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TaxTMI 
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2018 (7) TMI 737
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....ade to a society engaged in scientific research and thereby determining total income at Rs. 4,94,04,990/-. The ld. CIT(A) has confirmed the action of the Assessing Officer. 3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal: "1. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming addition of Rs. 1,75,00,000/- made by way of disallowance of deduction u/s 35 of the I.T. Act, 1961 arbitrarily and merely on the basis of assumptions and presumptions. Thus, the addition of Rs. 1,75,00,000/- deserves to be deleted. 1.1 That, the Ld. CIT(A) has further erred in holding that the donation given by appellant as accommodation entry solely on the basis of statements of certain persons recorded behind the back of the assessee by some other officer, without even allowing the opportunity to cross-examine such persons in spite of specific requests being made by appellant. Thus, the addition of Rs. 1,75,00,000/- deserves to be deleted. 1.2 That, the AO has further erred in ignoring the fact that the approval granted to the said institution u/s 35(1)(ii) of the Act was in existence as on the date when donation ....
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....itted that the AO has neither denied the fact of payment of donation by the appellant, nor has raised any objection regarding approval status of said institute at the time when the payment was made by the assessee to the said society and thus there was no reason to disallow the deduction claimed by it. (ii) It was submitted by the appellant that various sub sections of section 35 provide tax concessions for scientific research. Section 35(1)(ii) in particular, provides deduction in case of assessee who are not engaged in carrying out research work on their own and rather contribute to some other scientific research organization having its main object of undertaking scientific research or to a university, college, or other institution to be used for scientific research. It was further submitted that Proviso to section 35(1 )(ii) provides that such institution, university, college, other institution has to be "approved" for such purposes by prescribed authority. Thus, before making contribution, an assessee has to ensure that institution is approved by prescribed authority, and then sum paid as donation would eligible for deduction in accordance with section 35(1)(ii). Thus, a com....
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....t they had refunded the donation amount received by the society to the appellant company in cash or by any other mode and there was no such documentary evidence also. It was also stated that no such opportunity of cross examination was provided by the AO though specific request was made in this respect. (iv) It was submitted by the appellant that it is evident that in the year under consideration when it had made the donation, the society was having a valid approval from the appropriate authorities according to which the claim of the appellant could not be denied based on any event having occurred subsequently i.e. in next financial year. (v) In view of the above submissions, it was prayed by the appellant that the deduction claimed by it was duly supported by a valid approval through gazette notification of the Government of India which was not withdrawn in the year under consideration. Therefore, in view of the Explanation to section 35(ii), disallowance made by AO in the year under consideration deserves to be deleted. (Vi) I have duly considered the submissions of the appellant, assessment order and the material placed on record. There is no dispute that at the time of....
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....by the provisions to be granted by different authorities under the law, therefore, at the outset, we would like to point out that we would be refraining from disturbing any order that the authority is empowered for granted to it for various years, including the years before us. Subject to these remarks, we also find that, though such income earned was in contravention of the relevant precisions of the Act, prima fade, the applicant society has made full and true disclosure of its income now taxable in the relevant years. 12. Be that as it may, we also find that the income declared for the assessment years results in additional tax payable which exceeds the prescribed limits u/s. 245C The application has paid fee of Rs. 500/-. The additional tax and interest of Rs. 6,47,00,000/- has also been fully paid in respect of the proceedings pending of the Assessment Years 2012-13, 2013- 14 and 2014-15. Therefore,, the application is allowed to be proceeded with u/s. 245D(lj of income Tax Act for Assessment Years 2012-13,2013-14 & 2014-15." (vii) It is pertinent to mention that M/s SHG & PH has also paid taxes including interest to the tune of Rs. 6.47 Crore on the income disclosed bef....
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....ceive donation which are exempted u-s.SOG and u/s.35, the brokers. Shri Avijit Sinharoy, Shri Vijay Agarwai Shri Amit Gupta and Shri Madan Gupta, who gathered this information from market sources and came to us. Primarily, they offered to receive their money in the guise of donation exempted us. 80G & u/s.35 and they will return back their money after providing us actual donation @ 30%. But factually, we got at 3% of total amount during the first year which has been raised to 8% as on date. As our organization desperately needs money for its research and development activities, we accepted their proposal. Q. 12 How do your organization adjust the refund of said amount and in what form? Ans. The donations are made mainly in the form of RTGS and a few of them are in the form of cheque. The amounts are returned within 2 days in the names of various companies provided by the donor alter deducting the amount of actual donation (a 8%. The records have been managed by issuing normally back-dated appeal letters to the donors." (ix) It may further be mentioned that the above referred statement of Smt. Moumita Raghvan was agreed to by Smt. Samadrita Mukherjee Sardar, the founder mem....
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.... me. His contact No. is 8282967343. vi) Shri Avijit Sinharoy - His office is at Grant Lane, Kolkata and his contact Nos. are 9674111333, 9830777757. vii) Shri Sailesh Gupta - His office address is not known to me. His contact No. is 8013142439. 9903546784. 8017002888. viii) Shri Yoges Agarwal His office is at 27. Weston Street, top floor, Kolkata. His contact No. is 9831683393. ix) Shri Govind Choudhuri - His office is not known to me. His contact No. is 9831631716, 983003045. Q. 12 How the above persons, as you mentioned in your answer to question no, 10, came to know that they can get this type of services from your organization, i.e., they can donate their money to you and route back their money through your organization? Ans. As our organization is entitled to receive donation which are exempted u/s.80G and u/s.35, the brokers, Shri Avijit Sinharoy, Shri Vijay Agarwal. Shri Amit Gupta and Shri Madan Gupta, who have this information from their own source and propose us to receive amounts as donation through RTGS or Cheque, which has to be returned back to them and in turn, they will give us commission. Primarily, they offered to receive their money in the guise....
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....er. The appellant has not brought on record, about the identity of Shri Amit Gupta, its association with the appellant company etc. In fact, the appellant has not stated anything about Shri Amit Gupta at any stage of proceedings so far. (xii) It is noted from the official website of the income tax Department (https://www.incometaxindia.gov.in/Pages/utilities/Notified-Scientific Research.aspx) that a number of research institutes have been approved u/s 35 (1)(ii) of the Act, which are located only at Jaipur and in Rajasthan, some of them are as under: * Birla Science & Technology Centre, Jaipur * M/s Indian Institute of Health Management Research, Jaipur * Social Policy Research Institute, Jaipur * Indian Institute of Marwari Enterpreneurship, Jaipur * Jain Vishva Bharati, Ladnun, Rajasthan, (xiii) The appellant has not stated anything why it had made such huge donations to M/s SHG & PH at such a far off place and whether it has verified about the genuineness of its activities before making such huge donation. I fail to understand why the appellant did not choose to make donations to the research institutes located at Jaipur or in the state of Rajasthan. It is p....
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....come tax proceedings. It may be mentioned that the AO is not debarred from relying on private sources of information, which he may not disclose to the assessee at all. But, when he proposes to use the same against the assessee, the result of any private inquiry, he should communicate to the assessee, the substance of such information so as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him sufficient opportunity to meet it. On a perusal of assessment order that the AO has confronted to the appellant gist of the enquiries made and required it to explain why the donation to M/s SHG & PH should not be treated as bogus. There is no doubt that AO must place before the assessee all evidence gathered from private sources but he is not required by law in each & every case, to give to the assessee the right to cross-examine the parties from whom the evidence was gathered. In fact, he needs not even disclose the names of the parties because in that event confidentiality of the names of the parties would not be maintained. If the parties who have given evidence are to be assured confidentiality, the question of cross-examinatio....
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....e retracted their statements. (xvii) It is pertinent to mention here that in the written submissions, the appellant has harped upon the legal issues only and not even a single word has been stated about the findings of the AO as recorded in the assessment order, regarding the justification for making donation to M/s SHG & PH except stating that M/s SHG & PH was approved by the competent authority u/s 35 of the Act. (xviii) Therefore, in view of the above discussion and looking to the particulars facts and circumstances of the case, it is held that the AO was justified in not allowing deduction of Rs. 1.75 Crore claimed by the appellant u/s 35(1)(ii) of the Act and hence, the same is hereby sustained. Hence, this ground of appeal is hereby rejected." 5. While pleading on behalf of the assessee, the ld AR has submitted as under: All these grounds of appeal relate to disallowance of weighted deduction claimed by assessee u/s 35(1)(ii) of the Income Tax Act, 1961 on the contribution made of Rs. 1.00 Cr and are interlinked, thus the same are canvassed together for the sake of convenience. Facts of the case are that during the year under consideration, assessee had made donat....
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....5(1)(ii) provides that such institution, university, college, other institution has to be "approved" for such purposes by prescribed authority. Thus, before making contribution, an assessee has to ensure that institution is approved by prescribed authority, and then sum paid as donation would eligible for deduction in accordance with section 35(1)(ii). It is noteworthy that weighted deduction equal to 175% of donation is available to assessee if it: (i) pays donation to a research institution having object of undertaking scientific research; and (ii) which is "APPROVED" as well as "NOTIFIED" for the purposes of this section in accordance with guidelines prescribed. Your goodself would appreciate that lower authorities have: - neither denied the fact of payment of donation by assessee; - nor have raised any objection regarding approval status of said institute at the time when the payment was made by the assessee to the said society. In this scenario, there is no reason to disallow the deduction claimed by assessee which was legitimately available to it since it had complied all the conditions enumerated therein for claiming such weighted deduction. It is submitted t....
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....g approval was in force. If at all some retrospective action was to be taken against SHGPH, it should adversely affect the society and cannot and should not affect the other persons including the assessee company who acted in bonafide manner. It is settled proposition of law that any amendment in statute with retrospective operation cannot be made which had the effect of additional tax burden meaning thereby any levy of tax with retrospective operation cannot be made which is against the spirit of law. It has been held by Hon'ble Supreme Court in the case of Hitendra Vishnu Thakur vs. State of Maharashtra, AIR 1994 S.C. 2623 (Case law PB 46-63) that a procedural statute should not generally speaking be applied retrospectively, where the result would be to create new disabilities or obligations, or to impose new duties in respect of transactions already accomplished. Further, a statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication. The Hon'ble Apex court in the case of CIT (Central-1) Delhi Vs. Vatika Township Pvt. Ltd. rep....
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....ld not be denied based on any event having occurred subsequently after more than two years. The Hon'ble Kolkata ITAT in the case of M/s Maco Corporation (India) Pvt. Ltd. ITA No.16/Kol/2017 (Case Law PB 82-91) has allowed relief to assessee in the identical circumstances where deduction on account of donation to same Institute i.e. School of Human Genetics and Population health (SHGPH) was disallowed by ld. AO, by holding that at the outset we find that Taxation Laws (Amendment) Act 2006 has introduced explanation to section 35(1)(ii) of the Act. The provisions of the Act, in view of the explanation, are very clear that payer (the assessee) 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. It was further observed by the Hon'ble Tribunal that there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) and case of assessee falls on much better footing than the facts before Hon'ble Apex Court in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. vs CIT Gwalior as in ....
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....ognized u/s 35(1)(ii) of the Act at the time of giving donation. We hold that if the subsequent notification cancelled the registration u/s 35(1)(ii) of the Act, the same does not attract the donation made by the assessee when the said notification was in force. The bonafide belief of assessee donor at the time of granting donation to an institute on the basis of recognition then available, cannot be disturbed by subsequent event. This is more clearly spelt out in the provisions of the Act itself by way of explanation to section 35(1) of the Act. Hence even as per the provisions of the Act, the denial of deduction u/s 35(1)(ii) of the Act is not in order......." The ld. CIT(A) while confirming the disallowance, has also alleged that when there were other notified institutions in Jaipur also, then why assessee has donated such huge amount to an institution located outside Jaipur. In this regard it is submitted that it is the outlook of assessee as to which institution it wishes to donate and AO or other authority cannot ask to make the donation to any specified institute. It is also relevant to state that the institute to whom assessee has made the donation had a valid approval in....
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....learly stated the activity of SHGPH and also in reply to question No. 16 (APB 35) stated the details of the research scientists associated with SHGPH. It is further submitted that nowhere in the statement any of the office bearers have stated that they had issued any bogus donation receipts to the assessee company. Moreover none of the office bearer any where admitted that they had refunded the donation amount received by the society to the assessee company in cash or by any other mode. However, a reference of some Amit Gupta, stated as a middleman is made but neither any statements of Amit Gupta, if any, were provided nor any enquiry report, if any, was provided and also no opportunity to cross examine him was allowed. It is also submitted that no evidences / material has been brought on record by Ld. AO, from which it could be established that the assessee company had either made a bogus donation or had received back the donation amount in cash or in any other mode. Thus the allegation of the bogus donation is solely based on the presumptions without any cogent material against the assessee company. During the course of assessment proceedings, a request was made before Ld. AO....
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....e denied the sales in toto. He also prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to crossexamine the authors of those books. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross-examine the authors of those books as was laid down by this Court in Shaduli vs. State of Kerala (1972) 29 STC 44, which was confirmed by the Supreme Court in State of Kerala vs. Shaduli (1977) 39 STC 478." CIT vs. EASTERN COMMERCIAL ENTERPRISES (1994) 210 ITR 0103 "As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the corner-stones of natural justice." CIT vs. D.M. JOSHI & ORS (1999) 239 ITR 0315 "The Tribunal after considering all the relevant material on record, held that the AO ought not to have relied upon the affidavit of J.C. Dave made on 11th June, 1988, without affording an opportunity to the assessee of cross-examining J.C. Dave and that reliance placed on the affidavit without giving the assessee an opportunity....
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....has not discharged his onus of proving it otherwise by bringing on record any evidences on the basis of independent enquiries made during the course of assessment proceedings. In the circumstances it is submitted that the deduction claimed by the assessee company is duly supported by a valid approval through gazette notification of the Government of India which was not withdrawn in the year under consideration, when the assessee made the donation to SHGPH. Therefore in view of the explanation to section 35(1) (ii), disallowance of weighted deduction on the donation of Rs. 1,00,00,000/- deserves to be deleted. - B.P. Agarwalla & Sons Ltd. Vs. CIT (Cal.) 208 ITR 863 (case law PB 78-81) - CIT Vs. General Magnets Ltd. (Calcutta) 253 ITR 471(case law PB 72-74) - Jai Kumar Kankaria Vs. CIT (Calcutta) 251 ITR 707 (case law PB 75-77) - K.M. Scientific Rresearch Centre Vs. Laxman Prasad (Allahabad) - Seksaria Biswan Sugar Factory Ltd. Vs. IAC (Bombay) 184 ITR 123 - Chotatingrai Tea Estate Pvt. Ltd. Vs. CIT (Guahati) 236 ITR 644 - ITO Vs. M.C. Ponnoose (SC) 118 ITR (St.)32 6. On the other hand, the ld CIT DR has relied on the orders of the authorities below. 7. The Bench ha....
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....ntinued to be prospection in operation, unless otherwise provided, either expressly or by necessary implications. Similarly in the case of CIT(Central-1), Delhi Vs Vatika Township Pvt. Ltd. (supra), the Hon'ble Supreme Court has held that the beneficial amendment which effects the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given retrospective effect. Thus the retrospective effect can be given only for the beneficial amendments but not to put the additional burden that too on third party. Further the explanation to Section 35(1) of the Act also provides that deduction to which 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 association, university, college or other institution, referred to in clause (ii) or clause (iii) has been with....