TaxTMI 
TaxTMI 
2018 (3) TMI 811
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....machinery spares, equipment & component and project execution work. The return of income for the Asst Year 2013-14 was filed by the assessee on 29.9.2013 disclosing total income of Rs. 32,41,51,490/-. The ld AO observed that the assessee claimed donation of Rs. 3,06,25,000/- (being 175% of Rs. 1,75,00,000/-) u/s 35(1)(ii) of the Act for the scientific research organization donation made as under:- School of Human Genetics & Population Health (SHGPH in short) 19.11.2012 25,00,000 SHGPH 27.11.2012 25,00,000 Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF in short) 19.3.2013 50,00,000 HHBHRF 20.3.2013 50,00,000 HHBHRF 22.3.2013 25,00,000 1,75,00,000 Survey Operations u/s 133A of the Act were conducted on 27.1.2015 in the premises of SHGPH and HHBHRF by the Directorate of Investigation, Kolkata. In such survey, it was found that the aforesaid concerns were engaged in collecting bogus donations u/s 35(1)(ii) of the Act to beneficiaries to enable them to claim weighted deduction of 175% of the amounts actually paid by such beneficiaries. The ld AO issued a show cause notice asserting the followin....
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.... notice replied as under:- * These institutions are duly registered with the registrar of companies, Income Tax Department, SIRO and other authorities and are engaged in the research activities. These institutions enjoy registrations u/s 35(1)(ii) of the Act. * These are not bogus donations as alleged. The donations are genuine and no commission whatsoever was paid to any person with respect to these donations. At the time of making these donations no such discrepancy came to the knowledge of the assessee company. * The assessee company is subjected to regular assessment every year and it can be seen from the accounts that for several years the assessee group has been supporting several institutions by giving donations. This is the philosophy of the group. * The deduction claimed is correct and should be allowed in full. In support of its claim the assessee company furnished following:- a) Registration & renewal certificate of department of Science & Technology, Government of India. b) Request letter of HHBHRF. c) Income Tax Exemption of Certificate. d) Receipt of R.s 50,00,000/- issued by SHG&PH e) Receipt of Rs. 1,25,00,000/- issued by HHBHRF. * As....
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....uded that the assessee company had not verified the concerns properly. The MD of the assessee company does not know any person of these concerns and does not remember the name of the broker who had brought the details of these concerns. Accordingly, the ld AO disallowed the weighted deduction claimed in the sum of Rs. 3,06,25,000/- u/s 35(1)(ii) of the Act in the assessment. 6. The assessee filed a detailed written submissions before the ld CITA meeting out each and every point of the order of the the ld AO which are reproduced in pages 7 to 19 of the order of the ld CITA which are not reiterated herein for the sake of brevity. The ld CITA deleted the disallowance by observing as under:- "5.1. I have gone through the assessment order, written submissions filed by the AR of the appellant company as well as the documents filed in the form of paper book by the AR of the appellant. The sole issue to be decided in this appeal is whether the donation of Rs. 1,75,00,000/- made by the appellant to two concerns viz. SHG&PH amounting to Rs. 50,00,000/- and HHBRF amounting to Rs. 1,25,00,000/- is eligible for weighted deduction of Rs. 3,06,25,000/- i.e. ....
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....the survey report as well as the statements recorded by the DDIT (Inv), Kolkata. In fact, if the statements recorded are ignored the independent finding of the AO remains minimal. I find that the arguments of the AR are multifold. However his arguments can be categorized into two limbs. First limb being violation of principles of natural justice and second limb being on the merits of the case. The AR has vehemently argued that there had been gross violation of principles of natural justice in this case as the survey report or the copies of the statement relied upon by the AO were never provided to the appellant in spite of several written as well as verbal requests made by the appellant before the AO. In support of its contentions the AR drew my attention towards the relevant pages in the paper book. Thus the contentions of the AR of the appellant were found to be correct. 5.2 From the facts emerging from records, it is not in dispute that indeed the AO has neither provided the copies of statements recorded by the DDIT(Inv), Kolkata or the survey report prepared by him to the appellant for rebuttal. I find that the AO has relied upon by the entire findings....
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.... appellant has contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as mentioned at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price' list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the direction to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that is the testimony of these two witnesses is discredited/there was-no, material with....
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....ns named herein above who were eligible concerns u/s 35(1 )(ii) of the Act. It has further claimed additional deduction of Rs. 1,31,25,000/- representing the weighted deduction portion in the computation of income. Thus the appellant has claimed total deduction of Rs. 3,06,25,000/- u/s 35(1 )(ii) of the Act. On requisition from the AO, I find that the appellant furnished complete details of deduction claimed by it u/s 35(1)(ii) of the Act. The AO observed that sum of 50,00,000/- was paid to School Of Human Genetics & Population Health (SHG & PH) and sum of Rs. 1,25,00,000/- was paid to Herbicure Healthcare Bio-Herbal Research Foundation (HHBHRF). The AO issued a show cause notice dated 29.01.2016 to the appellant seeking explanation as to why the deduction claimed u/s 35 amounting to 3,06,25,000/- should not be disallowed. The whole basis for the show cause was that on 27.01.2016 the investigation wing, Kolkata conducted a survey in the premises of these concerns and found that these concerns are engaged in providing bogus donation to the beneficiaries/ donors in lieu of commission payments. Statement of several persons associated with these concerns were recorded ....
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.... statements without any supporting material or evidences in support of such statements. I find force in the argument of the AR of the appellant that these statements were given by concerned persons only to avoid any kind of enquiry or investigation by the DDIT (Inv), Kolkata into the respective person's books of accounts. I also agree with the submissions of the AR of the appellant that all the positive materials filed by the appellant have been ignored by the AD and the conclusion is drawn by him that these donations were bogus donations. The copies of such statements were never furnished to the appellant in course of assessment proceedings. In spite of seeking cross examination of these persons the AO did not issue a single summon u/s 131 to enforce the attendance of any of the persons whose statements were relied upon by the AO. It is found that the AD recorded statement of managing director of the appellant company in course of the assessment proceedings who confirmed the donations made and the basis of making such donation by the appellant company. I also find that the appellant has, given its comment on each of the person whose statemen....
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....ent. I find that the institute had indeed been awarded Bharat Nirman Award for the area of Rural development in 2005. It was also awarded Global Achievers foundation award in 2012 and Bharat Vibhushan Samman Puraskar in 2013. I find that the evidences filed in this regard before the AO has not been rebutted by the AO. The AO has not conducted any examination or enquiry in this regard before arriving at the conclusion that the concern was not doing any research work and it was only involved in receiving bogus donations through banks and returning cash in lieu' of such receipts. It is also found that approval is granted to an organization u/s 35(1)(ii) by CBDT only after strict compliance of law. The approval is granted after various levels of scrutiny and checks and to concerns having track record of doing research activity. In respect of donation made HHBHRF it was explained that the said concern was duly registered with the Registrar of Companies, Income Tax Department as well by SIRO (Scientific and Industrial Research Organization). The research publications were also furnished before the AO. It was also explained by the appellant that the said ....
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....ies 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 (Hi) has been withdrawn. Thus, I find that the statue has itself brought it-all the donors under the protective wings of explanation attached to section 35(1 )(ii) of the Act. Further, even if it is presumed that the approval granted to these concerns u/s 35(1)(ii) has been withdrawn with retrospective effect because these concerns had breached the terms of approval , and the purported donation to the said concerns is a make- believe transaction then also in my considered opinion by virtue of this explanation attached to section 35(1) ,the disallowance made by the AO amounting to f3,06,25,0001- does not stand the test of law and is required to be reversed. I find that the ratio of decision of Calcutta High Court in the case of Jai Kumar Kankaria relied upon by the AR is relevant to the facts of the present case and accordingly it is held that since the donation was effected in FY 2013-14 and the validity of such registration of these insti....
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.... the report of Investigation wing, Kolkata at page 50 of the assessment order. It was thus concluded by the AO that through this trail HHBRF booked bogus expenses and generated cash. It is observed that these concerns may have been indulged in bogus billing of expenditure and siphoned or misappropriated the money which was received as donation, but the claim of donation made by the appellant cannot be denied to it merely on this ground. I find that these concerns were headed by renowned doctors and professionals and were awarded several times by the Government of India for their research related activities. I agree with the submissions of the AR of the appellant that after making the donation, the appellant was neither authorized nor required to check the end use of the funds by the said organizations. Thus, if any irregularity has happened it has happened at the level of the said concerns and the appellant is in no way connected to this scheme of arrangement particularly in absence of any material evidence to prove that the cash in lieu of the RTGS made by the appellant has come back to either the appellant or any of his representati....
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....pany was appearing in Serial No. 272 & 301 of the survey report amongst the names of list furnished by the DDIT(Investigation), Unit-4(1), Kolkata in the case of School of Human Genetics & Population Health and Herbicure Healthcare Bio- Herbal Research Foundation reflecting wherein bogus donation had been availed." 5. "That on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that CBDT, vide Notification No. 79/20 16/F. No. 203/ 135/2007 /IT A.II dt. 06.09.2016 & 82/20 16/F. No. 203/64/ 2009/ITA.II dt. 15.09.2016 has withdrawn the approval Notification of donees concern namely School of Human Genetics & Population Health, Kolkata and Herbicure Healthcare Bio-Herbal Research Foundation, Kolkata with effect from 1st April, 2007." 6. That on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that on the basis of enquiry made on Survey & post survey operations by the Investigation Wing of the Department in the case of the done concerns, the Hon'ble CBDT has withdrawn the approval Notification of the done concern w.e.f. 1st April, 2007. 8. W....
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....e 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. 8.3. We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision of the Hon'ble Supreme Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior reported in (2018) 90 taxmann.com 281 (SC) wherein it was held that :- 21. In our considered opinion, the CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second, the order passe....
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....endment in question was not retrospective but was prospective in nature. 28. The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of DIT (Exemptions) v. Mool Chand Khairati Ram Trust [2011] 11 taxmann.com 42/199 Taxman 1/339 ITR 622, Uttaranchal High Court in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74/[2007] 158 Taxman 199 and Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [2009] 315 ITR 382. 29. All the three High Courts after examining the issue, in the light of the object of Section 12A of the Act and Section 21 of the General Clauses Act held that the order of the CIT passed under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration till 01.10.2004; and lastly, Section 21of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate....