductions for donations made while the recognition was valid.6. Precedent Cases:The Tribunal cited several cases, including Rajda Polymers and M/s Maco Corporation India (P) Ltd., where similar issues were decided in favor of the assessee. The Tribunal held that the AO's reliance on general statements without specific evidence against the assessee was insufficient to disallow the deduction.7. Conclusion:Consistent with the view taken in the referenced cases, the Tribunal allowed the appeal of the assessee and directed the AO to grant the necessary deductions. The Tribunal emphasized that the assessee should not suffer due to the retrospective withdrawal of recognition of the donee institutions.Result:The appeal of the assessee was allowed, and the AO was directed to grant the deductions as claimed.