TaxTMI 
TaxTMI 
2023 (7) TMI 1510
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....06.09.2016 withdrew the recognition given to M/s. School of Human Genetic and Population Health, Kolkata of Human Genetic and Population Health, Kolkata and Matrivani Institute of Experimental Research & Education, Kolkata to grant approval u/s. 35(1)(ii) of the Income Tax Act, 1961 as such the alleged donation is a fake one as the Donee has no authority to receive donation. 3. Whether on the facts and circumstances of the case, the CIT(a) erred in law in deleting the addition of bogus donation Rs. 1,75,00,000/-completely ignoring the decision of the jurisdictional High Court in the case of Swati Bajaj 139 taxmann.com 362 (Cal) which upheld the additions on the basis of the inquiry/findings of Investigation Wing. 4. Whether on the facts and circumstances of the case, the CIT (A) erred in law in restricting the addition by Rs. 26,610/-from Rs. 96,383/-u/s. 14A of the I. T. Act, 1961 ignoring the facts that the AO has made the addition under the provision of Rule 8D of the Income Tax Rules, 1962." 3. Facts stated in the Statement of Facts as placed in the records are that assessee has filed its return of income, reporting total income at Rs. 7,22,23,070/-on....
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....verified before making donations to the said institutions. Under the circumstances, assessee requested not to disallow the claim of deduction made by it. Ld. AO did not pay heed to the request and disallowed the deduction as claimed by the assessee. 3.4. Also, in the return of income filed by the assessee, it had suo moto disallowed a sum of Rs. 175/-under section 14A of the Act, in computing the total income. However, Ld. AO calculated the disallowance at an amount of Rs. 96,383/-. 3.5. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). 4. In the first appeal, Ld. CIT(A), observed that in assessee's case, a survey operation was carried out on 20.12.2012 along with search and seizure action in Fogla Group of cases, to which the assessee belonged. Information was received from Investigation Wings in respect of these two institutions. Report from the Investigation wings revealed that survey was conducted by Investigation Wings at the premises of the said two institutions. Investigation report revealed that these institutions were engaged in accepting bogus donation through various brokers, in lieu of commission. Bogus donations were taken through cheques/....
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....tions. Both these institutions were granted registration u/s. 12A of the Act and these are also registered under Society Registration Act, 1961. Besides, both these institutions had been approved by the Central Govt. for the purpose of section 35(1)(ii) as a Scientific Industrial Research Organisation (SIRO) by Ministry of Science & Technology, Govt. of India. Assessee also stated that Explanation to section 35(1)(ii) makes it clear that if at the time of giving the donation to any research institute it had a valid approval granted under the Act, subsequent withdrawal of such approval would not be a reason to deny deduction claimed by the donor. In the case of assessee, both the conditions are fulfilled. Donation was made by the assessee when both these institutions were duly approved by the Central Govt. vide notification in Official Gazette. Assessee had given the donation under bonafide belief that these institutions are carrying out scientific research activities. 4.3. Ld. CIT (A) thereafter gave his finding by giving relief to the assessee on the basis of decision of Hon'ble Calcutta High Court in the case of Maco Corporation (India) (P) Ltd. [2022] 144 taxmann.com 39 (Ca....
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....)(ii) in respect of donations given." [emphasis supplied by us by bold and underline] 4.4. Further, Ld. CIT (A) accepted the revised computation of the assessee wherein it had rectified the mistake of claiming the deduction u/s. 80G for the payment made to MIERE. He directed the Ld. AO to allow the deduction u/s. 35(1)(ii) in respect of payment made to MIERE also. 4.5. In respect of disallowance u/s. 14A, Ld. CIT (A) restricted it to Rs. 26,610/-after considering the facts that assessee had sufficient own funds and that only those investments should be considered on which exempt income is earned in the year as also taking into account the suo moto disallowance of Rs. 175/-by the assessee. 4.6. Aggrieved, Department is in appeal before the Tribunal. 5. Before us, Ld. Counsel for the assessee has heavily relied on the decision of Hon'ble Supreme Court in the case of Chotatingrai Tea [2002] 258 ITR 529 (SC) dated 29.10.2002 and asserted that once the assessee fulfils all conditions laid-down u/s. 35CCA for claiming deduction of amount donated, there is no obligation on the part of the assessee to see that amount is actually utilised for the purpose for which it was....
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....nstitution unless the assessee furnishes a certificate from such association or institution to the effect that- (a) the prescribed authority had approved the association or institution before the 1st day of March, 1983; and (b) the training of persons for implementing any programme of rural development had been started by the association or institution before the 1st day of March, 1983. (2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless such association or institution has obtained from the prescribed authority authorisation in writing to issue certificates of such nature. Explanation. For the purposes of this section, 'programme of rural development' shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC." It is not in dispute that the assessees had made donations to the Society for Integral Development, Calcutta, which had as its object the undertaking to carry out approved programmes of rural development. The society had granted a certificate to the assessee which had also been approved by the prescribed authority. According to ....
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.... ITR 785, and came to the conclusion that once it was found that the assessees had fulfilled all the conditions which had been laid down under section 35CCA of the Act for claiming deduction of the amount donated by it, there was no obligation on the part of the assessee to see that the amount was utilised for the purpose for which it was donated. Furthermore, the deduction was allowed on the certificate furnished and it was not for the assessee to show whether the institution to which the money had been donated was carrying on the rural development work, as envisaged under section 35CCA of the Act. In our view, the reasoning of the High Court while answering the question referred to it in favour of the assessees is sound and calls for no interference. The final submission of learned counsel appearing on behalf of the appellant is that the High Court's final observation that the order of the Tribunal remanding the matter back for decision would stand quashed and that the assessees were entitled to claim deduction was beyond the jurisdiction of the High Court. Learned counsel for the appellant may be technically correct but what has been observed by the High Court was as a ne....
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....dicate that if an assessee, which is not engaged in carrying out research work on their own and rather contribute to some other scientific research organisation having its main object of undertaking scientific research or to a University, College or other Institution to be used for scientific research, then this Section provides that such Institution, University, College has to be 'approved for such purposes by prescribed authority. Therefore, if a research institute is approved and notified by the prescribed authorities under the Rules of Income Tax Rules, 1962 and the provision of this Act, then the donors will be entitled for a deduction equivalent to 175% of donation given by them. Therefore, as far as scope of this Section or meaning/instruction of the language employed in this section is concerned, there is no dispute between the parties. In other words, interpretation of the meaning of section is not involved, which requires reference to any judgment from the authoritative pronouncements of Hon'ble High Courts as well as Hon'ble Supreme Court. 16. The dispute relates to the factum of giving donations to a genuine institution for claiming deduction under section 35....
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....e Court in the case of CIT-vs.-Vatika Township Pvt. Limited reported in 367 ITR 466. He also made reference to the judgment of Hon'ble Supreme Court in the case of Hitendra Vishnu Thakur-vs.-State of Maharashtra [AIR 1994 S.C. 2623]. On the strength of these two decisions, he submitted that a procedural statute should not generally be applied retrospectively, where the result would be to create new disabilities or obligations, or to impose new duties in respect of transactions are not accomplished. The ld. Counsel for the assessees thereafter made reference to a series of decisions, where ITAT has allowed such a deduction to the assesses. He pointed out that some of the decisions in Kolkata have been upheld upto the Hon'ble High Court also. He pointed out that across India, such deductions have been allowed to the assessees. 19. All the ld. Counsels have been by and large took the same line of argument. They only placed on record different ITAT orders in their paper book, wherein identical issues were involved. 20. Originally Shri Amal Kamat, ld. CIT(DR) appeared in the case of Tarasafe International Private Limited assisted with Smt. Ranu Biswas, Addl. CIT, Sr. D.R. ....
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....n'ble High Court. The Hon'ble High Court has reversed the decision of the Tribunal. However, Department took it to the Hon'ble Supreme Court, which reversed the decision of the Hon'ble Calcutta High Court and upheld the rejection of the registration under section 12A(3). He emphasized that in this decision, the Hon'ble Supreme Court has taken note of the discussion made by the ld. CIT (Exemption), who cancelled the registration as well as the finding recorded by the Tribunal. Both these findings are based upon the material discovered during the survey upon SHG&PH and, therefore, in view of this latest decision of the Hon'ble Supreme Court, he emphasized all other orders of the ITAT and the decisions of the Hon'ble High Court are not to be followed. 22. Since this decision was supplied by the Revenue after conclusion of the arguments, therefore, we re-fixed the hearing and confronted the assessee with this latest position of law. However, Shri Soumitra Chowdhury, ld. Counsel for the assessee has placed on record the judgment of the Hon'ble Calcutta High Court in the case of Commissioner of Income Tax (Exemption), Kolkata-vs.-Sanskriti Sagar. In thi....
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....DIT(E)/S-132/8E/23/04-05 27.10.2004 Director of Income Tax (Exemption), Kolkata Registration u/s 80G(5)(vi) of the I.T. Act, 1961 (made perpetual) DIT(E)/906/SE/23/04-05 DIT(E)/3248/SE/2 3/04-05 27.10.2004 12.12.2011 Director of Income Tax (Exemption), Kolkata Registration u/s 10(23C) of the I.T. Act Initial order no. 49 Renewal vide No. CCIT-III/10(23C)(iv)/11-12/245 27.02.2004 16.01.2014 CCIT-III, Kolkata Recognition of Scientific and Industrial Research Organization Renewal till 31.03.2016 vide Communication No. 14/473/2007-TU-V(for 01.04.10 to 31.03.13) For 01.04.08 to 31.03.10) 01.04.2013 01.04.2013 17.06.2010 Government of India, Ministry of Science and Technology Gazette Notification u/s 35(1)(ii) of the I.T. Act, 1961 Notification No. 4/2010 28.01.2010 Government of India, Ministry of Finance (Department of Revenue) (Central Board of Direct Taxes) 24. The Governing Body members of the recipient are as und er: (a) Dr. Madhumita Roychoudhury President (b) Dr. Shyamal Kumar Nandy Vice-President (c) Dr. Samadrita Mukherjee Sardar Secretary (d) Ms. Basanti Rauth Assistant Secretary (e) Mrs. Moumita Raghavan Treasurer (f) Mr. Ga....
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....n the books of account and returned to the 'donors'. 27. It was also submitted before Settlement Commission that a survey operation under section 133A of the Act was carried out at the premises of the done Society at 6A, Malanga Lane, Kolkata-12 on 27.01.2015. During the course of survey following documents were found and impounded:- Name & Address Name & Address Items Documents found Documents impounded School of Human Genetics & Population Health, Books of Accounts 'A' SHG/1 to SHG/8 and SHG/PD/1 (one Pen Drive) SHG/1 to SHG/8 and SHG/PD/1 (one Pen Drive) 6A, Malanga Lane, Kolkata-700012 Cash '3' Rs. 82,400/- NIL Bank A/c. '2' 16 nos. NIL Debit/Credit Card '4' 4 nos. NIL 28. The main allegation and reason for the survey against the donee was that it had received huge amount of donations on which the applicant society earned service charges. During the survey operation, statements of the Secretary and the Treasurer of the Society were recorded in which they admitted the fact of accepting donations through certain mediators and refunding the same after keeping 3%-8% as service charges for the society. 29. In 2019, one of us was....
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....e ld. Counsel for the assessee contended that donations were given on 25.03.2014. At that point of time, donee was notified as eligible institution and fall within the statutory eligibility criterion. Certificate for receiving donation was cancelled on 6.9.2016. There is no mechanism with the assessee to verify whether such donee was a genuine institute or not, which can avail donation from the society. 5. The Id. DR, on the other hand, contended that in the investigation it came to know about bogus affairs conducted by the donee. Hence, these donations are rightly been treated as bogus, and addition is rightly made. 6. We have duly considered rival contentions and gone through the record carefully. The AO is harping upon an information supplied by the survey tern of Calcutta. He has not specifically recorded statement of representative of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been pu....
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....ure and quantum of the material discovered during the course of survey exhibiting as to how a modus operandi in an organized manner was adopted by the recipients with the help of brokers to fraud the nation. There was no question of law involved in the factual finding given by the Tribunal in all the cases. Thus on facts the orders of the Tribunal were upheld. Abhilasha TradecomPvt. 33. Let us take note of the material placed before us persuading us to record a finding of fact being a last authority on this aspect. There is no dispute that a survey under section 133A was carried out at the premises of M/s. SHG&PH as well as M/s. Herbicure Healthcare Bio-Herbal Research Foundation (in short 'HHBRF') because Limited obtained the accommodation entry from this Institution and issue is involved in ITA No. 132/KOL/2021. In this survey, statement of the Secretary of M/s. SHG&PH was recorded. The Secretary has admitted that the Trust has not used such amount in any research activity, rather it has received the donation in a connived manner on the alliance of certain brokers. They have pleaded specifically in their statement of facts before the Settlement Commission that certain bro....
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....iding accommodation entries in the form of bogus share capital/unsecured loans/bogus bills etc. to various beneficiaries/parties through various 'jama-kharchi'/paper companies/proprietorship concerns controlled by me in lieu commission. Q.7. Kindly go through the Annexure-A which is submitted by you in the case of SHG&PH. Kindly provide the bank account along with the bank name and branch addresses of 21 concerns mentioned in the Annexure-A. Ans.: I will submit all the required details by 27.03.2015. Q.8. Kindly furnish the names, postal addresses and phone numbers of the directors /proprietors of the 21 concerns mentioned in the Annexure-A. Ans. I will submit all the required details by 27.03.2015. Q.9. Please go through the Annexure-A in which total billing is shown as Rs. 1118848138/-. Please state where this amount has been transferred after bogus billing and how. Ans. This amount has been transferred to the donors through 'Hawala Operators'. First I transferred this amount to various parties, who was raised bogus bill on my concerns by bank channel through layering. Then from these parties, I have go cash in return which is transferred to....
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....given. They are approved by the Income Tax Authority and, therefore, their claim is to be allowed. However, if the first onus discharged by the assessee was dispelled by the ld. Assessing Officer by confronting them with the material recovered during the survey and post survey enquiries, then the questions posed before us is, whether this belief harped by all the appellants was such a bonafide that could not be questioned in any circumstances. To our mind, it is a misplaced argument at the end of the appellants. It is to be appreciated that recipient came into existence in 1993, it might have been working on charitable objects and got approval for the purpose of recognition of Scientific and Industrial Research Organisation first time on 17.06.2010. There might be a good intention at the end of the recipient but it has detracted its objectives and indulged in fraudulent activities. The fraud of this magnitude cannot be done without an organised planning where involvements of alleged brokers have come. Thus operative force the minds of all decision-maker in donors organisation/individual was acting with a fraudulent intent in giving donation through broker in this manner. The ld. CI....
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....e facts that a large number of orders have been passed in favour of the assessee by ITAT and some of those were upheld by Hon'ble High Courts also. We have extracted one of the orders from Hon'ble Gujarat High Court. The Hon'ble Supreme Court in the case of CIT-vs.-Batanagar Education & Research Trust reported in 129 taxmann.com 30, whose copy has been placed on the record by the ld. CIT(DR), has considered the identical material, which has been placed before us also. In the case of Batanagar Education & Research Trust, the facts are that during the course of survey at the premises of SHG&PH, and in post survey inquiry statement of Shri Ramendra Lahiri, Managing Trustee of the assessee, i.e. Batanagar Society was recorded. The Secretary, Smt. Samadrita Mukherjee Sardar and Treasurer Smt. Moumita Raghavan of SHG&PH have categorically deposed in their statements that source of income of SHG&PH was the money received in the form of donations from Corporate Bodies as well as from individuals. The assessee Batanagar Society was selected by the brokers, who have arranged the donations to SHG&PH as a conduit for receiving the donations from SHG&PH. This donation was to be retu....
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....ct-based decision without laying down any particular proposition of law, rather an inference could be drawn from it that if there is no element of fraud committed by an assessee, then such an assessee does not deserve to be punished. This case cannot buttress any of the contentions of the appellants before us. 42. It is also pertinent to note that it is not a simple case of claiming deduction on fulfilment of conditions under section 35(1)(ii) of the Income Tax Act, rather it is a case where Revenue has disproved this claim and proved that, with a criminal mind all such donors have layered their transaction in such a manner which apparently appears to be genuine, but in reality not genuine. They took such a step to commit fraud, an economic offence against the economy of the country. 43. The bonafide of the assessees can be appreciated if they have demonstrated that they have given the donations in the past or subsequent periods to some Institution of national importance, such as Tata Research Centre, certain Hospitals, etc. but none of them has given such a donation except a small amount of few thousand in the case of Abhilasha TradecomPvt. Limited. The moment Assessing Offi....
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....llenged the reopening of the assessment. We will be deciding this issue in the following part of the judgment. Similarly in the case of Tarasafe International Pvt. Limited, i.e. ITA No. 261/KOL/2020, the assessee has taken an additional ground of appeal, which we are taking up separately in the following part." [emphasis supplied by us by bold and underline] 8. Relief given by the Ld. CIT (A) in the present case before us is solely based on the decision of Hon'ble jurisdictional High Court of Calcutta in the case of Maco Corporation (India) Pvt. Ltd. (supra). From the perusal of the said judgment, it is observed that the decision is solely based on placing reliance on the judgment of Hon'ble Supreme Court in the case of CIT Vs. Chotatingrai Tea (supra), as is evident from the finding recorded in para 7 which is reproduced as under: "7. In the light of the above decision, we find the reasoning given by the tribunal to be just and proper and cannot be held to be perverse. In the result, the appeal filed by the revenue (ITA/42/2020) is dismissed and the substantial question of law is answered against the revenue." 8.1. This leads us to delve into the judgment of Cho....
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....accepting cash and giving bogus donations. In the statement recorded in the survey conducted in the case of SHG and PH on 27-1-2015, it was explained that SHG& PH's source of income was the money received in the form of donations from corporate bodies as well as from individuals. In the said statement it was explained that there were about nine brokers who used to bring donations in the form of cheque/RTGS to SHG and PH. The Donations received would be returned by issue of cheque/RTGS in the name of companies or organization specified by the nine brokers. SHG and PH would receive 7 or 8% of the donations amount. It was also stated in such statement since the assessee was entitled to exemption u/s 80G and u/s 35 of the Act their organization was chosen by the brokers for giving donations to SHG and PH as well as for giving donations by SHG and PH. Till now the Assessee's name did not figure in the statement recorded on 27-1-2015. However, pursuant to the Survey in the case of SHG& PH proceedings for cancellation of registration u/s 12A of the Act granted to them were initiated. In such proceedings, Smt. Samadrita Mukherjee Sardar (in a letter dated 24-8-2015) had given a lis....
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....the registration conferred upon it under sections 12AA and 80G of the Act was completely being misused by the Trust. An entity which is misusing the status conferred upon it by section 12AA of the Act is not entitled to retain and enjoy said status. The authorities were therefore, right and justified in cancelling the registration under sections 12AA and 80G of the Act. 12. The High court completely erred in entertaining the appeal under section 260A of the Act. It did not even attempt to deal with the answers to the questions as aforesaid and whether the conclusions drawn by the CIT and the Tribunal were in any way incorrect or invalid. In our view, this appeal, therefore, deserves to be allowed." [emphasis supplied by us by bold and underline] 8.5. From the above judgment of Batanagar Education and Research Trust (supra), the apprehension on the factual aspect of utilization of money by the recipient donee trusts for the approved programme which remained open, is set to rest by the fact-based conclusion arrived at, as quoted above. Hon'ble Court has made reference to the outcome of the survey at SHGPH and the post survey enquiry conducted upon Batanagar Education a....
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..... This judgment has been pronounced on 02.08.2021. After this judgment, a judgment of the Hon'ble Calcutta High Court in the case of Mackaw Corporation has been passed, which has been relied upon by the ld. Counsel, but in this decision, Hon'ble High Court has not considered the judgment of the Hon'ble Supreme Court, because the judgment of the Hon'ble Supreme Court in the case of Batanagar Education & Research Trust was not cited by both the parties." [emphasis supplied by us by bold and underline] 8.7. Coordinate Bench in the case of Tarasafe International Pvt .Ltd. (supra) has recorded finding of facts, based on the material placed before it by the Revenue in voluminous paper books gathered in the course of survey conducted u/s. 133A in the case of the donee trusts as well as post survey enquiries. In the present case before us, the donee trusts are the same whose facts and credible material were brought on record by the Revenue and considered by the Coordinate Bench. Claim of deductions by the donors have already been disproved by the Revenue by dispelling the claim of first onus discharged by the donors, on the strength of credible material. These fact findi....