Tribunal grants deduction under Section 35(1)(ii) due to lack of corroboration and fair opportunity.

The Tribunal allowed the assessee's appeal, directing the AO to grant the deduction under Section 35(1)(ii). The Tribunal held that the statements used by the Revenue were not corroborated, the assessee was not given a fair opportunity for cross-examination, and the donation was made in good faith when HHBRF's approval was valid. Therefore, the deduction should not be denied based on subsequent events or uncorroborated statements.

---

---

Issues Involved:
1. Validity of disallowance of deduction under Section 35(1)(ii) of the Income Tax Act, 1961.
2. Admissibility of statements and evidence collected during the survey.
3. Right to cross-examination of witnesses whose statements are relied upon by the Revenue.
4. Applicability of the principle of human probabilities in determining the genuineness of the donation.

Detailed Analysis:

1. Validity of Disallowance of Deduction under Section 35(1)(ii):
The assessee claimed a deduction under Section 35(1)(ii) for a donation made to Heribicure Healthcare Bio Herbal Research Foundation (HHBRF), which was initially approved as a scientific research organization. The deduction was disallowed by the Assessing Officer (AO) on the grounds that the donation was bogus, as HHBRF allegedly returned the donation in cash to the donor in lieu of a commission.

2. Admissibility of Statements and Evidence Collected During the Survey:
The Revenue's case was based on statements recorded from various individuals during a survey under Section 133A, including Mr. Swapan Ranjan Dasgupta, Mr. Kishan Bhawsinghka, and Smt. Sujata Ghosh Dastidar. The AO concluded that HHBRF accepted donations and routed them back to donors in cash. However, the Tribunal noted that these statements were not corroborated by Mr. Kishan Bhawsinghka, who denied the allegations. The Tribunal emphasized that statements recorded during a survey do not have conclusive evidentiary value unless supported by corroborative evidence.

3. Right to Cross-Examination:
The assessee argued that he was not given the opportunity to cross-examine the individuals whose statements were used against him. The Tribunal upheld this contention, citing various judicial precedents, including the Hon'ble Supreme Court's decision in Andaman Timber Industries Ltd. vs. Commissioner of Central Excise, which held that not allowing cross-examination of witnesses amounts to a violation of natural justice. The Tribunal concluded that the AO's reliance on these statements without providing an opportunity for cross-examination was unjustified.

4. Applicability of the Principle of Human Probabilities:
The first appellate authority applied the principle of human probabilities, asserting that no businessman would donate more than 50% of his earnings to a cause unrelated to his business. However, the Tribunal disagreed, stating that the assessee's donation was made when HHBRF's approval under Section 35(1)(ii) was valid. The Tribunal emphasized that the assessee's claim for deduction should be allowed based on the material available on record and the bonafide belief at the time of donation.

Conclusion:
The Tribunal allowed the assessee's appeal, directing the AO to grant the deduction under Section 35(1)(ii). The Tribunal held that the statements used by the Revenue were not corroborated and the assessee was not given a fair opportunity for cross-examination. The Tribunal also noted that the assessee's donation was made in good faith when HHBRF's approval was valid, and hence, the deduction should not be denied based on subsequent events or uncorroborated statements.

---