TaxTMI 
TaxTMI 
2023 (7) TMI 1510
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.... facts that CBDT vide notification dated 15.09.2016 and 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 it....
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....rred to as the "Rules") and due registration and approval regarding the above had also been 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 do....
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....ent was made through normal banking channels and these donations were duly acknowledged by the institutions. 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....
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....ndia) (P) Ltd. (supra), respectfully following the same, it is held that assessee is entitled for deduction u/s. 35(1)(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 donate....
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....e the 1st day of March, 1983. (2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution 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, ....
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....ramme before the date specified in the section and on this basis only restoring the matter to the Assessing Officer?" (p. 645) The High Court followed the reasoning of the Calcutta High Court in CIT v. Bhartia Cutler Hammer Co. [1998] 232 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 ....
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....ved, 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 specified as such, by notification in the Official Gazette, by the Central Government;] xxxxxxxxxxxxx 15. A bare perusal of the above provision would indicate 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 pa....
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....proval was rescinded on 15.09.2016 with a retrospective effect from 01.04.2007. Thus he emphasized that after four years from the date of payment of contribution, how the assessees could be branded that such a donation was bogus one. This retrospective effect cannot be given on the bonafide belief and for this purpose, he relied upon the judgment of the Hon'ble Supreme 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....
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....of the Revenue that Batanagar Society was receiving bogus donations and giving the money in cash. Its registration was cancelled by the ld. Commissioner of Income Tax under section 12AA(3)of the Act. The appeal of the assessee was dismissed by the Tribunal bearing ITA No. 756 & 912/KOL/2016. 21. Dissatisfied with this order, assessee carried the matter in appeal before the Hon'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 th....
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....mpowerment through self-help group, women literacy & vocation; (iv) to fight major population health issues, as Cancer Thalassaemia etc. The Registered Office of the donee society is situated at 7, Nilamber Mukherjee Street, Kolkata-700004. The particulars of various registrations/approvals/legal status of the Applicant Society are as under:- Particulars Regn. No. Date Authority Registration u/s 12A of the IT. Act 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 Noti....
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....us heads in books of account after retaining a certain margin of 3% to 8% towards service charges for itself. Owing to lack of financial flows and for the need for meeting their financial requirements, the Secretary and Treasurer of the Society accepted such 'donations' during the F.Y. 2011-12, 2012-13 and 2013-14, which were accommodating entries for 'donations' through mediators. The refunds were made by debiting the payments, mainly under the head Research & Development Expenditures and some other heads i.e. SHG Advances etc. in 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 ....
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....h Foundation, Calcutta. A survey action was carried out at the premises of the donee wherein it revealed to the Revenue that this concern was misusing the benefit of notification issued by the Income Tax Department. It has been getting donation from various sources, and after deducting certain amount of commission, these donations were refused in cash. On the basis of that survey report registration granted to its favour was cancelled. On the basis of the outcome of that survey report, the Id.AO construed the donation given by the assessee as bogus. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 4. Before us, the 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, ....
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....22) 8 TMI 1750, ITA 42 of 2020, G.A. No. 2 of 2019, Old G.A. No. 1477 of 2019. 31. The ld. Counsels have emphasized that under identical circumstances, deductions have been allowed by the ITAT and the order of ITAT has been upheld by the Hon'ble High Courts. Therefore, these appeals are to be allowed and deductions be granted to the appellants. 32. With respect to all the case laws including our own order, which has been upheld by the Hon'ble Gujarat High Court, we are of the view that all the decisions are based on the set of facts in those cases. In these cases, the Department did not file paper book, did not bring it to the notice of the ITAT about the nature 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 ....
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....led "School of Human Genetics & Population Health (SHGPH)? Ans. Initially, I came with the contact of Smt. Moumita Raghavan, President and Smt. Samadrita Mukherjee Sardar, Secretary of School of Human Genetics & Population Health through a market broker named Shri Sailesh Gupta, residing at howrah who approached me for bogus billing. After that, I have direct contact with Smt. Moumita Raghavan & Smt. Samadrita Mukherjee Sardar of SHGPH regularly and raise bogus bills for SHGPH over the years as per their directions. I shall furnish the details of bogus billing on 10.03.2015. Q. 6: Please explain the nature of business done by you in detail. Ans. I am an accommodation entry operator and I am engaged in the business of providing 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 mentione....
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.... assessees about the outcome of the survey and how these donations are to be treated as bogus. 37. The stand of all these appellants right from the ld. Assessing Officer upto the Tribunal is that since Institution was approved by the Competent Authority to receive donation. This approval was intact when they have made the donation. Therefore, under bonafide belief, they have given the donations and on the basis of post donation, material collected by the Revenue should not be used against them for doubting the genuineness of the donation. The scheme of the Income Tax Act provides that a claim made by an assessee has to be proved by the assessee. Thus the first onus is upon the assessee about the claim made by him. This onus was discharged by the assessee by pointing out that Institution to whom donations were 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 appe....
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....amount of donation has been given to a different organisation in the next year. Therefore, if we weigh the simple plea of the appellants about their bonafide belief for giving such donations, vis-a-vis huge materials collected by the Revenue demonstrating the fact how such a belief is misplaced, then, the scale would tilt in favour of the revenue. It is to be appreciated that roughly 720 entities including individuals available in a part-list on pages no. 72 to 81 of the paper book compiled by the Revenue would have not formed a bonafide belief about giving donation to one entity across India in Kolkata. This material speaks in itself that under a criminal conspiracy, these donations have been arranged by the brokers across India for defrauding the nation. We do not find any credence in the belief of bonafide raised by the appellants. 39. We are aware of the 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 reporte....
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....(Exemption), Kolkata-vs.-Sanskriti Sagar, this judgment of the Hon'ble Supreme Court was considered. 41. We find that in this case, the assesese was recipient of a small donation of Rs. 85,000/-from Herbicure and on the basis of receipt of this donation, its registration was sought to be cancelled. The Hon'ble High Court has propounded that the decision in the case of Batanagar Education & Research Trust is not applicable on the facts of that case because Sanskriti Sagar has neither given any donation to this Trust and claimed deduction under section 35(1)(ii) nor it has returned the money in cash out of a small donation received by it from Herbicure, a similar Trust to SHG&PH. Hon'ble High Court has held that Tribunal has rightly set aside the order passed by the ld. Commissioner vide which registration was cancelled. In our opinion, it is purely a fact-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....
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.... claim by the assessees for long-term capital gain was a bogus claim. The Hon'ble Court has considered the material collected by the Investigating Wing of the Department on the premises of certain companies, who were manipulating the stocks or indulging any accommodation entry business. If we apply the ratio of this judgment upon these cases, then it would reveal that the benefit of claim under section 35(1)(ii) is outcome of an organized fraud with the help of certain manipulators. Therefore, we do not find any material in the first-fold of arguments raised by the ld. Counsels for the assessees. The appellants are not entitled for deduction under section 35(1)(ii) of the Income Tax Act. This finding is subject to our finding on other preliminary issues in the case of Abhilasha Tradecom Pvt. Limited i. e. ITA Nos. 132 & 133/KOL/2021. In ITA Nos. 132 & 133/KOL/2021, assessee has challenged 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 separatel....
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....ity named School of Human Genetics and Population Health, Kolkata under section 133A of the Act, it was prima facie observed that the Trust was not carrying out its activities in accordance with the objects of the Trust. A show cause notice was, therefore, issued by the CIT on 04.12.2015." 8.3. By invoking section 12AA(3), registration of the said trust was cancelled including the approval granted u/s. 80G. Appeal filed by the trust before the Tribunal was dismissed by recording fact-based finding that from the evidence on record, it is clear that activities of the trust were not genuine and hence their registration is liable to be cancelled. conclusion of the Tribunal arrived at after Aforesaid considering the entire material on record is as under: "13. We have given a very careful consideration to the rival submissions. It is clear from the statements of Secretary and Treasurer of SHG and PH that they were 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....
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....was ploughed back or returned to the donors in cash. According to the Hon'ble Court, registration conferred upon it under section 12AA and 80G of the Act was completely being misused by the Trust. Thus, cancellation of registration is justified. Hon'ble Supreme Court in conclusion, further noted that High Court erred in not dealing with the conclusion drawn by the CIT and the Tribunal. Relevant extracts of the conclusion arrived at by the Hon'ble Supreme Court in para 11 and 12 are as under: "11. The answers given to the questionnaire by the Managing Trustee of the Trust show the extent of misuse of the status enjoyed by the Trust by virtue of registration under section 12AA of the Act. These answers also show that donations were received by way of cheques out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly show that those were bogus donations and that 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. ....
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...., who have arranged the donations to SHG&PH as a conduit for receiving the donations from SHG&PH. This donation was to be returned back to those Corporate Houses and individuals in cash after layering the transaction and the Batanagar Education & Research Trust would also retain commission income for such an activity. On the basis of that, its registration was cancelled by the ld. Commissioner (Exemption) by exercising the powers under section 12AA(3). This order was upheld by the ITAT. However, on further appeal, Hon'ble High Court has reversed this order but Hon'ble Supreme Court restored this order, in other words upheld the cancellation of the registration to Batanagar Education & Research Trust. In this judgment, Hon'ble Supreme Court has made reference to the outcome of the survey at SHG&PH coupled with the post survey enquiry conducted upon Batanagar Society and satisfied that it was an organized fraud to misuse the status of a charitable entity. 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, bu....