Rajda Polymers, Kolkata V. DCIT, Cir-36,Kolkata, Kolkata

ITA 333/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1099 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 17-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Principle of natural justice; Opportunity of cross examination; Bonafide belief
• Section: 133A; 234B; 12AA; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A NO. 333/KOL/201 7 ASSESSMENT YEAR : 2013-1 4 RAJDA POLYMERS -VS- DCIT, CIRCLE-36, K OLKATA [PAN: AADFR 2816 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MIRAJ D. SHAH , AR FOR THE RESPONDENT : SHRI SAURABH KUMAR, ADDL . CIT (DR) DATE OF HEARING : 17.10.2017 DATE OF PRONOUNCEMENT : 08.11.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-10, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO.301/CIT(A)- 10/CIR-36/15-16/KOL DATED 17.01.2017 AGAINST THE O RDER PASSED BY THE DCIT, CIRCLE- 36, KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 27.01.2016 FOR THE ASSESSME NT YEAR 2013-14. 2. THE GROUND NOS. 1 & 9 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. THE ONLY EFFECTIVE GROUND (GROUNDS 2 TO 5) RAISE D BY THE ASSESSEE IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 35(1)(II) OF THE ACT IN THE SUM OF RS 24,50,000/- IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 2 4. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN POLYMERS, MASTER BATCH & PLA STIC GRANULES AND ALSO ACTING AS COMMISSION AGENT. THE RETURN OF INCOME FOR THE AS ST YEAR 2013-14 WAS FILED BY THE ASSESSEE ON 20.9.2013 DISCLOSING TOTAL INCOME OF RS 29,96,220/-. THE LD AO OBSERVED THAT THE ASSESSEE CLAIMED DONATION OF RS 24,50,000/ - (BEING 175% OF RS 14,00,000/-) U/S 35(1)(II) OF THE ACT FOR THE DONATION MADE TO THE H ERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION (HHBRF IN SHORT). A SURVEY OP ERATION U/S 133A OF THE ACT WAS CONDUCTED ON 27.1.2015 IN THE CASE OF HHBRF BY THE DIRECTORATE OF INVESTIGATION, KOLKATA. IT WAS NOTICED THAT HHBRF IS A NON-PROFIT ORGANIZATION WHICH IS REGISTERED AS A PRIVATE COMPANY LIMITED BY SHARES AND LICENSED U/ S 25 OF THE COMPANIES ACT, 1956. THE ORGANIZATION IS REGISTERED U/S 12AA OF THE ACT. IT WAS ALSO APPROVED U/S 35(1)(II) OF THE ACT AS A SCIENTIFIC RESEARCH ORGANIZATION FO R THE PURPOSE OF DEDUCTION OF ACCOUNT OF EXPENDITURE ON SCIENTIFIC RESEARCH. THE FOUND ER DIRECTOR OF THE SAID ORGANIZATION IS SHRI SWAPAN RANJAN DASGUPTA. PURSUANT TO THE SURVE Y, IT CAME TO LIGHT THAT HHBRF, IN CONNIVANCE WITH VARIOUS PERSONS AS DONORS, BROKERS AND ACCOMMODATION ENTRY PROVIDERS HAS INDULGED IN A DEVIOUS SCHEME OF TAX EVASION BY DEFRAUDING REVENUE AND HAS ILL- PROFITED FROM THE INCENTIVES PROVIDED BY THE GOVERN MENT TO ADVANCE AND ENCOURAGE SCIENTIFIC RESEARCH OR RESEARCH IN SOCIAL SCIENCE O R STATISTICAL RESEARCH IN THE COUNTRY. THE MODUS OPERANDI INVOLVED WAS THAT AFTER THE AMOU NT OF DONATIONS ARE RECEIVED THROUGH CHEQUE OR RTGS, THE AMOUNT IS ROUTED BACK T O THE DONOR IN CASH AFTER RETAINING A PART OF THE AMOUNT AS COMMISSION THROUGH LAYERS O F CONCERNS OF BROKERS, ENTRY OPERATORS, BENEFICIARIES OF OTHER ACCOMMODATION ENT RIES. 4.1. THE ASSESSEE HEREIN, PAID A SUM OF RS 14,00,0 00/- TO HHBRF AND CLAIMED WEIGHTED DEDUCTION OF 175% OF THE SUM PAID AMOUNTIN G TO RS 24,50,000/- (1400000 * 175% = 2450000) , U/S 35(1)(II) OF THE ACT IN THE R ETURN OF INCOME FOR THE ASST YEAR 2013-14 FILED ON 20.9.2013. DURING THE SURVEY OPER ATION , STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA (FOUNDER DIRECTOR OF HHBRF) WAS REC ORDED ON OATH U/S 131 OF THE 3 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 3 ACT, WHEREIN HE ADMITTED TO ENGAGE IN PROVIDING ACC OMMODATION ENTRIES. BASED ON THE STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA, THE LD AO WAS OF THE OPINION THAT THE CLAIM U/S 35(1)(II) OF THE ACT MADE BY THE ASSESSEE WAS B OGUS, AND THEREFORE, PROCEEDED TO DISALLOW THE CLAIM IN THE SUM OF RS 24,50,000/- IN THE ASSESSMENT. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. FOR THAT THE ADDITIONS WERE MADE ON STATEMENT AN D EVIDENCES WHICH WERE COLLECTED BEHIND THE BACK OF THE ASSESSEE AND NO OP PORTUNITY OF CROSS EXAMINATION WAS ALLOWED TO THE ASSESSEE. HENCE, THE ADDITION SHOULD BE DELETED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLO WANCE OF DEDUCTION CLAIMED U/S 35(1)(II) OF THE INCOME TAX ACT, 1961 OF RS. 2 4,50,000/-. THE DISALLOWANCE IS NOT CALLED FOR HENCE THE SAME BE REVERSED. 4. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN UPHOLDING THE DISALLOW ANCE OF RS. 24,50,000/- DESPITE THE CONFIRMATION FROM THE PARTY. HENCE, THE DISALLOWANCE BE REVERSED. 5. FOR THAT THE LD. AO ERRED IN DISALLOWING THE DED UCTION OF RS. 24,50,000/- U/S 35(1)(II) OF THE INCOME TAX ACT, 1961 WITHOUT MAKIN G HIS INDEPENDENT INQUIRIES, AND MERELY RELYING ON THE REPORT OF THE INVESTIGATI ON DEPARTMENT. THE DISALLOWANCE MADE ON SUCH BASIS IS BAD IN LAW AND T HEREFORE THE SAME BE REVERSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS PERTAINING TO HHBRF ARE AS UNDER:- A) HHBRF WAS REGISTERED U/S 12AA OF THE ACT BY THE LD DIT(EXEMPTIONS), KOLKATA WITH EFFECT FROM 26.12.2003. B) HHBRF WAS REGISTERED U/S 6(1)(A) OF THE FOREIGN CONRIBUTION (REGULATION) ACT, 1976 ON 26.2.2008 VIDE REGISTRATION NO. 147120804. C) HHBRF WAS ALSO RECOGNIZED IN THE YEAR 2006-07 AS A SCIENTIFIC INDUSTRIAL RESEARCH ORGANIZATION (SIRO) BY MINISTRY OF SCIENCE & TECHNO LOGY, GOVERNMETN OF INDIA. 4 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 4 D) HHBRF WAS RECOGNIZED VIDE GAZETTE NOTIFICATION N O. 35/2008 DATED 14.3.2008 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT I N SHORT), MINISTRY OF FINANCE, GOVERNMENT OF INDIA, U/S 35(1)(II) OF THE ACT. 5.1. WE FIND THAT THE ASSESSEE HAD EXPLAINED ABOUT ITS COMMERCIAL OBJECTIVE FOR ASSOCIATION WITH SUCH AN ACCREDITED INSTITUTION APA RT FROM GETTING AN IMMEDIATE TAX BENEFIT VIA WEIGHTED DEDUCTION FOR ANY DONATION MAD E TO THE INSTITUTION. WE FIND THAT WHEN THE LD AO INFORMED THE ASSESSEE THAT DIRECTOR OF HHBRF HAD GIVEN SOME STATEMENT BEFORE THE INVESTIGATION WING AS PER WHIC H THE DONATION MADE BY THE ASSESSEE WAS TO BE HELD AS A BOGUS TRANSACTION AND ASSESSEE WOULD BE INVITED WITH CONSEQUENTIAL DISALLOWANCE THEREON, THE ASSESSEE ASKED FOR ALL T HE ADVERSE MATERIALS WHICH THE LD AO PROPOSED TO RELY UPON AND ALSO SOUGHT AN OPPORTUNIT Y TO CROSS EXAMINE THE DIRECTORS OF HHBRF. WE FIND FROM THE PERUSAL OF THE ASSESSMENT ORDER, THAT THE LD AO HAD DENIED THE CROSS EXAMINATION AND BY PLACING RELIANCE ON TH E STATEMENT GIVEN BY DIRECTORS OF HHBRF , PROCEEDED TO FRAME THE ASSESSMENT U/S 143(3 ) OF THE ACT IN THE HANDS OF THE ASSESSEE BY DISALLOWING THE DEDUCTION CLAIMED U/S 3 5(1)(II) OF THE ACT. HENCE IT COULD BE SAFELY CONCLUDED THAT THERE WAS NO CROSS EXAMINA TION OF THE ADVERSE WITNESSES. 5.2. WE FIND THAT ON THE OTHER HAND, THE ASSESSEE H AD SUBMITTED ALL THE DOCUMENTS PERTAINING TO THE CLAIM OF DEDUCTION U/S 35(1)(II) OF THE ACT BEFORE THE LD AO. THE UNDISPUTED FACT BEFORE US IS THAT THE ASSESSEE HAD PAID A SUM OF RS 14,00,000/- VIDE CHEQUE NO. 786400 DATED 28.11.2012 DRAWN ON CANARA BANK, BRABOURNE ROAD BRANCH, KOLKATA TO HHBRF, WHICH HAS BEEN ACKNOWLEDGED VIDE LETTER DATED 6.12.2012. THIS PAYMENT OF RS 14,00,000/- WAS DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. HENCE THE SOURCE FOR MAKING THIS PAYMENT STOOD CLEA RLY EXPLAINED AND IS NOT IN DISPUTE BEFORE US. WE FIND THAT THE ENTIRE ASSESSMENT I S BASED UPON THE STATEMENT OF DIRECTORS OF HHBRF. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMENT WAS SUPPLIED TO THE ASSESSEE (THE ASSESSEE WAS ASKED TO READ THE SA ME IN THE PRESENCE OF THE LD AO), NOR 5 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 5 WAS ANY OPPORTUNITY OF CROSS EXAMINATION GIVEN BY T HE LD AO. IN THIS REGARD , THE RELIANCE PLACED BY THE LD AR ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES LTD VS COMMISSIONER OF CE NTRAL EXCISE IN CIVIL APPEAL NO. 4228 OF 2006 REPORTED IN (2015) 62 TAXMAN 3 (SC) IS VERY WELL FOUNDED, WHEREIN IT WAS HELD THAT :- 'ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THO SE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. 5.3. WE FIND THAT SIMILAR VIEWS WERE TAKEN IN THE F OLLOWING DECISIONS :- A) DECISION OF HONBLE BOMBAY HIGH COURT IN THE CAS E OF H R MEHTA VS CIT REPORTED IN 387 ITR 561 (BOM) B) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ASHWANI GUPTA REPORTED IN 322 ITR 396 (DEL) C) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SMC CHARE BROKERS LTD REPORTED IN 288 ITR 345 (DEL) D) DECISION OF HONBLE SUPREME COURT IN THE CASE OF PRAKASH CHAND NAHTA VS UNION OF INDIA REPORTED IN 247 ITR 274 (SC) E) DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS EASTERN COMMERCIAL ENTERPRISES REPORTED IN 210 ITR 103 (CAL ) F) DECISION OF HONBLE KERALA HIGH COURT IN THE CAS E OF P.S.ABDUL MAJEED VS AGRICULTURAL INCOME TAX & SALES TAX OFFICER & ORS R EPORTED IN 209 ITR 821 (KER) 5.4. WE FIND THAT THE LD AO DID NOT PROVIDE THE MAT ERIAL RATHER HE MERELY ALLOWED THE ASSESSEE TO READ THE STATEMENT. THIS, IN OUR CONSI DERED OPINION, WAS NOT JUSTIFIED. THE ASSESSEE CANNOT BE EXPECTED TO GIVE REPLY TO THE ST ATEMENT WITHOUT GOING THROUGH THE 6 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 6 SAME IN DETAIL AND PREPARE ITS COUNTER THEREON. H ENCE IT COULD BE SAFELY CONCLUDED THAT IN THE INSTANT CASE, THE LD AO DID NOT PROVIDE THE RELEVANT MATERIALS TO THE ASSESSEE. FURTHER DESPITE REQUEST FOR CROSS EXAMINATION BEING MADE BY THE ASSESSEE, THE SAME WAS NOT ALLOWED BY THE LD AO AND HENCE RESPECTFULLY FOL LOWING THE AFORESAID DECISIONS OF THE HONBLE SUPREME COURT AND VARIOUS HIGH COURTS SUPRA , WE HOLD THAT THERE WAS NO MATERIAL AVAILABLE WITH THE REVENEUE ON THE BASIS O F WHICH IT COULD JUSTIFY ITS ACTION OF DISALLOWING THE CLAIM OF DEDUCTION U/S 35(1)(II) OF THE ACT. 5.5. MOREOVER, WE FIND THAT THE PROVISIONS OF EXPLA NATION TO SECTION 35(1)(II) OF THE ACT ALSO COMES TO THE RESCUE OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE SAID EXPLANATION IS REPRODUCED BELOW:- 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 INSTITUTION TO WHICH CLAUSE (II) OR CLAUSE (III) APPLIES, SHALL NOT BE DENIED MERELY ON THE GROUND THAT, SUBSEQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESSEE, THE APP ROVAL GRANTED TO THE ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTI ON REFERRED TO IN CLAUSE (II) OR CLAUSE (III) HAS BEEN WITHDRAWN. IN THE INSTANT CASE, THE LD DR ARGUED THAT THE RECO GNITION U/S 35(1)(II) OF THE ACT WAS WITHDRAWN IN THE CASE OF HHBRF BY THE CBDT WITH RET ROSPECTIVE EFFECT. IN RESPONSE TO THIS, THE LD AR ARGUED THAT ON THE DATE ON WHICH DONATION WAS GIVEN, THE NOTIFICATION U/S 35(1)(II) OF THE ACT WAS IN FORCE AND VALID AND THEREFORE THE DEDUCTION CLAIMED BY THE ASSESSEE WAS IN ORDER. WE FIND THAT THE LD CI TA HAD IGNORED THE PROVISIONS OF THE ACT (I.E THE EXPLANATION TO SECTION 35(1)(II) OF TH E ACT) BY MERELY STATING THAT HHBRF HAD SUBSEQUENTLY DECLARED BEFORE THE HONBLE SETTLE MENT COMMISSION, DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA , ADDITIONAL INCOME AN D ADMITTED TO THE MODUS OPERANDI OF VARIOUS TRANSACTIONS CARRIED OUT BY THEM. BUT THIS IN OUR CONSIDERED OPINION, WOULD NOT SERVE THE PURPOSE OF THE REVENUE. MERELY BECAU SE THE DONEE GOES TO HONBLE 7 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 7 SETTLEMENT COMMISSION AND DECLARES SOME ADDITIONAL INCOME THEREON, IT DOES NOT AUTOMATICALLY IMPLEAD THE ASSESSEE HEREIN ON THE NE GATIVE SIDE AND THE EXPRESS PROVISIONS OF THE ACT CANNOT BE IGNORED THEREON. T HERE CANNOT BE ANY MALAFIDE THAT COULD BE ATTRIBUTED ON THE ASSESSEE HEREIN. WE FIN D THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF AND HAD MADE PROPER DUE DILIGENCE B EFORE GRANTING DONATION TO HHBRF WHICH WAS DULY RECOGNIZED U/S 35(1)(II) OF THE ACT AT THE TIME OF GIVING DONATION. WE HOLD THAT IF THE SUBSEQUENT NOTIFICATION CANCELLED THE REGISTRATION U/S 35(1)(II) OF THE ACT, THE SAME DOES NOT AFFECT THE DONATION MADE BY THE A SSESSEE WHEN THE SAID NOTIFICATION WAS IN FORCE. THE BONAFIDE BELIEF OF THE ASSESSEE DONOR AT THE TIME OF GRANTING DONATION TO AN INSTITUTION ON THE BASIS OF RECOGNITION THEN AVAILABLE, CANNOT BE DISTURBED BY SUBSEQUENT EVENT. THIS IS MORE CLEARLY SPELT OUT I N THE PROVISIONS OF THE ACT ITSELF BY WAY OF AN EXPLANATION TO SECTION 35(1) OF THE ACT. HENCE EVEN AS PER THE PROVISIONS OF THE ACT, THE DENIAL OF DEDUCTION U/S 35(1)(II) OF T HE ACT IS NOT IN ORDER. WE ALSO FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAES OF B. P.AGARWALLS & SONS LTD VS CIT REPORTED IN 208 ITR 863 (CAL) AND JAI KUMAR KAN KARIA VS CIT REPORTED IN 251 ITR 707 (CAL) HAD HELD THAT THERE WAS NO POWER TO CANCEL THE REG ISTRATION RETROSPECTIVELY. HENCE EVEN ON THIS COUNT, THE DEDUCTION CLAIMED U/S 35(1)(II) OF THE ACT BY THE ASSESSEE DESERVES TO BE ALLOWED. 5.6. WE FIND THAT THE LD CITA HAD MADE AN OBSERVAT ION WHICH HAS BEEN HEAVILY RELIED UPON BY THE LD DR THAT THE ASSESSEES LINE OF BUSIN ESS HAS GOT NOTHING TO DO EVEN REMOTELY WITH THE HEALTHCARE OR HERBAL HEALTHCARE I NDUSTRY MUCH LESS IN THE AREA OF RESEARCH THEREON AND ACCORDINGLY THERE WAS NO NEED FOR THE ASSESSEE TO GIVE DONATION OF RS 14,00,000/- TO HHBRF . WE FIND THAT THIS ASPEC T HAS BEEN DULY ADDRESSED BY THE ASSESSEE BY STATING THAT ONE CARDIOLOGIST DOCTOR HA D INTRODUCED THE ASSESSEE TO HHBRF AND DONATIONS WERE GIVEN AFTER DUE SATISFACTION OF THE ASSESSEE BASED ON PERSONAL VISITS TO THE TWO RESEARCH CENTRES OF HHBRF AND ACTIVITIES CARRIED ON BY THEM. MOREOVER, IT IS WELL SETTLED THAT IT IS ALWAYS THE PREROGATIVE O F THE ASSESSEE TO GIVE OR NOT TO GIVE ANY 8 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 8 DONATION TO A PARTICULAR INSTITUTION, WHICH WISDOM CANNOT BE QUESTIONED BY THE REVENUE. THE QUESTION OF BUSINESS EXPEDIENCY OF AN EXPENDITU RE HAD TO BE VIEWED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT FROM THE VIEW PO INT OF THE REVENUE. THE BUSINESSMAN KNOWS HIS INTEREST BEST. HOWEVER, IT CANNOT BE DENIED THAT THIS DONATION PAID TO HHBRF IS FREE FROM ANY SUSPICION. IT DEFI NITELY LEADS TO FURTHER PROBE BY THE REVENUE, WHICH HAS BEEN CARRIED OUT BY THE REVENUE BY SUMMONING THE DIRECTOR OF HHBRF . THE SAID DIRECTOR SHRI SWAPAN RANJAN DASGU PTA, THOUGH COULD NOT APPEAR IN PERSON BEFORE THE LD AO FOR CROSS-EXAMINATION (WHIC H WAS SOUGHT BY THE ASSESSEE) BUT HAD CONFIRMED IN WRITING THAT THE DONATIONS GIVEN B Y THE ASSESSEE TO HHBRF WERE GENUINE IN NATURE AND HAD FURTHER CONFIRMED THAT HH BRF HAD NOT PAID ANY CASH BACK TO ASSESSEE IN LIEU OF CHEQUE DONATIONS PAID TO THEM. THE REVENUE HAD LEFT THE MATTER AT THIS STAGE ITSELF AND DID NOT FURTHER PROBE INTO IT TO CHECK THE VERACITY OF THE CONFIRMATION MADE BY SHRI SWAPAN RANJAN DASGUPTA. THEREFORE, T HE LD AO PROCEEDED TO MAKE THE ADDITION ONLY BASED ON THE STATEMENT RECORDED FROM SWAPAN RANJAN DASGUPTA AT THE TIME OF SURVEY. IT MAY BE TRUE THAT IN THE SAID S TATEMENT, SWAPAN RANJAN DASGUPTA MAY HAVE DEPOSED TO THE FACT THAT HHBRF WERE IN RECEIPT OF VARIOUS DONATIONS FROM VARIOUS PERSONS IN CHEQUES AND THE SAME WERE ROUTED BACK TO THE DONORS IN CASH AFTER RETAINING CERTAIN PORTION AS THEIR COMMISSION AND INTERMEDIAR IES COMMISSION. THIS IS ONLY A GENERAL STATEMENT GIVEN BY SWAPAN RANJAN DASGUPTA A BOUT THE MODUS OPERANDI CARRIED OUT BY HHBRF. BUT NOWHERE IN THE SAID STATEMENT OR IN THE SUBSEQUENT ENQUIRES / INVESTIGATION , IT CAME TO LIGHT THAT THE ASSESSEE HEREIN HAD INDEED RECEIVED BACK THE CASH IN LIEU OF CHEQUE DONATIONS GIVEN TO HHBRF. THIS SERVES AS A CLINCHING MISSING EVIDENCE IN THE ENTIRE GAMUT OF THIS CASE. 5.7. NOW LET US COME TO YET ANOTHER LEGAL ASPECT A S TO WHETHER ANY ADDITION / DISALLOWANCE COULD BE MADE MERELY BASED ON STATEMEN T RECORDED DURING SURVEY WHICH IS NOT BACKED BY ANY OTHER SUPPORTING MATERIAL. IT WOU LD BE PERTINENT TO NOTE THAT THE SWORN STATEMENT RECORDED DURING SURVEY DOES NOT HAVE ANY EVIDENTIARY VALUE. IN THIS REGARD, 9 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 9 THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF S.KHADER K HAN (2008) 300 ITR 157 (MAD) ASSUMES SIGNIFICANCE, WHEREIN IT WAS HELD THAT :- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EV IDENCE , BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON , WHO MADE IT, TO SHOW IT HAS INCORRECTLY BEEN MADE AND THE PERSON, MAKING THE ST ATEMENT SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT IT DOES NOT SHOW TH E CORRECT STATE OF FACTS. IT WAS FURTHER HELD THAT THE MATERIALS FOUND IN THE COURSE OF SURVEY COULD NOT BE THE BASIS FOR MAKING ANY ADDITION IN THE ASSESSMENT. THE WOR D MAY USED IN SECTION 133A(3)(III) OF THE ACT MAKES IT CLEAR THAT THE MAT ERIAL COLLECTED AND STATEMENT RECORDED DURING THE SURVEY U/S 133A OF THE ACT ARE NOT CONCL USIVE PIECE OF EVIDENCES BY ITSELF. THIS DECISION OF HONBLE MADRAS HIGH COURT WAS AFFI RMED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS S KHADER KHAN SONS REPORTED I N 352 ITR 480 (SC) , WHEREIN THEIR LORDSHIPS OF SUPREME COURT HELD AS UNDER:- HEARD COUNSEL ON BOTH THE SIDES. LEAVE GRANTED. THE CIVIL APPEAL FILED BY THE DEPARTMENT PERTAINS T O ASSESSMENT YEAR 2001-02. IN VIEW OF THE CONCURRENT FINDINGS OF FACT, THIS CI VIL APPEAL IS DISMISSED. WE FIND THAT THE SOLE BASIS OF LD AO MAKING THIS DI SALLOWANCE OF DEDUCTION U/S 35(1)(II) OF THE ACT WAS ON THE BASIS OF STATEMENT RECORDED D URING SURVEY FROM THE DIRECTOR OF HHBRF WHICH DOES NOT HAVE ANY EVIDENTIARY VALUE. H ENCE RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE MADRAS HIGH COURT AFFIRMED LATER BY THE HONBLE APEX COURT SUPRA, WE HOLD THAT THERE IS NO CASE MAD E OUT BY THE LD AO FOR MAKING THIS DISALLOWANCE U/S 35(1)(II) OF THE ACT. 5.8. WE ALSO FIND THAT SIMILAR ISSUE CAME UP BEFORE THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SAIMED INNOVATION VS ITO IN ITA NO. 2231/KOL/2016 FOR ASST YEAR 2013- 14 DATED 13.9.2017, WHEREIN IT WAS HELD AS UNDER:- 10 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 10 9. WE NOTE THAT THE SOLE BASIS FOR MAKING THE ADDIT ION IS ON THE BASIS OF THE STATEMENT RECORDED ON OATH DURING SURVEY AT M/S. HE RBICURE OF SHRI SWAPAN RANJAN DASGUPTA, OTHER THAN THE SAID STATEMENT THER E IS NO OTHER EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED BACK THE DONATI ON AS SUGGESTED IN HIS GENERAL STATEMENT ABOUT PROVIDING ACCOMMODATION ENT RY BY SHRI SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE SAID SHRI SW APAN 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 BACK TO THE ASSESSEE AFTER DEDUCTING THE COMMISSION. WE NOTE THAT THE STATEMEN T RECORDED ON OATH DURING SURVEY CANNOT BE THE SOLE BASIS FOR MAKING THE DISA LLOWANCE AS DECIDED BY THE HON'BLE 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 FOUNDER DIRECTOR OF M/S. HERBI CURE HAS ADVERSELY AFFECTED THE VERACITY OF THE DONATION MADE BY THE A SSESSEE THEN HE WAS DUTY BOUND TO SUMMON SHRI SWAPAN RANJAN DASGUPTA AND ALL OWED THE ASSESSEE TO HAVE CROSS EXAMINED HIM, FAILING WHICH THE STATEMEN T OF SHRI SWAPAN RANJAN DASGUPTA COULD NOT BE USED AGAINST THE ASSESSEE TRU ST AS HELD BY THE HON'BLE SUPREME COURT IN ANDAMAN TIMBERS LTD. VS. COMMISSIO NER OF CENTRAL EXCISE 62 TAXMAN 3. WE NOTE THAT THE AO HAD IN FACT, RECOR DED THE FACT THAT THE PARTNERS OF THE ASSESSEE FIRM DESIRED TO CROSS EXAM INE THE FOUNDER DIRECTOR OF M/S. HERBICURE SHRI SWAPAN RANJAN DASGUPTA REGARDIN G THE PURPORTED DEPOSITION MADE AT THE TIME OF SURVEY. HOWEVER, AO DID NOT GRANT HIM THAT OPPORTUNITY TO CROSS EXAMINE SHRI SWAPAN RANJAN DAS GUPTA. WE ALSO NOTE THAT THE AO ISSUED NOTICE U/S. 131 OF THE ACT TO TH E PARTNERS OF THE ASSESSEE FIRM AND HAS RECORDED THEIR STATEMENT ON OATH ON 28.12.2 015. WE NOTE FOR QUESTION NO. 14 AS TO HOW THE PARTNER KNEW ABOUT M/S. HERBIC URE, THE PARTNER OF THE ASSESSEE FIRM HAS ANSWERED THAT DR. BHUBAN CHAKRABO RTY, A CARDIOLOGIST FRIEND INTRODUCED THEM TO M/S. HERBICURE AND TO QUE STION NO. 15 AS WHETHER THE PARTNERS HAVE VISITED THE OFFICE OF M/S. HERBIC URE TO WHICH THE PARTNERS 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 REPLIED THAT DURI NG 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 CERT IFICATE ISSUED BY GOVT. OF INDIA AND ALSO 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 CHAKRABORTY'S 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 D IRECTORATE OF INVESTIGATION, KOLKATA CARRIED OUT SURVEY U/S. 133A AND THAT ITS I NVESTIGATION IS FOUND THAT THE ACTIVITIES WERE NOT GENUINE, THE PARTNERS REPLI ED THAT THEY WERE NOT AWARE 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 RECOMMENDATION OF THE CARDIOLOGIST DR. BHUBAN CHAKRABRTY THEY 11 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 11 MADE DONATION TO THE SAID CONCERN. WE ALSO NOTE THA T THE AO ISSUED SUMMONS TO SHRI SWAPAN RANJAN DASGUPTA WHO DID NOT APPEAR F OR CROSS EXAMINATION DUE TO ILL HEALTH BUT THE SAID SHRI DASGUPTA CONFIR MED THE DONATIONS MADE BY THE ASSESSEE FIRM TO M/S. HERBICURE IN WRITING TO THE AO AND CLEARLY STATED THAT NO MONEY WAS REFUNDED BACK TO ASSESSEE FIRM, W HICH 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 REP LY DATED 22.01.2016, I WOULD FURTHER REQUEST YOUR GOOD OFFICE TO ELABORATE THE FINANCIAL YEARS IN QUESTION TO ENABLE OUR ACCOUNTS DEPTT FOR VERIFICAT ION AND SUBMISSION. HOWEVER, WE APPARENTLY OBSERVE FROM OUR RECORDS THA T FOLLOWING DONATIONS WERE RECEIVED BY US FROM M/S. SAIMED INNOVATION, TH E ASSESSEE IN THE FINANCIAL 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 STRIC T MEDICAL SUPERVISION. AS SUCH, MY PERSONAL APPEARANCE MAY KINDLY BE WAIVED O N COMPASSIONATE GROUND. I AM ATTACHING THE CURRENT MEDICAL PRESCRIP TION/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 DASGUPTA 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 SHRI SWAPAN RANJAN DASGUPTA AG AINST DONATION MADE THE CLAIM OF ASSESSEE FOR DEDUCTION SUSPICIOUS. HOW EVER, WHEN THE AO INVESTIGATED, SHRI SWAPAN RANJAN DASGUPTA HAS CONFI RMED THAT M/S. HERBICURE WAS IN RECEIPT OF THE DONATION AND IT HAS NOT GIVEN ANY REFUND IN CASH, THEN THE SOLE BASIS OF DISALLOWANCE OF CLAIM AS A MATTER OF FACT DISAPPEARED. IT SHOULD BE REMEMBERED SUSPICION HOWS OEVER STRONG CANNOT 12 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 12 TAKE THE PLACE OF EVIDENCE. THE CONFIRMATION FROM S HRI SWAPAN RANJAN DASGUPTA FORTIFIES THE CLAIM OF THE ASSESSEE FOR WE IGHTED DEDUCTION U/S. 35(1)(II) OF THE ACT. THE SOLE BASIS OF THE ADDITIO N/DISALLOWANCE BASED ON STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE ALLOWED AS HELD BY HON'BLE SUPREME COURT IN KADER KHAN & SONS (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 SWAPAN RANJAN DAS GUPTA AND SHRI KISHAN BHAWASINGKA AS HELD BY HO N'BLE 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 A SIDE 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. 5.9. IN VIEW OF THE AFORESAID FINDINGS IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDE NTS RELIED UPON HEREINABOVE, WE DIRECT THE LD AO TO GRANT DEDUCTION U/S 35(1)(II) OF THE A CT IN THE SUM OF RS 24,50,000/- TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS 2 TO 5 RAISED B Y THE ASSESSEE ARE ALLOWED. 6. DURING THE COURSE OF HEARING, THE LD AR STATED T HAT HE IS NOT PRESSING GROUND NO. 6 RAISED BY THE ASSESSEE. THE SAME IS RECKONED AS A STATEMENT FROM THE BAR AND ACCORDINGLY THE GROUND NO. 6 IS DISMISSED AS NOT PR ESSED. 7. THE GROUND NO. 7 RAISED BY THE ASSESSEE IS WITH REGARD TO NON-GRANTING OF CREDIT FOR TDS OF RS 3,30,569/- BY THE LD AO. THE LD AR STATE D BEFORE US THAT THE SAID CREDIT HAS BEEN GRANTED BY THE LD AO AND STATED THAT THE SAID GROUND IS NOT PRESSED. ACCORDINGLY THE GROUND NO. 7 RAISED BY THE ASSESSEE IS DISMISSE D AS NOT PRESSED. 8. THE GROUND NO. 8 RAISED BY THE ASSESSEE IS WITH REGARD TO CHARGEABILITY OF INTEREST U/S 234A, 234B , 234C & 234D OF THE ACT IS CONSEQUE NTIAL IN NATURE AND DOES NOT 13 ITA NO.333/KOL/2017 RAJDA POLYMERS A.YR.2013-14 13 REQUIRE ANY SPECIFIC ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 08.11.2017 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BALAGA NESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 08.11.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. RAJDA POLYMERS, C/O, D J SHAH & CO. KALYAN BHAVA N, 2, ELGIN ROAD, KOLKATA-700020 2. DCIT, CIRCLE-36, 110, SHANTI PALLI, OPPO. RUBY H OSPITAL, KASBA, E.M. BYPASS, KOLKATA- 700107 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S