TaxTMI 
TaxTMI 
2018 (7) TMI 737
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....ct) towards the donation of Rs. 1.00 crore made 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....
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....llate proceedings, the appellant has referred to the provisions of section 35 of the Act and submitted 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 t....
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....ated that they had issued any bogus donation receipts to the appellant company and they have not admitted that 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 considere....
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....ed laudable and enjoyed exemption from taxation, it has misused its exempt status under different provisions of law. As various approvals for registration are mandated 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....
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....tioned 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.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 o....
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....anval - His office is at Room No.48 B, 2nd Floor, 207, Maharshi Devendra Road, Kolkata-7. His contact nos. 9051726402, 9007118177, 9051726425. iv) Shri Amit Gupta - His office address is not known to me. His contact No. is 9804359206. v) Shri Madan Gupta - He is brother of Shri Amit Gupta. His office address is also not known to 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 ....
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....ed etc. The appellant has not brought on record why such donation was made to the said institute at Kolkatta and how did it come to know about the activities of M/s SHG & PH. It is noted that the amount of donation appears to be received by M/s SHG & PH through Shri Amit Gupta, a broker and the name of the appellant company was appearing in the list of bogus donation entries obtained through the said broker. 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 Enterpreneur....
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....g the course of survey as relied upon, to the appellant, during the course of assessment proceedings i.e. it has confronted these statements. The appellant could not state who was 'Amit Gupta', who working as a broker for arranging the bogus donation entries and why its name appeared in the list of bogus donations arranged by him and how does the appellant has come into contact with him. Further, it is to be noted that the strict rules of Evidence Act do not apply to income 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....
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.... the persons whose statements were recorded during survey." it is further noted that the requirement of the statute for a valid assessment would be met if the appellant is confronted with the material which is to be used against the assessee while framing the assessment order. It may be mentioned that the appellant has not brought on record any material which may indicate that the persons whose statement were stated in the assessment order and relied upon by the AO, have 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....
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....y notification in the Official Gazette, by the Central Government;] It is submitted that various sub sections of section 35 provide tax concessions for scientific research. Section 35(1)(ii) in particular, provides deduction in case of assesses 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. 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). 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 purpose....
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....uch in force at the time when assessee made donation to it and assessee had no reason to disbelieve the operation of approval and notification of the SHGPH at the relevant time and thus deduction was rightly claimed by assessee. The approval and notification continued to be in force even till the end of previous year relevant to present assessment year. Disallowing deduction by Ld. AO, on the basis of the subsequent notification through which the CBDT has rescinded the approval, is unjust and unlawful, as not only on the date of giving donation but even afterwards till the end of previous year, the notification of granting 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 ....
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....ion], 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 withdrawn.] [emphasis supplied] On perusal of above, it is evident that in the year under consideration when the assessee company had made the donation i.e. on 13.01.2014, SHGPH was having a valid approval from the appropriate authorities and according to this explanation the claim of the assessee could 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 expla....
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....ement commission was provided to the appellant. Such contention of assessee is supported by following decision: Hon'ble Kolkata ITAT in the case of Rajda Polymers vs. DCIT in ITA No. 333/Kol/2017 (case law PB 96-102), wherein Hon'ble Bench has observed that ".....Merely because the donee goes to Hon'ble Settlement commission and declares some additional income thereon, it does not automatically implead the assessee herein on the negative side and the express provisions of the Act cannot be ignored thereon. There cannot be any malafide that could be attributed on the assessee herein. We find that the assessee was under the bonafide belief and had made proper due diligence before granting donation to HHBRF which was duly recognized 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 spe....
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....nst which actually the society was engaged in regular research works which is evident from the answer to question No. 20 of the statements of Smt. Moumita Raghwan (APB 31) which is reproduced as under: "Q.20 Please state in detail all the activities done by your organization since last four years. Ans 20. I am submitting the details of research publications made by our organization during last few years separately. Our organization also extends its charitable activities such as development of health consciousness among downtrodden people, strengthening basic public health system, intervening to combat HIV / AIDS epidemic etc." Similarly in the statement recorded on oath u/s 133A Samadrita Mukherjee Sardar (APB 33) in reply to question No. 8 has clearly 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 a....
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....le Allahabad High Court in the case of CCE Vs. Shyam Traders reported in 2016 (333) ELT 389 wherein, the judgment of Supreme Court in Andaman Timber Industries was followed and the requirement of allowing cross-examination of witnesses was held as indispensable for adjudication. Reliance is also placed on the following decisions:- P.S. Abdul Majeed vs. Agricultural Income Tax & Sales Tax Officer(r) & Ors. reported in (1994) 209 ITR 0821 "Reliance on the auctioneers' records and treating them as if they were conclusive and as gospel truth is doing violence to the principles of the natural justice. Petitioner had in fact questioned the correctness of those records and stated that he had not sold any cardamom to the extent of 241 kgs. suggested by the assessing authority through auctioneers. He 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 o....
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....O so as to prove that how the donation paid by assessee was received back except the so called statements of some office bearers recoded during the course of survey at the premises of the society. Reliance is also placed on the decision of Hon'ble Kolkatta ITAT 'D' Bench in the case of Saimed Innovation Vs. ITO in ITA No. 2231/Kol/2016 order dated 13.09.2017 (Case Law PB 92-95) wherein under identical facts, the Hon'ble bench has allowed the weighted deduction claimed u/s 35(1)(ii) by holding that the statements recorded on oath during the survey cannot be relied upon. Further held that when opportunity for cross examination the third party was not given, no addition could be made on the basis of such statements. Your goodself would appreciate that assessee has fulfilled all the conditions specified for claiming deduction u/s 35(1)(ii) and on the other hand, Ld.AO 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 app....
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....DT rescinding the approval retrospectively shall not or should not affect the claim of the assessee. There was no information with the assessee regarding non-genuinity or not observing the standard fixed by the CBDT for making eligible itself for deduction U/s 35 of the Act. The assessee's act was in a bonafide manner. It is well settled proposition of law that no additional tax burden can be put on the assessee by making retrospective operations of certain notifications or withdrawal of notifications. In the case of Hitendra Vishnu Thakur Vs. State of Maharastra (supra), the Hon'ble Supreme Court has held 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 continued 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 th....