Saimed Innovation, Kolkata V. ITO, Ward-22(2), Kolkata, Kolkata

ITA 2231/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1544 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BISWAS
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Bogus purchase; Bonafide belief; Accommodation entries
• Section: 133A; 80G; 12A; 12AA; 131

Judgement Text

1 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] / I.T.A NO. 2231/KOL/2016 ! ' / ASSESSMENT YEAR: 2013-14 SAIMED INNOVATION (PAN: ACDFS0128G) VS. INCOME-TAX OFFICER, WD-22(2), KOLKATA ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING 22.06.2017 DATE OF PRONOUNCEMENT 13.09.2017 FOR THE APPELLANT/ SHRI MIRAJ D. SHAH, ADVOCATE FOR THE RESPONDENT/ SHRI M. K. BISWAS, JCIT / ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-6, KOLKATA DATED 28.10.2016 FOR AY 2013-14. 2. THE GROUND NOS. 1, 2 AND 8 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 3. GROUND NOS. 3, 4 AND 5 ARE AGAINST THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S. 35(1)(II) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) OF RS.26,28,500/-. 4. BRIEF FACTS ARE THAT THE ASSESSEE MADE A DONATIO N OF RS.15,02,000/- TO M/S. HERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION (IN SHORT M/S. HERBICURE) FOR WHICH THE ASSESSEE CLAIMED DEDUCTION U/S. 35(1)(II) OF THE AC T TO THE TUNE OF ONE AND THREE FOURTH OF RS.15,02,000/- AMOUNTING TO RS.26,28,500/- IN ITS R ETURN OF INCOME. THE AO TOOK NOTE OF THE INFORMATION RECEIVED FROM THE OFFICE OF THE PR. DIRECTOR OF INCOME-TAX (INV.), KOLKATA-69 WHICH INFORMATION WAS BASED ON A SURVEY OPERATION C ARRIED OUT U/S. 133A OF THE ACT AT THE 2 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 OFFICE PREMISES OF M/S. HERBICURE ON 27.01.2015. D URING THE SURVEY OPERATION STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA (FOUNDER DIRECTOR) OF M /S. HERBICURE WAS RECORDED ON OATH WHEREIN HE HAS ADMITTED TO ENGAGE IN PROVIDING ACCO MMODATION ENTRIES. BASED ON THE STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA, THE AO WA S OF THE OPINION THAT THE CLAIM MADE BY THE ASSESSEE WAS BOGUS AND, THEREFORE, HE DID NO T ALLOW THE CLAIM AND ADDED THE DEDUCTION CLAIMED OF RS.26,28,500/- TO THE RETURNED INCOME OF ASSESSEE AT RS.7,53,440/- AND ASSESSED THE TOTAL INCOME AT RS.33,81,940/-. AGGRI EVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM T HE SAME. AGGRIEVED BY THE AFORESAID DECISION OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A PARTNERSHIP F IRM ENGAGED IN THE BUSINESS OF MEDICAL EQUIPMENTS. DUE TO THE RECESSIONARY TREND IN THE BU SINESS OF MEDICAL EQUIPMENT, THE ASSESSEE THOUGHT IT PRUDENT TO DIVERSIFY ITS BUSINE SS AND VENTURED INTO MANUFACTURING AND MARKETING OF HERBAL PRODUCT. THE ASSESSEE REALIZED THAT SINCE IN THE BUSINESS OF BUYING HERBAL PRODUCTS SUBSTANTIALLY DEPENDED UPON THE CON TINUOUS UPGRADATION OF THE TECHNOLOGY WHICH CAN BE DONE ONLY BY A TIE UP WITH AN ACCREDIT ED RESEARCH ORGANIZATION. WHEN THIS THOUGHT PROCESS WAS GOING ON, THE ASSESSEE WAS INTR ODUCED TO M/S. HERBICURE BY A FRIEND WHO WAS A CARDIOLOGIST DR. CHAKRABORTY AND THEN THE PARTNERS OF THE ASSESSEE FIRM VISITED TWO UNITS LOCATED AT PAILAN AND BARAL AND AFTER INS PECTING 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 TAKING 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 H IS MEMO DATED 03.02.2005 (PAPER BOOK PAGE 22). M/S. HERBICURE WAS ALSO HAVING REGISTRAT ION U/S. 80G(5)(VI) OF THE ACT WHICH WAS GRANTED BY THE LD. DIT(E). M/S. HERBICURE WAS ALSO HAVING A REGISTRATION U/S. 6(1)(A) OF THE FOREIGN CONTRIBUTION (REGULATION) ACT, 1976 WHICH W AS GRANTED TO IT ON 26.02.2008 VIDE REGISTRATION NO.147120804. M/S. HERBICURE WAS ALSO RECOGNIZED IN THE YEAR 2006-07 AS A 3 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 SCIENTIFIC INDUSTRIAL RESEARCH ORGANISATION (SIRO) BY MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA. M/S. HERBICURE WAS ALSO RECOGNIZED VIDE GAZETTE NOTIFICATION NO. 35/2008 DATED 14.03.2008 ISSUED BY CBDT, MINISTRY OF FINANC E 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 WHE REIN 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 PROFITABLE SCIENTIFIC RESEARCH INSTITUTE CARRYING OUT RESEARCH, DRUG TESTING AND OTHER ALLI ED ACTIVITIES AS PER THE OBJECTIVE OF THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA SE EKING GENEROUS DONATION AND HAS GIVEN ITS DETAILS LIKE NAME, CERTIFICATE OF INCORPORATION , 12A REGISTRATION, GAZETTE NOTIFICATION U/S. 35(1)(II) OF THE ACT, RENEWAL OF SIRO DATED 31.03.2 015 VIDE ORDER DATED 13.08.2012 IN MEMO NO. 14/444/2006TUV BY THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA. FCRA REGISTRATION 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 NOTE THAT THE M/S. HERBIC URE 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 A FTER THE RESEARCH WORK IN M/S. HERBICURE AND THAT BASED ON HER CONTRIBUTION TOWARD S SCIENTIFIC RESEARCH ON MICROBIOLOGY FOR DECADES, SHE HAS BEEN SELECTED AS THE PRESIDENT OF INTERNATIONAL SOCIETY OF NON- ANTIBIOTICS (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. 00601020001174 70 WITH IDBI BANK, BRABOURNE 4 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 ROAD BRANCH, KOLKATA. SIMILARLY, A PAYMENT WAS MAD E ON 26.03.2013 BY RTGS DATED 23.06.2013. AT PAGE 26 AND 27 OF THE PAPER BOOK, W E NOTE THAT THE RECEIPT OF THE SAID AMOUNTS HAS BEEN PLACED ON RECORD. AT PAGE 28 OF T HE PAPER BOOK SHOWS THE BANK OF BARODA STATEMENT WHEREIN 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 B Y THE FOUNDER DIRECTOR OF M/S. HERBICURE TO ADIT, INVESTIGATION TO QUESTION NO. 22 AND QUESTION NO. 23 WAS THE BASIS OF DISALLOWANCE OF THE CLAIM MADE BY THE ASSESSEE WHIC H IS REPRODUCED BELOW: 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 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? 5 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 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 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 THE ASSESSEE HAS RECEIVED BACK THE DONATION AS SUGGESTED IN HIS GENERAL STATE MENT ABOUT PROVIDING ACCOMMODATION ENTRY BY SHRI SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE SAID SHRI SWAPAN RANJAN DASGUPTA HAS NOT STATED ANYWHERE THAT THE ASSESSEE INDULGED IN BOGUS DONATION OR THAT THE AMOUNT DONATED TO IT (M/S. HERBICURE) WAS GIVEN BAC K TO THE ASSESSEE AFTER DEDUCTING THE COMMISSION. WE NOTE THAT THE STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE THE SOLE BASIS FOR MAKING THE DISALLOWANCE AS DECIDED BY THE HONBLE SUPREME COURT IN CIT VS. S. KADER KHAN SON (2013) 352 ITR 480 (SC). IN ANY CASE , IF THE AO WAS OF THE OPINION THAT THE STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA, THE F OUNDER DIRECTOR OF M/S. HERBICURE HAS ADVERSELY AFFECTED THE VERACITY OF THE DONATION MAD E BY THE ASSESSEE THEN HE WAS DUTY BOUND 6 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 TO SUMMON SHRI SWAPAN RANJAN DASGUPTA AND ALLOWED T HE 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 C OURT IN ANDAMAN TIMBERS LTD. VS. COMMISSIONER OF CENTRAL EXCISE 62 TAXMAN 3. WE NOT E THAT THE AO HAD IN FACT, RECORDED THE FACT THAT THE PARTNERS OF THE ASSESSEE FIRM DES IRED TO CROSS EXAMINE THE FOUNDER DIRECTOR OF M/S. HERBICURE SHRI SWAPAN RANJAN DASGUPTA REGAR DING THE PURPORTED DEPOSITION MADE AT THE TIME OF SURVEY. HOWEVER, AO DID NOT GRANT H IM THAT OPPORTUNITY TO CROSS EXAMINE SHRI SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE AO ISSUED NOTICE U/S. 131 OF THE ACT TO THE PARTNERS OF THE ASSESSEE FIRM AND HAS RECORD ED THEIR STATEMENT ON OATH ON 28.12.2015. WE NOTE FOR QUESTION NO. 14 AS TO HOW THE PARTNER K NEW ABOUT M/S. HERBICURE, THE PARTNER OF THE ASSESSEE FIRM HAS ANSWERED THAT DR. BHUBAN CHAK RABORTY, A CARDIOLOGIST FRIEND INTRODUCED THEM TO M/S. HERBICURE AND TO QUESTION N O. 15 AS WHETHER THE PARTNERS HAVE VISITED THE OFFICE OF M/S. HERBICURE TO WHICH THE P ARTNERS ANSWERED THAT THEY HAD VISITED THE PREMISES OF M/S. HERBICURE ON TWO OCCASIONS 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 RE PLIED THAT DURING THEIR VISIT AT PAILAN AND BARAL THEY WERE SATISFIED WITH THE SCIENTIFIC RESEA RCH WORK AND FOR QUESTION NO. 17 THE PARTNERS REPLIED THAT THEY HAD SEEN THE CERTIFICATE ISSUED BY GOVT. OF INDIA AND ALSO HAVE GONE THROUGH THE RESEARCH PAPER OF THE PEOPLE WORKI NG 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. B HUBAN CHAKRABORTYS ADDRESS FOR WHICH THE PARTNER REPLIED THAT THE DOCTOR RESIDES A T KSHUDIRAM SARANI, RATHTALA, KOLKATA. FOR QUESTION NO. 21 AS TO WHETHER THEY KNEW ABOUT T HE DIRECTORATE OF INVESTIGATION, KOLKATA CARRIED OUT SURVEY U/S. 133A AND THAT ITS INVESTIGA TION IS FOUND THAT THE ACTIVITIES WERE NOT GENUINE, THE PARTNERS REPLIED THAT THEY WERE NOT AW ARE OF THE SURVEY, HOWEVER, THEY ADDED THAT AFTER THEIR VISIT OF THE TWO CENTERS THEY WERE ON A BONAFIDE BELIEF THAT M/S. HERBICURE 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 SAID SHRI DASGUPTA CONFIRMED THE DONATIONS MADE BY THE ASSESSEE FIRM TO 7 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 M/S. HERBICURE IN WRITING TO THE AO AND CLEARLY STA TED THAT NO MONEY WAS REFUNDED BACK TO ASSESSEE FIRM, WHICH FACT HAS BEEN REPRODUCED BY TH E AO AT PAGE 7 OF HIS ORDER AS UNDER: 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 R ANJAN DASGUPTA DURING SURVEY CONDUCTED AT THE PREMISES OF M/S. HERBICURE. WE HA VE REPRODUCED QUESTION NO. 22 AND 23 AND ANSWERS GIVEN BY SHRI SWAPAN RANJAN DASGUPTA, W HEREIN HE ADMITS TO PROVIDE ACCOMMODATION ENTRIES IN LIEU OF CASH. THIS INFORM ATION WE SHOULD SAY CAN BE THE TOOL TO START AN INVESTIGATION WHEN THE ASSESSEE MADE THE C LAIM FOR WEIGHTED DEDUCTION. THE GENERAL STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA AG AINST DONATION MADE THE CLAIM OF ASSESSEE FOR DEDUCTION SUSPICIOUS. HOWEVER, WHEN T HE AO INVESTIGATED, SHRI SWAPAN RANJAN DASGUPTA HAS CONFIRMED THAT M/S. HERBICURE WAS IN RECEIPT OF THE DONATION AND IT HAS NOT GIVEN ANY REFUND IN CASH, THEN THE SOLE BAS IS OF DISALLOWANCE OF CLAIM AS A MATTER OF FACT DISAPPEARED. IT SHOULD BE REMEMBERED SUSPICIO N HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE. THE CONFIRMATION FROM SHRI SWAP AN RANJAN DASGUPTA FORTIFIES THE CLAIM OF THE ASSESSEE FOR WEIGHTED DEDUCTION U/S. 35(1)(I I) OF THE ACT. THE SOLE BASIS OF THE ADDITION/DISALLOWANCE BASED ON STATEMENT RECORDED O N OATH DURING SURVEY CANNOT BE ALLOWED 8 ITA NO.2231/KOL/2016 SAIMED INNOVATION, AY 2013-14 AS HELD BY HONBLE SUPREME COURT IN KADER KHAN & SO NS (SUPRA). MOREOVER, WE NOTE THAT IF THE AO WAS HELL BENT DETERMINED TO DISALLOW THE CLAIM OF THE ASSESSEE, THEN HE SHOULD HAVE GRANTED AN OPPORTUNITY TO CROSS EXAMINE SHRI S WAPAN RANJAN DAS GUPTA AND SHRI KISHAN BHAWASINGKA AS HELD BY HONBLE 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 IMPUGNED ORDER AND DIRECT THE AO TO ALLOW THE DEDUCTION OF RS.26,28,500/- U/S. 35(1)(II ) OF THE ACT. 12. IN THE RESULT, APPEAL OF ASSESSEE IS ASSESSEE I S ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.09.2017 SD/- SD/- (M. BALAGANESH) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :13TH SEPTEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SAIMED INNOVATION, C/O D. J. SHAH & CO. KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020. 2 RESPONDENT ITO, WARD-22(2), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECY.,