D.C.I.T., Circle-12(1), Kolkata, Kolkata V. M/s Desmet Reagent Pvt. Ltd., Kolkata

ITA 15/KOL/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4276 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Bogus purchase; Bonafide belief; Accommodation entries
• Section: 133A; 80G; 12A; 12AA; 131

Judgement Text

1 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 15/KOL/2017 ASSESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(1), KOLKATA. VS. M/S. DESMET REAGENT PVT. LTD. (PAN: AADCA8740R) APPELLANT RESPONDENT DATE OF HEARING 19.07.2018 DATE OF PRONOUNCEMENT 10.10.2018 FOR THE APPELLANT SHRI SALLONG YADEN, ADDL. CIT, S R. DR FOR THE RESPONDENT SHRI MIRAJ D. SHAH, FCA ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A)-4, KOLKATA DATED 24.10.2016 FOR AY 2013-14. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL OF REVENU E IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF DEDUCTION U/S. 35(1 )(II) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) OF RS.1,05,0 0,000/-. 3. BRIEFLY STATED FACTS ARE THAT THE AO NOTED FROM THE DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE DONATIONS TO M/S. HERBICURE H EALTHCARE BIO-HERBAL RESEARCH FOUNDATION (HEREINAFTER M/S. HHBHRF) A SUM OF RS. 6 0 LAKHS AND CLAIMED WEIGHTED DEDUCTION OF 175% U/S. 35(1)(II) OF THE ACT FROM IT S TAXABLE INCOME. THE AO ALSO NOTED THAT A SURVEY OPERATION WAS CONDUCTED BY THE INVESTIGATI ON WING, KOLKATA AGAINST THE SAID CONCERN M/S. HHBHRF ON 27.01.2015 AND IT WAS FOUND THAT THE AFORESAID CONCERN WAS 2 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 ENGAGED IN PROVIDING BOGUS DONATION U/S. 35(1)(II) OF THE ACT TO BENEFICIARIES LIKE ASSESSEE TO ENABLE THEM TO CLAIM DEDUCTION OF 175% OF THE AM OUNTS PURPORTED TO HAVE BEEN PAID AS DONATION TO IT. CONSEQUENTLY, THE AO ISSUED SHOW CA USE NOTICE WHICH IS AVAILABLE FROM PAGE 2 TO 5 OF THE ASSESSMENT ORDER. REPLY WAS FILED BY ASSESSEE, WHICH IS AVAILABLE AT PAGES 5 AND 6 OF THE ASSESSMENT ORDER. THE REPLY OF THE ASS ESSEE WAS UNACCEPTABLE TO THE AO AND THEREFORE, HE CONCLUDED THAT M/S. HHBHRF WAS INVOLV ED IN PROVIDING BOGUS DONATION ENTRY U/S. 35(1)(II) OF THE ACT AND DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD INDULGED IN GIVING BOGUS DONATION OF RS.60 LAKHS TO M/S. HHBHRF AND HAS CLAIMED WEIGHTED DEDUCTION OF 175% U/S. 35(1)(II) OF THE A CT WHICH CLAIM OF RS.1,05,00,000/- IS BOGUS AND SO HE DISALLOWED IT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO ALLOWED THE ASSESSEES APPEAL AND DIRECTED THE AO T O DELETE THE ADDITION IN FULL. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE COMPANY HAS DONATE D RS.60 LAKH TO M/S. HERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION (M/S. HHB HRF) AND CLAIMED WEIGHTED DEDUCTION OF 175% ON THE SAID DONATION WHICH WORKS OUT TO RS.1,05,00,000/-. WE NOTE THAT M/S. HHBHRF IS AN INSTITUTION WHICH ENJOYED THE APP ROVAL U/S. 35(1) OF THE ACT AS EVIDENT FROM THE NOTIFICATION DATED 14.03.2008 WHICH IS FOU ND PLACED AT PAGE 1 OF PAPER BOOK AND THE RENEWAL OF RECOGNITION OF SCIENTIFIC & INDUSTRI AL RESEARCH ORGANISATION (SIRO) GIVEN VIDE LETTER DATED 13.08.2012 BY THE GOVT. OF INDIA, MINISTRY OF SCIENCE & TECHNOLOGY FROM 01.04.2012 UPTO 31.03.2015 FOUND PLACED AT PAGE 2 O F PAPER BOOK. THE DONATION AMOUNT OF RS. 60 LAKH HAS BEEN TRANSFERRED BY THE ASSESSEE TH ROUGH RTGS TO M/S. HHBHRFS IDBI BANK ACCOUNT ON 26.03.2013 WHICH FACT IS DISCERNIBL E FROM PAGE 3 OF PAPER BOOK AND M/S. HHBHRF VIDE LETTER DATED 26.03.2013 RECEIPT NO. HH BHRF/26.03.13/010 HAS CONFIRMED THE RECEIPT OF THE SUM OF RS. 60 LAKH DONATION FROM ASSESSEE. WE NOTE THAT AT THE TIME WHEN THE ASSESSEE DONATED THE DONATION OF RS. 60 LAKH M/ S. HHBHRF HAD APPROVED FROM CENTRAL GOVT. FOR THE PURPOSE OF CLAUSE (II) OF SUB-SECTION (1) OF SEC. 35 OF THE ACT READ WITH RULE 5C & 5B OF INCOME-TAX RULES, 1962 WITH EFFECT FROM 01.04.2007. THE CLAIM OF WEIGHTED DEDUCTION @ 175% HAS BEEN DECLINED BY AO TO THE ASS ESSEE ON THE GROUND THAT 3 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 SUBSEQUENTLY VIDE NOTIFICATION NO. 82/2016 DATED 15 .09.2016 AND NOTIFICATION NO. 79/2016 DATED 06.09.2016 THE REGISTRATION GRANTED TO M/S. H HBHRF HAS BEEN CANCELLED BY CBDT, WHICH ACTION OF THE AO CANNOT BE COUNTENANCED AND T HE LD. CIT(A) RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT M /S. HHBHRF WAS ENJOYING THE APPROVAL WITHIN THE MEANING OF SEC. 35(1)(II) OF THE ACT AS ON THE DATE OF RECEIPT OF DONATION AND RETROSPECTIVE CANCELLATION OF APPROVAL OF THE CONCE RNED INSTITUTION, THE DEDUCTION CLAIMED IN RESPECT OF DONATION CANNOT BE DENIED. THIS VIEW OF OURS HAS BEEN APPROVED BY THE HONBLE BOMBAY HIGH COURT IN SEKSARIA BISWAN SUGAR FACTORY LTD. AND ANOTHER VS. INSPECTING ASSISTANT COMMISSIONER AND OTHERS (1990) 184 ITR 12 3 AND THIS VIEW THIS TRIBUNAL HAS BEEN CONSISTENTLY TAKEN WHEN APPLICATION OF WEIGHTE D DEDUCTION CLAIMED AGAINST M/S. HHBHRF HAS COME BEFORE US. MOREOVER, OUR VIEW IS F ORTIFIED BY THE EXPLANATION GIVEN U/S. 35(1)(II) OF THE ACT IS REPRODUCED UNDER: SECTION 35(1)(II) - EXPLANATION. THE DEDUCTION, TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF ANY SUM PAID TO A RESEARCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTI ON TO WHICH CLAUSE (II) OR CLAUSE (III) APPLIES, SHALL NOT BE DENIED MERELY ON THE GROUND THAT, SUBS EQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESSEE, THE APPROVAL GRANTED TO THE ASSOCIATION, UNIVERSIT Y, COLLEGE OR OTHER INSTITUTION REFERRED TO IN CLAUSE (II) OR CLAUSE (III) HAS BEEN WITHDRAWN . SO THE EXPLANATION GIVEN IN THE STATUTE ITSELF DISP ELS ALL DOUBTS AND THE LD. CIT(A) HAS RIGHTLY ALLOWED THE WEIGHTED DEDUCTION CLAIMED BY T HE ASSESSEE FOR THE DONATION GIVEN TO M/S. HHBHRF IN THE FACTS AND CIRCUMSTANCES ABOVE. 5. MOREOVER, IN SIMILAR CASE OF M/S. SAIMED INNOVAT ION ITA NO. 2231/KOL/2016 (FOR AY 2013-14), THE COORDINATE BENCH OF THIS TRIBUNAL D BENCH, WHEREIN THE AUTHOR OF THIS ORDER HAS IN DETAILED DEALT WITH THE MERITS OF THE DISALLOWANCE OF THE WEIGHTED DEDUCTION CLAIM U/S. 35(1)(II) OF THE ACT FOR SIMILAR DONATIO N GIVEN TO M/S. HHBHRF( WHICH IS REFERRED IN THAT CASE AS M/S. HERBICURE )WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER: 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGE D IN THE BUSINESS OF MEDICAL EQUIPMENTS. DUE TO THE RECESSIONARY TREND IN THE BUSINESS OF MEDICAL E QUIPMENT, THE ASSESSEE THOUGHT IT PRUDENT TO DIVERSIFY ITS BUSINESS AND VENTURED INTO MANUFACTUR ING AND MARKETING OF HERBAL PRODUCT. THE ASSESSEE REALIZED THAT SINCE IN THE BUSINESS OF BUY ING HERBAL PRODUCTS SUBSTANTIALLY DEPENDED UPON THE CONTINUOUS UPGRADATION OF THE TECHNOLOGY WHICH CAN BE DONE ONLY BY A TIE UP WITH AN ACCREDITED RESEARCH ORGANIZATION. WHEN THIS THOUGHT PROCESS WA S GOING ON, THE ASSESSEE WAS INTRODUCED TO M/S. HERBICURE BY A FRIEND WHO WAS A CARDIOLOGIST DR. CH AKRABORTY AND THEN THE PARTNERS OF THE ASSESSEE 4 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 FIRM VISITED TWO UNITS LOCATED AT PAILAN AND BARAL AND AFTER INSPECTING THE INSTITUTION AND SATISFYING THEMSELVES AFTER TAKING NOTE OF VARIOUS CERTIFICATE ISSUED BY INCOME TAX AUTHORITIES AND GOVT. OF INDIA (DETAILS WE WILL DISCUSS LATER) ON A BONA FIDE BELIEF THEY DONATED THE AMOUNT TAKI NG INTO CONSIDERATION THAT THEY WOULD ENJOY TAX BENEFIT AT A WEIGHTED RATE OF 175% OF THE DONATION. 6. WE NOTE THAT M/S. HERBICURE WAS REGISTERED U/S. 12AA OF THE ACT WHICH WAS GRANTED BY THE LD. DIT(E), KOLKATA W.E.F. 26.12.2003 VIDE HIS MEMO DATED 03.02.2005 (PAPER BOOK PAGE 22). M/S. HERBICURE WAS ALSO HAVING REGISTRATION U/S. 80G(5)( VI) OF THE ACT WHICH WAS GRANTED BY THE LD. DIT(E). M/S. HERBICURE WAS ALSO HAVING A REGISTRAT ION U/S. 6(1)(A) OF THE FOREIGN CONTRIBUTION (REGULATION) ACT, 1976 WHICH WAS GRANTED TO IT ON 2 6.02.2008 VIDE REGISTRATION NO.147120804. M/S. HERBICURE WAS ALSO RECOGNIZED IN THE YEAR 2006-07 A S A SCIENTIFIC INDUSTRIAL RESEARCH ORGANISATION (SIRO) BY MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. O F INDIA. M/S. HERBICURE WAS ALSO RECOGNIZED VIDE GAZETTE NOTIFICATION NO. 35/2008 DATED 14.03.2 008 ISSUED BY CBDT, MINISTRY OF FINANCE U/S. 35(1)(II) OF THE ACT (PAPER BOOK PAGE 23). THE LD. AR DREW OUR ATTENTION TO LETTER DATED 01.02.2013 BY M/S. HERBICURE WHICH IS EVIDENT FROM PAGE 21 OF THE PAPER BOOK WHEREIN THE SAID M/S. HERBICURE HAS REQUESTED THE ASSESSEE FOR DONATION U/S. 35(1)( II) OF THE ACT. A PERUSAL OF THE LETTER SHOWN THAT M/S. HERBICURE HAS CLAIMED ITSELF TO BE A NON PROFI TABLE SCIENTIFIC RESEARCH INSTITUTE CARRYING OUT RESEARCH, DRUG TESTING AND OTHER ALLIED ACTIVITIES AS PER THE OBJECTIVE OF THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA SEEKING GENEROUS DONATIO N AND HAS GIVEN ITS DETAILS LIKE NAME, CERTIFICATE OF INCORPORATION, 12A REGISTRATION, GAZETTE NOTIFIC ATION U/S. 35(1)(II) OF THE ACT, RENEWAL OF SIRO DATED 31.03.2015 VIDE ORDER DATED 13.08.2012 IN MEM O NO. 14/444/2006TUV BY THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA. FCRA REGISTR ATION RENEWAL OF 80G WHICH WAS RENEWED VIDE CERTIFICATE OF EXEMPTION U/S. 80G(5)(VI) OF THE ACT VIDE NO. DIT(E)/438/8E/155/04-05 DATED 18.08.2009 AND PAN NO. HAS BEEN STATED. WE ALSO NO TE THAT THE M/S. HERBICURE HAS STATED ITS PROJECT IN BRIEF WHICH IS REPRODUCED AS UNDER: THE VISION OF HERBICURE HEALTHCARE BIO-HERBAL RES EARCH FOUNDATION IS TO MEET THE SCIENTIFIC RESEARCH NEEDS IN LIFE SCIENCE AND TO CONSTANTLY ST RIVE FOR EXCELLENCE AND GLOBAL LEADERSHIP IN THE FIELD OF NEW DRUG DISCOVERY FROM NATURAL RESOUR CES FOR THE PURPOSE OF PREVENTION AND MANAGEMENT OF BURDEN OF DISEASES AT AFFORDABLE COST AND ALSO TO PROVIDE LATER HEALTHCARE SERVICES, EDUCATION AND TRAINING ON SCIENTIFIC RESE ARCH FOR THE WELFARE OF THE SOCIETY. 7. WE ALSO NOTE THAT SMT. SUJATA GHOSH DASTIDER HAS STATED IN HER LETTER TO AO DATED 27.01.2016 THAT SHE IS DIRECTOR OF M/S. HERBICURE A ND THAT SHE WAS EX-EMERITUS PROFESSOR OF JADAVPUR UNIVERSITY IN MICROBIOLOGY AND NOW LOOKS AFTER THE RESEARCH WORK IN M/S. HERBICURE AND THAT BASED ON HER CONTRIBUTION TOWARDS SCIENTIFIC RESEARCH ON MICROBIOLOGY FOR DECADES, SHE HAS BEEN SELECTED AS THE PRESIDENT OF INTERNATIONAL SOCIETY OF NON-ANTIB IOTICS (ISN) BASED IN DENMARK. 8. WE NOTE FROM THE PERUSAL OF PAPER BOOK PAGES 24 AND 25 WHICH IS THE LETTER DATED 15.03.2013 AND 26.03.2013 WHICH ARE THE LETTERS BY THE ASSESSEE TO M/S. HERBICURE WHEREIN DESCRIPTION OF PAYMENT OF A SUM OF RS.7,51,000/- B Y RTGS DATED 15.03.2013 ON BANK OF BARODA TO M/S. HERBICURE ACCOUNT NO. 0060102000117470 WITH ID BI BANK, BRABOURNE ROAD BRANCH, KOLKATA. SIMILARLY, A PAYMENT WAS MADE ON 26.03.2013 BY RTGS DATED 23.06.2013. AT PAGE 26 AND 27 OF THE PAPER BOOK, WE NOTE THAT THE RECEIPT OF THE SAID AM OUNTS HAS BEEN PLACED ON RECORD. AT PAGE 28 OF THE PAPER BOOK SHOWS THE BANK OF BARODA STATEMENT WHERE IN WE NOTE THAT ON 15.03.2013 BY RTGS TO M/S. HERBICURE HEALTH AN AMOUNT OF RS.7,51,000/- AS WELL AS ON 26.03.2013 BY RTGS OF RS.7,51,000/- WAS SENT TO M/S. HERBICURE HEALTH. WE NOTE THAT ANSWER GIVEN BY THE FOUNDER DIRECTOR OF M/S. HERBICURE TO ADIT, INVESTIGATION TO QUESTION NO. 22 AND QUEST ION NO. 23 WAS THE BASIS OF DISALLOWANCE OF THE CLAIM MADE BY THE ASSESSEE WHICH IS REPRODUCED BELO W: Q. 22. LET ME REMIND YOU THAT AS ONE OF THE DIRE CTORS OF HERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION YOU ARE DUTY BOUND TO KEEP COMP LETE INFORMATION REGARDING TRANSACTIONS BEING MADE BY THE SAID ENTITY AND THE GENUINENESS OF PERSONS/ENTITIES WITH WHOM 5 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 THE SAID TRANSACTIONS ARE BEING MADE. YOUR ATTENTIO N IS FURTHER BEEN DRAWN TO THE COMPUTER EXTRACTS TAKEN OUT OF THE TALLY WHICH WAS FOUND IN YOUR E-MAIL. THESE PAGES ARE RELATED TO THE BANK BOOK OF HERBICURE HEALTHCARE BIO-HERBAL RESEAR CH FOUNDATION WHEREIN IT IS CLEARLY REFLECTED THAT THE AMOUNT OF RS.25 LAKH (IN TWO TRE NCHES) RECEIVED FROM OCL INDIA LTD ON 15.07.2011, RS.25 LAKH RECEIVED FROM OCL INDIA LTD. ON 11.08.2011 & 17.08.2011 ARE IMMEDIATELY BEING TRANSFERRED TO A.S. ENTERPRISES W HICH IS A PAPER COMPANY ON THE SAME DATES. SIMILAR TREND IS VISIBLE IN THE CASE OF DONA TIONS RECEIVED FROM OTHER PARTIES WHERE JUST IMMEDIATELY AFTER THE RECEIPT OF DONATION AMOUNT TH E SAME IS BEING TRANSFERRED TO THE ACCOUNT OF ANY PAPER COMPANY. IN VIEW OF THE SAME YOU ARE ONCE AGAIN BEING GIVEN AN OPPORTUNITY TO SPEAK THE TRUTH AND EXPLAIN THE TRANSACTION REFLECTED FROM YOUR BAN K BOOK AS ABOVE. ANS. SIR, I WISH TO STATE THAT OUR CONCERN HERBICUR E HEALTH ARE BIO-HERBAL RESEARCH FOUNDATION WAS INCORPORATED IN THE YEAR 2003 U/S 25 OF THE COMPANIES ACT, 1956 WHICH WAS RECOGNIZED IN 2006-07 AS A SCIENTIFIC AND INDUSTRIA L RESEARCH ORGANIZATION (SIRO) BY THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA AN D SUBSEQUENTLY WE BECAME A GAZETTE NOTIFIED COMPANY U/S 35(1)(II) OF THE I. T. ACT, 19 61 IN MARCH, 2008. DESPITE OF OUR SINCERE, HONEST AND BEST INTENTION WE FAILED TO PROCURE ANY GENUINE DONATIONS TILL 2010-11. THE SITUATION WAS BECOMING BAD TO WORSE DUE TO NON-AVAI LABILITY OF FUNDS FOR NOT AGREEING TO THE PREVALENT PRACTICE IN THE DONATION MARKET. THE SITU ATION BECAME SO CRITICAL FOR US TO SURVIVE AND CARRY ON OUR MISSION TO DO THE WORK FOR THE LAR GER INTEREST OF THE AILING POPULATION WE HAD NO OTHER ALTERNATIVE BUT TO BECOME THE VICTIM OF TH E CIRCUMSTANCES AGAINST OUR WILL AND PRINCIPLE. SUBSEQUENTLY, I WAS APPROACHED BY ONE MR KISHAN BHA WASINGKA WITH THE PROPOSAL TO ADOPT THE PREVALENT PRACTICE OF SCIENTIFIC AND RESE ARCH ORGANIZATION OF GIVING ACCOMMODATION ENTRIES ON COMMISSION TO DIFFERENT BENEFICIARIES IN THE GARB OF DONATION RECEIPTS TO BE FINALLY GIVEN BACK TO THEM IN THE FORM OF CASH OR CHQUE. SI NCE WE WERE FACING SEVERE FINANCIAL CRISIS AND THE GENUINE DONATIONS WERE NOT COMING TO US WE WERE COMPELLED TO ACCEPT THE PROPOSAL. Q. 23. PLEASE EXPLAIN IN DETAIL THE MODUS OPERANDI OF GIVING THE ACCOMMODATION ENTRIES BY WAY OF ACCEPTING DONATIONS TO DIFFERENT BENEFICIARI ES. ALSO STATE WHO IS THE/ARE THE BROKER/BROKERS (WHILE GIVING HIS MOBILE NO. AND ADD RESS) THROUGH WHICH YOU HAVE GIVEN ACCOMMODATION ENTRIES IN THE FORM OF BOGUS DONATION S ON COMMISSION? PLEASE ALSO STATE WHAT ARE THE COMMISSION CHARGED B Y YOU AND BROKER CONCERNED FOR PROVIDING ACCOMMODATION ENTRIES TO DIFFERENT BENEFI CIARIES. ANS. THE ENTIRE ACCOMMODATION ENTRIES OF BOGUS DONA TIONS ARE FACILITATED BY MR. KISHAN BHAWASINGKA HAVING HIS MOBILE NOS. 9830087866 & 988 3051515 WHO LIVES SOMEWHERE IN BHAWANIPORE NEAR NETAJI SUBHAS METRO STATION. THE M ODUS IS LIKE THIS. THE INFORMATION IS GIVEN TO US BY MR KISHAN BHAWASINGKA AS TO BOGUS DO NATION ENTRY IS NEEDED BY A PARTICULAR PARTY. SOMETIMES WE COME TO KNOW ABOUT THE ACCOMMOD ATION ENTRY BEING GIVEN TO A PARTY WHEN WE DIRECTLY RECEIVE COMMUNICATION FROM THE CON CERNED BANK THAT THE AMOUNT HAS BEEN CREDITED. THUS, THE ACCOMMODATION ENTRY IS COMPLETE LY CONTROLLED AND MANAGED BY MR. KISHAN BHAWASINGKA. THE BOGUS DONATIONS ARE RECEIVED VIDE CHEQUE/RTGS INTO ANY OF THE BANK ACCOUNTS MENTIONED BY M IN RESPONSE TO QUESTION NO. 7 OF THIS STATEMENT. AFTER THIS PAYMENT IS MADE TO ANY OF THE PAPER / BOGUS COMPANIES ON ACCOU NT OF BOGUS PURCHASE/EXPENSES ON THE ADVICE OF MR KISHAN BHAWASINGKA. THE REMAINING TRAN SACTION IS ALSO MANAGED ON PAPER BY HIM ONLY WHICH HAPPENS IN THE FORM OF ROUTING OF TH E DONATION AMOUNT THROUGH HIS BOGUS/PAPER COMPANIES IN 2 TO 3 LAYER. FINALLY, CHE QUE OF THE DONATION AMOUNT (AFTER DEDUCTING THE CUT OF COMMISSION CHARGED BY US AND B ROKER MR KISHAN BHAWASINGKA) IS GIVEN BACK TO THE ORIGINAL BENEFICIARY WHO GAVE DONATION TO US. SOMETIMES, THE AMOUNT IS 6 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 WITHDRAWN AT 3RD OR 4TH LEVEL AND CASH IS GIVEN BAC K TO THE ORIGINAL BENEFICIARY (AFTER DEDUCTING THE CUT OF COMMISSION CHARGED BY US AND B ROKER MR KISHAN BHAWASINGKA) WHO GAVE DONATION TO US. IN THIS ENTIRE PROCESS OF PROVIDING ENTRY IN THE FO RM OF BOGUS DONATION TO DIFFERENT BENEFICIARY COMPANIES/ INDIVIDUALS A COMMISSION OF 5 % APPROX IS CHARGED BY US WHICH IS THE ACTUAL DONATION WE RECEIVE FRONT THAT PARTICULAR DO NOR IN REALITY. THE COMMISSION OF ALMOST 5 TO 8 % IS CHARGED BY MR. KISHAN BHAWNSINGKA FOR FAC ILITATING THE SAID ACCOMMODATION ENTRY. SUBSEQUENTLY, A SANCTION LETTER IS RECEIVED FROM TH E DONOR REFLECTING THE AMOUNT OF DONATION AND MODE OF PAYMENT. THE PARTICULARS ARE THEN VERIFIED WITH THE AMOUNT CREDITED IN OUR BANK ACCOUNTS AFTER WHICH AN EXEMPTION U/S. 35( 1)(II) OF THE I. T. AT, 1961 WHICH QUALIFIES HIM/HER TO CLAIM ONE AND THREE FOURTH OF THE SAID DONATION AS TAX EXEMPT U/S. 35(1)(II) OF THE I. T. ACT, 1961. 9. WE NOTE THAT THE SOLE BASIS FOR MAKING THE ADDI TION IS ON THE BASIS OF THE STATEMENT RECORDED ON OATH DURING SURVEY AT M/S. HERBICURE OF SHRI SWAPAN RANJAN DASGUPTA, OTHER THAN THE SAID STATEMENT THERE IS NO OTHER EVIDENCE TO SHOW THAT T HE ASSESSEE HAS RECEIVED BACK THE DONATION AS SUGGESTED IN HIS GENERAL STATEMENT ABOUT PROVIDING ACCOMMODATION ENTRY BY SHRI SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE SAID SHRI SWAPAN R ANJAN DASGUPTA HAS NOT STATED ANYWHERE THAT THE ASSESSEE INDULGED IN BOGUS DONATION OR THAT THE AMOUNT DONATED TO IT (M/S. HERBICURE) WAS GIVEN BACK TO THE ASSESSEE AFTER DEDUCTING THE COMMISSION . WE NOTE THAT THE STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE THE SOLE BASIS FOR MAKING T HE DISALLOWANCE AS DECIDED BY THE HONBLE SUPREME COURT IN CIT VS. S. KADER KHAN SON (2013) 3 52 ITR 480 (SC). IN ANY CASE, IF THE AO WAS OF THE OPINION THAT THE STATEMENT OF SHRI SWAPAN RANJA N DASGUPTA, THE FOUNDER DIRECTOR OF M/S. HERBICURE HAS ADVERSELY AFFECTED THE VERACITY OF TH E DONATION MADE BY THE ASSESSEE THEN HE WAS DUTY BOUND TO SUMMON SHRI SWAPAN RANJAN DASGUPTA AND ALL OWED THE ASSESSEE TO HAVE CROSS EXAMINED HIM, FAILING WHICH THE STATEMENT OF SHRI SWAPAN RAN JAN DASGUPTA COULD NOT BE USED AGAINST THE ASSESSEE TRUST AS HELD BY THE HONBLE SUPREME COURT IN ANDAMAN TIMBERS LTD. VS. COMMISSIONER OF CENTRAL EXCISE 62 TAXMAN 3. WE NOTE THAT THE AO HA D IN FACT, RECORDED THE FACT THAT THE PARTNERS OF THE ASSESSEE FIRM DESIRED TO CROSS EXAMINE THE FOUN DER DIRECTOR OF M/S. HERBICURE SHRI SWAPAN RANJAN DASGUPTA REGARDING THE PURPORTED DEPOSITION MADE AT THE TIME OF SURVEY. HOWEVER, AO DID NOT GRANT HIM THAT OPPORTUNITY TO CROSS EXAMINE SHR I SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE AO ISSUED NOTICE U/S. 131 OF THE ACT TO THE PAR TNERS OF THE ASSESSEE FIRM AND HAS RECORDED THEIR STATEMENT ON OATH ON 28.12.2015. WE NOTE FOR QUEST ION NO. 14 AS TO HOW THE PARTNER KNEW ABOUT M/S. HERBICURE, THE PARTNER OF THE ASSESSEE FIRM HAS ANS WERED THAT DR. BHUBAN CHAKRABORTY, A CARDIOLOGIST FRIEND INTRODUCED THEM TO M/S. HERBICU RE AND TO QUESTION NO. 15 AS WHETHER THE PARTNERS HAVE VISITED THE OFFICE OF M/S. HERBICURE TO WHICH THE PARTNERS ANSWERED THAT THEY HAD VISITED THE PREMISES OF M/S. HERBICURE ON TWO OCCAS IONS AND FOR QUESTION NO. 16 AS TO WHETHER THE PARTNERS WERE SATISFIED WITH THE WORK OF SCIENTIFIC RESEARCH CARRIED ON BY THE SAID M/S. HERBICURE, THE PARTNERS OF THE ASSESSEE FIRM HAD REPLIED THAT DURING THEIR VISIT AT PAILAN AND BARAL THEY WERE SATISFIED WITH THE SCIENTIFIC RESEARCH WORK AND FOR QUESTION NO. 17 THE PARTNERS REPLIED THAT THEY HAD SEEN THE CERTIFICATE ISSUED BY GOVT. OF INDIA AND A LSO HAVE GONE THROUGH THE RESEARCH PAPER OF THE PEOPLE WORKING THERE. FOR QUESTION NO. 20 THEY HAVE GIVEN THE NAME OF THE DOCTOR WHO WAS A CARDIOLOGIST WHO INTRODUCED THEM TO M/S. HERBICURE. WE NOTE THAT THE AO ENQUIRED ABOUT DR. BHUBAN CHAKRABORTYS ADDRESS FOR WHICH THE PARTNER REPLIED THAT THE DOCTOR RESIDES AT KSHUDIRAM SARANI, RATHTALA, KOLKATA. FOR QUESTION NO. 21 AS TO WHETHER THEY KNEW ABOUT THE DIRECTORATE OF INVESTIGATION, KOLKATA CARRIED OUT SURVEY U/S. 133A AND THAT ITS INVESTIGATION IS FOUND THAT THE ACTIVITIES WERE NOT GENUINE, THE PARTNERS REPLIED T HAT THEY WERE NOT AWARE OF THE SURVEY, HOWEVER, THEY ADDED THAT AFTER THEIR VISIT OF THE TWO CENTER S THEY WERE ON A BONAFIDE BELIEF THAT M/S. HERBICUR E WAS A COMPETENT INSTITUTE AND BASED ON THE RECOMMEN DATION OF THE CARDIOLOGIST DR. BHUBAN CHAKRABRTY THEY MADE DONATION TO THE SAID CONCERN. WE ALSO NOTE THAT THE AO ISSUED SUMMONS TO SHRI SWAPAN RANJAN DASGUPTA WHO DID NOT APPEAR FOR CROSS EXAMINATION DUE TO ILL HEALTH BUT THE 7 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 SAID SHRI DASGUPTA CONFIRMED THE DONATIONS MADE BY THE ASSESSEE FIRM TO M/S. HERBICURE IN WRITING TO THE AO AND CLEARLY STATED THAT NO MONEY WAS REFU NDED BACK TO ASSESSEE FIRM, WHICH FACT HAS BEEN REPRODUCED BY THE AO AT PAGE 7 OF HIS ORDER AS UNDE R: SHRI SWAPAN RANJAN DASGUPTA, DIRECTOR OF M/S HERBI CURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION HAD FILED A LETTER ON 28/01/2016 STATING REFERRING TO THE ABOVE AND YOUR COMMENTS ON MY REPLY DATED 22.01.2016, I WOULD FURTHER REQUEST YOUR GOOD OFFICE TO ELABORATE THE FINANCIAL YEARS IN QUESTION TO ENABLE OUR ACCOUNTS DEPTT FOR VERIFI CATION AND SUBMISSION. HOWEVER, WE APPARENTLY OBSERVE FROM OUR RECORDS TH AT FOLLOWING DONATIONS WERE RECEIVED BY US FROM M/S. SAIMED INNOVATION, THE ASSESSEE IN THE FI NANCIAL YEARS MENTIONED AGAINST EACH: F.YS AMOUNT MODE OF TRANSACTION DATE RECEIPT NO. 2012-13 7,51,000/- RTGS:UTR NO. BARBH13074606758 15.03.2013 HHBHRF/15-03- 13/004 2012-13 7,51,000/- RTGS:UTR NO BARBH 13085899500 26.03.2013 HHBHRF/26-03- 13/004 FURTHER, IT IS SUBMITTED FOR YOUR KIND RECORD THAT NO MONEY WAS REFUNDED TO THE ABOVE NAMED ASSESSEE AGAINST DONATIONS GIVEN BY THEM. MEANTIME, I MAY SUBMIT THAT I AM CRITICALLY INDISPO SED DUE TO ACUTE LUMBER SCOLIOSIS AND AM NOT ABLE TO MOVE. I AM UNDER STRICT MEDICAL SUPERVISION . AS SUCH, MY PERSONAL APPEARANCE MAY KINDLY BE WAIVED ON COMPASSIONATE GROUND. I AM ATTACHING THE CURRENT MEDICAL PRESCRIPTION/ADVICE ALONG WITH MRI REPORTS FOR YOUR KIND RECORD. HOWEVER, THE INFORMATION AS SUBMITTED ABOVE MAY PLE ASE RECORDED AS MY WITNESS. 10. THUS WE NOTE FROM THE ENTIRE FACTS AND CIRCUMST ANCES, THAT THE AO GOT SWAYED AWAY WITH THE STATEMENT RECORDED ON OATH OF MR. SWAPAN RANJAN DAS GUPTA DURING SURVEY CONDUCTED AT THE PREMISES OF M/S. HERBICURE. WE HAVE REPRODUCED QUESTION NO. 22 AND 23 AND ANSWERS GIVEN BY SHRI SWAPAN RANJAN DASGUPTA, WHEREIN HE ADMITS TO PROVIDE ACCOM MODATION ENTRIES IN LIEU OF CASH. THIS INFORMATION WE SHOULD SAY CAN BE THE TOOL TO START AN INVESTIGATION WHEN THE ASSESSEE MADE THE CLAIM FOR WEIGHTED DEDUCTION. THE GENERAL STATEMENT OF S HRI SWAPAN RANJAN DASGUPTA AGAINST DONATION MADE THE CLAIM OF ASSESSEE FOR DEDUCTION SUSPICIOUS . HOWEVER, WHEN THE AO INVESTIGATED, SHRI SWAPAN RANJAN DASGUPTA HAS CONFIRMED THAT M/S. HER BICURE WAS IN RECEIPT OF THE DONATION AND IT HAS NOT GIVEN ANY REFUND IN CASH, THEN THE SOLE BASIS O F DISALLOWANCE OF CLAIM AS A MATTER OF FACT DISAPPEARED. IT SHOULD BE REMEMBERED SUSPICION HOW SOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE. THE CONFIRMATION FROM SHRI SWAPAN RANJAN DASGUPTA F ORTIFIES THE CLAIM OF THE ASSESSEE FOR WEIGHTED DEDUCTION U/S. 35(1)(II) OF THE ACT. THE SOLE BASI S OF THE ADDITION/DISALLOWANCE BASED ON STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE ALLOWED AS HELD BY HONBLE SUPREME COURT IN KADER KHAN & SONS (SUPRA). MOREOVER, WE NOTE THAT IF THE AO W AS HELL BENT DETERMINED TO DISALLOW THE CLAIM OF THE ASSESSEE, THEN HE SHOULD HAVE GRANTED AN OPPORT UNITY TO CROSS EXAMINE SHRI SWAPAN RANJAN DAS GUPTA AND SHRI KISHAN BHAWASINGKA AS HELD BY HONBL E SUPREME COURT IN ANDAMAN TIMBER (SUPRA). 11. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMS TANCES, WE CANNOT SUSTAIN THE ORDER OF THE AUTHORITIES BELOW. THEREFORE, WE SET ASIDE THE IMP UGNED ORDER AND DIRECT THE AO TO ALLOW THE DEDUCTION OF RS.26,28,500/- U/S. 35(1)(II) OF THE A CT. 8 ITA NO. 15/KOL/2017 DESMET REAGENT PVT LTD, AY 2013-14 IN VIEW OF THE AFORESAID DISCUSSION AND THE STATUTO RY PROVISIONS AND THE DECISION IN SIMILAR CASE AS CITED ABOVE, WE FIND NO INFIRMITY IN THE OR DER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10TH OCTO BER, 2018. SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10TH OCTOBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CIRCLE-12(1), KOLKATA. 2 RESPONDENT M/S. DESMET REAGENT PVT. LTD., 9, FL OOR, SUKHSAGAR APPT., 2/5, SARAT BOSE ROAD, BHOWANIPORE, KOLKATA-700 020. 3. 4. 5. CIT(A)-4, KOLKATA CIT, KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY