TaxTMI 
TaxTMI 
2020 (4) TMI 362
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....us donation made by the assessee and allowing the deduction claimed to the tune of Rs. 1,62,75,000/- u/s 35(1)(ii) of the I.T. Act, 1961." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the AO has solely relied upon the report of Investigation Wing and has not carried out any worthwhile independent inquiry in this matter as it is evident form the record that post survey investigation was also carried out. Notices were also issued u/s 131 of the IT Act to various brokers. During post survey proceedings, statement of brokers who are providing the accommodation entries were recorded and they accepted during the statement that they had arranged accommodation entries in the form of bogus billing for School of Human Genetics & Population Health(SHG&PH), Herbicure Healthcare Bio- Herbal Research Foundation (HHBRF) and Matrivani Institute of Experimental Research & Education(MIERE) in lieu of commission." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that addition has been done without any investigation as enough evidence is placed on record to prove that the assessee was....
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.... of facilitating bogus donation u/s 35(1)(ii) of the Income Tax Act, 1961. School of Human Genetics & Population Health, (SHG & PH), Herbicure Healthcare Bio- Herbal Research & Education (MIERE) were listed as the institution engaged in the bogus donation u/s 35(1)(ii) of the Act through various brokers in lieu of commission. The assessee was one of the beneficiary who had given donation of Rs. 93,00,000/- to the institution engaged in the bogus donation u/s 35(1)(ii) of the Act through various brokers in lieu of commission and claimed deduction u/s 35 of the I. T. Act, 1961 to the tune of Rs. 1,62,75,000/- and claimed of bogus donation in connection with the HHBRF to the tune of Rs. 54,25,000/- and claimed of the bogus donation to MIER & E to the tune of Rs. 36,75,000/- was disallowed and added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs. 2,78,05,289/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenues has filed the present appeal before us. ISSUE NOs. 1 to 6:- 5. All the issues are in connection with the allowance of the claim of the assessee by CIT(....
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....itness to enable him to dispose of the appeal Under sub-section (4,) of section 250, the AAC is empowered to make such further inquiry as he thinks fit or to direct the ITO to make further inquiry and to report the result of the same to him. Sub-section (5) of section 250 empowers the AAC to allow the appellant, at the hearing of the appeal, to go into any ground of appeal not specified in grounds of appeal on his being satisfied that the omission of the ground from the form of appeal was not wilful It is clear from the above provisions that the powers of the AAC are much wider than the powers of an ordinary court of appeal The scope of his powers is coterminous with that of the ITO. He can do what the ITO can do. He can also direct the IT() to do what he failed to do. The power conferred on the MC under sub-section (4) of section 250 being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances jusit. If the MC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. 4. On a conjoint reading of s....
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....te cases. The Court, therefore, upheld the impugned order of the Tribunal whereby the Assessing Officer was directed to consider the evidence produced by the appellant before the first appellate authority to prove the genuineness of the credits. 6.5 Therefore, a bare reading of the exposition of law relating to the power of the Commissioner of Income-tax (Appeals) to admit additional evidence as made by the Bombay High Court and relied on by the Kerala High Court (discussed above) clearly indicates that even if the repeated opportunities were given to the appellant to produce evidence and even if the appellant does not suo-motu produce any additional evidence, in the spirit of justice and fair-play, it is incumbent on the first appellate authority, being a quasi-judicial authority, to require the appellant to produce requisite evidence or to make necessary inquiry and admit any such fresh and additional evidence, by virtue of section 250(4) and (5) read with sub-rule(4) of rule 46A. 6.6 In the present case, the details submitted by the appellant are crucial to the grounds raised in appeal. The impugned order and remand reports do not contain any details to controvert the assert....
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....t, the Directors of the Herbicure Healthcare Bio-Herbal Research Foundation in the statements recorded U/s. 131 of the Act, had stated before the investigation team of the department that owing to severe financial crisis, genuine donations were not coming to them and they were compelled to accept the proposal to adopt the prevalent practice of scientific and research organizations giving accommodation entries on commission basis to different beneficiaries in the garb of donation receipts. The survey team also observed that the Institute has violated Rule SC, 5D and 5E of Income Tax Rules to be followed by an institution approved U/s. 35(1)(H) of the Act. Further, during the course of survey U/s. 133A, in the statements were recorded U/s. 131 of the Act, the authorized persons of the Matrivani Institute of Experimental Research & Education had stated before the investigation team of the department that MIER & E has earned service charges by providing accommodation entries for 'donations' received and refunding amounts after deducting such service charges. The survey team also observed that the Institute has violated Rule 5C, 5D and 5E of Income Tax Rules to be followed as an....
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....income U/s 12AA and also was an approved institution U/s. 35(1)(H) of the Act as a scientific research organization for the purpose of deduction on account of expenditure on scientific research. The assessing officer during the course of assessment proceedings had issued a show cause to the appellant The appellant has submitted Donation receipts issued by the said institute, Certificate of registration issued by Registrar of Companies, West Bengal, Extract from "The Gazette of India" wherein it was notified for general information that HHBRF has been approved by the Government of India for the purpose of Clause (H) of Sub Section (1) of Section 35 of the Income Tax Act read with Rules 5C and 5E of the Income Tax Rules 1962, Letter from the Secretary, the School of Human Genetics and Population Health, West Bengal as regards renewal of recognition of Scientific and Industrial Research Organizations (SIR0s) and Registration certificate U/s. 12A of the Act issue by Directorate of Income Tax (Exemptions) Kolkatta dated 03.02.2005. 6.11 Further, the appellant had given donation of Rs. 21,00,000/- to the Matrivani Institute of Experimental Research & Education and claimed deduction U/s....
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....ng the course of assessment proceeding vide submission dated 12.10.2015 and it was duly acknowledged by the assessing officer in Paragraph 5, Page No. 2 of the assessment order itself. The A.O. has thereafter made an allegation that this was an exercise to re-route the money into the books of accounts. No specific instances of re-routing have been pointed out by the assessing officer either at the time of assessment proceedings or in the remand report. The provisions of section 35(1)(H) of the Act, which reads as follows: - "35. (1) in respect of expenditure on scientific research. the following deductions shall he allowed- (ii) an amount equal to one and three fourth limes of any sun? paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research: Provide that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (b) such association, university, college or other institution is spe....
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.... Rs. 2.00.000 to the scientific research association on the basis of the approval granted by the prescribed authority to it for the purposes of clause (ii) of sub-section (1) of section 35 of file Act by notification in the Official Gazette at the material time can be adversely affected the withdrawal of the approval subsequently with retrospective effect by the prescribed entitled to rely upon the certificate granted by the prescribed authority. We have already decided an identical controversy in the context of deduction under section 35CCA of the Act to the institution or association to which it had donated any sum of money for claiming deduction under that section if it was subsisting and valid at the time the donation was made. The retrospective withdrawal and/or cancellation of the certificate will have no effect upon the assessee who has acted upon it when it was valid and operative. 6.16 Further the Honorable Mumbai High Court while delivering the above decision had followed its own decision in the case of Ramdas Maneklal Gandhi reported in [2000] 108 Taxman 590 (Bombay). In the case of Ramdas Maneklal Gandhi applying the ratio of Honorable Supreme Court in the case of Sta....
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....y which was approved by department on date of payment to that society, notwithstanding the fact that said approval was withdrawn with retrospective effect. 6.19 The Honorable Calcutta Tribunal in the case of Shri Mayapur Dham Pilgrim and vs. CIT(Exemptions), Kolkata I.T.A No. 1165/Ko1/2016 order pronounced 03.05.2017 has decided similar issue, wherein the appellant in that case had taken donation from School of Human Genetics and Population Health, Kolkata and subsequent after survey action by the Investigate(' Wring or Calcutta, the exemptions u/s. 12A has been denied to the appellant. The Honorable Tribunal had given IS findings in Paragraph No. 19 of the its order which is reproduced as under: - "19. The fact that assessee's name figures in the list of donations given by SHG&PH as submitted by them in an application filed before the Settlement Commission of Income Tax u/s 245C of the Act, throws doubts about the genuineness of the Donation received by the assessee from SHG&PH. As far as the assessee is concerned all general Donations received by it during the F. Y. relevant to A. Y. have been duly accounted for and spent for charitable purpose. The money representing....
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....ormation that the Central Govt. has rescinded the relevant notification dated 28.01.2010 to the effect that the said notification would be deemed as not issued for any tax benefits under the Act to the said research institute. Taking note of this development, the Pr. CIT cancelled the assessment order passed by the AO. In an appeal to Tribunal, the honorable Tribunal held that the subsequent developments i.e. CBDT Notification rescinding the recognition for M/s. SHGPH on 15.09.2016 cannot be a ground to hold that A.O' s order on 29.06.2016 is erroneous in the light of the explanation in section 35(1)(ii) of the Act (supra). 6.21 Further, the Hon'ble Income Tax Appellate Tribunal - Mumbai in the case of Vora Financial Services Private Vs Assistant Commissioner of Income Tax ITA No. 532/Mum/2018 A.Y. 2014-2015 dated 29.06.2018 is also decided the identical issue. The honorable jurisdictional Tribunal held that even if the approval is cancelled subsequently with retrospective effect, the weighted deduction claimed by the assessee u/s 35(1)(ii) of the Act cannot be denied, if there was valid and subsisting approval when the donation was given. The relevant part of decision is as ....
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....erial has been mentioned/found in the statement with respect to such donation which would specifically establish that the same is bogus. It is settled proposition of law as held by the Hon'ble Madras High Court in the case of CIT V/s. S. Khader Khan Son reported in 214 CTR 589 and subsequently affirmed by the Honourable Apex Court reported in 352 ITR 0480 that the addition to income merely on the basis of statement recorded during the course of survey is not valid. In this regard the observation of the Hon'ble Madras High Court in the concluding portion is reproduced herewith which has considered Apex Court's decision in the case of Pullangode Rubber Produce Co. Ltd vs. State of Kerala reported in (1973) 91 ITR 18: - "(i) An admission is extremely an important piece of evidence but it cannot be said that conclusive and it is open to the person who made the admission to show that it incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts. vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala 1973 91 ITR 18 (SC) (ii) In contradistinc....
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....n the case of PAUL MATHEWS AND SONS V. C.I.T. reported in (2003) 263 ITR 101 (Ker) wherein it is held: A power to examine a person on oath is specifically conferred on the authorized officer only under section 132(4) in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas Section 1314 does not empower any Income-tax Officer to examine any person on Oath. Thus in contradistinction to the power under Section 1334. Section 132(4) of the Income-tar Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act On the other hand, whatever statement recorded under section 1334 of the Income-tax Act is not given an evidentiary value. 6.25 Again the Hon'ble Madras High Court in the case of C.I.T. v. S. KADHER KHAN SON reported in (2008) 300 ITR 157 (Mad) further held that Statement given Survey Operations not conclusive proof of evidence. It held that: "The principles relating to Section I334 of the Income tax Act, 1961 are as foll....
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....nce placed on record, the donation cannot be treated as accommodation entries. During the assessment proceedings, the appellant has submitted sufficient documents. The genuineness of the transaction is established from the fact that the payment had been made through banking channels. In the assessment order, the A.O. did not at all discuss the merit of submission made by the appellant and casually brushed aside details filed by the appellant. Further, the appellant has stated that the had & all the relevant details during the course of the assessment proceedings and duly discharged its onus. There was no material with the A.O. on the basis of which it could be justified its action. The registration of above three institutes was in force during the assessment year 2013-14. Therefore, the donor is entitled for deduction u/s.35(1)(ii) of I.T. Act. 6.28 After considering the totality of facts, rival submissions, the applicable law and on the basis of discussion mentioned above, I find force in the argument of the appellant. The appellant had obtained all the relevant certificates / documents and after due verification to the best of his satisfaction had given donations to the abo....