JAYSHREE KIRIT SHAH, Mumbai V. ASSTT. CIT 26(2), Mumbai

ITA 4461/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2805 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Opportunity of cross examination; Retrospective amendment; Accommodation entries; Cancellation of registration; Revenue expenditure; Capital expenditure; Set aside
• Section: 271(1)(c); 12A; 143(1); 201; 22; 147; 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 4461/MUM/2019 (ASSESSMENT YEAR 2014-15) JAYSHREE KIRIT SHAH B-1601, LAKE CASTLE HIRANANDANI GARDENS POWAI, MUMBAI-400 076. PAN : AJMPS3621A VS. ACIT-26(1) C-11, 7 TH FLOOR PRATYASHAKAR BHAVAN, BKC BNADRA EAST MUMBAI- 400 051. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 11.10.2021 DATE OF PRONOUNCEMENT 21.10.2021 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A) DATED 24.1.2019 PERTAINS TO A.Y. 2014-15. 2. GROUNDS OF APPEAL READ AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N AW THE ORDER PASSED BY THE HON'BLE CIT (APPEAL) IS INVALID AND B AD IN LAW. 2. THE LD. AO AS WELL AS HON'BLE CIT(APPEAL) FAILED TO INTERPRET AND APPLY THE EXPLANATION TO SECTION 35 WHICH STATES THAT EXPLANAT ION-'THE DEDUCTION, TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF ANY SUM PAID TO A RESEARCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTIO N TO WHICH CLAUSE (II) OR CLAUSE(III) APPLIES, SHALL NOT BE DENIED MERELY ON TH E GROUND THAT, SUBSEQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESSEE, THE APPROVA L GRANTED TO THE ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION REFERRED TO IN CLAUSE (II) OR CLAUSE (IN) HAS BEEN WITHDRAWN.' DESPITE THE PROVISIONS OF THE LAW IS SO CLEAR, THE H ON'BLE CIT(APPEAL) HAS CONFIRMED THE ADDITION (I.E ADDITION OF RS.3,50,000/ -) MADE BY LD. AO. THE ADDITION IS MADE AS WELL AS CONFIRMED WITHOUT BRINGIN G ANY CORROBORATIVE EVIDENCE ON RECORD. 3. THE HON'BLE CIT(APPEAL) HAS FAILED TO UNDERSTAND T HE GENUINENESS OF THE DONATION MADE BY THE ASSESSEE EVEN THOUGH THE ASSES SEE HAS PROVIDED ALL THE DETAILS WHICH WERE SUFFICIENT TO PROVE THAT THE DONA TION MADE BY THE ASSESSEE IS GENUINE. THE HON'BLE CIT(APPEAL) HAS NO T CONSIDERED THE DETAILS JAYSHREE KIRIT SHAH 2 WHICH WERE SUBMITTED BY THE ASSESSEE DURING THE COURS E OF HEARING AND PASSED THE ORDER. THE HON'BLE CIT(APPEAL) HAS FAILE D TO UNDERSTAND THAT THE DONATION WAS MADE BY THE ASSESSEE WHEN THE TRUST HAD VALID APPROVAL IN FORCE. THE HON'BLE CIT [APPEAL) HAS PASSED THE ORDER WITHOUT PROVIDING THE OPPORTUNITY OF CROSS EXAMINATION. THE HON'BLE CIT(AP PEAL) HAS FAILED TO UNDERSTAND THAT THE ASSESSEE HAS GIVEN DONATION AS CHARI TY AND NOT TO AVAIL HIGHER DEDUCTION FOR THE PURPOSE OF TAX EVASION. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE CHARGING OF INTEREST UNDER SECTION 234B, 234C AND 234D OF THE I.T. ACT, 1961 ARE INVALID AND BAD IN LAW AND EVEN INITIATED PENALTY PROCEEDING S UNDER SECTION 271(1)(C) OF THE ACT ARE INVALID AND BAD IN LAW. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED RETURN ON 26.07.2014 DECLARING TOTAL INCOME OF RS.31,81,270/-. THE RETUR N OF INCOME WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961, SUBSEQ UENTLY, INFORMATION WAS RECEIVED VIDE LETTER NO. DDIT(INV.)/UNIT 4(1)/KOL/T RUST-2015-16/3306 DATED 07.03.2016 OF DDIT (INV.)/UNIT.4(1), KOLKATA REGARD ING WIDESPREAD RACKET OF BOGUS DEDUCTION U/S.35(L)(II) OF THE INCOME-TAX ACT , 1961 CARRIED OUT BY M/S. SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH, KOL KATA (PAN AABAS4570M), AND BY SOME OTHER INSTITUTES. IT WAS A LSO INFORMED THAT THE ASSESSEE IS ONE SUCH BENEFICIARY AND THAT IN THE AS SESSMENT YEAR UNDER CONSIDERATION M/S. SCHOOL OF HUMAN GENETICS AND POP ULATION HEALTH, KOLKATA HAD SHOWN TO HAVE RECEIVED SUCH DONATION OF RS.2,00,000/-FROM THE ASSESSEE. 4. NOTICE UNDER SECTION148 DATED 27.10.2016 WAS ISS UED REOPENING THE ASSESSMENT AFTER RECORDING THE REASONS FOR INITIATI ON OF PROCEEDINGS U/S. 147 OF THE INCOME-TAX ACT, 1961 AND OBTAINING NECESSARY APPROVAL U/S. 151 OF THE INCOME-TAX ACT, 1961. 5. THE ASSESSING OFFICER AND LEARNED CIT(A) HAVE DI SALLOWED THE SAID PAYMENT ON FOLLOWING REASONING :- THE ASSESSEE HAS FAILED TO EXPLAIN AS TO HOW SUCH PA YMENT MADE TO M/S. SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH, KOLKATA COULD QUALIFY AS 'EXPENDITURE LAID OUT OR EXPENDED ON SCIENTIFIC RESEAR CH RELATED TO THE BUSINESS, HAS LED TO OR FACILITATED AN EXTENSION OF TH AT BUSINESS', SO AS TO FULFILL THE CONDITIONS OF SECTION OF THE INCOME TAX AC T, 1961, JAYSHREE KIRIT SHAH 3 ON THE CONTRARY, AS PER THE SUBMISSION MADE BY THE AS SESSEE VIDE LETTER DATED 01.11.2017, IT IS SEEN THAT THE NET PROFIT MARGIN O F 'BUSINESS' HAVE BEEN CONSTANTLY DETERIORATING FROM 53.05% TO 49.14% F ROM A.Y. 2012-13 TO A.Y. 2014-15. IN ANY CASE, THE ASSESSEE IS AN AGENT FOR INSURANCE, MUTUAL FUNDS AND BONDS OPERATING FROM RESIDENCE, FOR WHICH ANY 'SCIENTIFIC RESEARCH' IS HIGHLY UNLIKELY TO BE REQUIRED. FURTHER ON THE OTHER HAND, IT HAS BEEN PROVEN BEYOND D OUBT THAT THE ACTIVITIES OF M/S. SCHOOL OF HUMAN GENETICS AND POPULA TION HEALTH; KOLKATA ARE NOT GENUINE. 6. LEARNED CIT(A) HAS NOTED THAT THE ASSESSEE HAS S UBMITTED THE FOLLOWING BEFORE HIM :- BEFORE ME, THE LD. AR HAS PRODUCED COPY OF MONEY R ECEIPT BEARING NO.2445 DATED 31.03.2014 AND COPY OF BANK ACCOUNT STATEMENTS, COPY OF STATEMENT OF COMPUTATION OF TOTAL INCOME, P&L ACCOUNT AND BALANCE SH EET OF THE APPELLANT FOR THE YEAR ENDED ON 31.03.2014. THE LD. AR ALSO FURNISHED COPY OF NOTIFICATION IN THE GAZETTE OF INDIA DATED 28.01.20 10 TO DEMONSTRATE THAT THE TRUST WAS ACCORDED APPROVAL BY CBDT FOR THE PURPOS E OF SECTION 35(L)(II). THE LD. AR ALSO FURNISHED COPY OF RENEWAL OF RECOGN ITION OF SCIENTIFIC & INDUSTRIAL RESEARCH ORGANIZATIONS DATED 01,04.2013 AL ONG WITH COPY OF NOTIFICATION DATED 15.09.2016 ISSUED BY DIRECTOR TO GO VERNMENT OF INDIA, CBDT REVOKING THE BENEFITS OF SECTION 35(L)(II) WHI CH HAVE BEEN CONFERRED ON THE TRUST. 7. LEARNED CIT(A) WHILE DISMISSING THE APPEAL HAS C ONCLUDED AS UNDER :- 7.2.7 THE FACT THAT APPELLANT HAS FAILED TO PRODUCE THE ALLEGED PARTY OR CONTACT THE ALLEGED PARTY AND OBTAIN CONFIRMATION INDIC ATES THAT SUCH PURPORTED TRANSACTIONS ARE QUESTIONABLE AS FAR AS GE NUINENESS IS CONCERNED AND IN THIS CONTEXT WHEN THE PRIMARY ONUS OF PROOF H AS NOT BEEN DISCHARGED BY THE APPELLANT IT IS NOT TENABLE TO COMPLAIN THAT CROSS EXAMINATION OF THE ALLEGED PARTY WAS NOT PROVIDED TO THE APPELLANT. IN THIS REGARD, REFERENCE IS MADE TO THE RATIO LAID DOWN BY THE HON'BLE ITAT MUMBAI , 'C' BENCH, MUMBAI IN THE CASE OF M/S. SOMAN SUN CITI, KALYAN VS JOT R ANGE-2, KALYAN, IN ITS ORDER DATED 23 OCTOBER. 2017, WHEREIN IT IS HELD AS, 'THE VIEW OF THE AUTHORITIES BELOW IS SUPPORTED BY DECISION OF HON'BL E SUPREME COURT IN THE CASE OF N.K. PROTEIN LTD. (SUPRA). IN THESE CIRCUMSTAN CES, WE ARE OF THE CONSIDERED VIEW THAT NO PREJUDICE IS CAUSED TO THE AS SESSEE BY NON GRANTING OF OPPORTUNITY OF CROSS EXAMINATION BY THE AUTHORITIE S BELOW AS RIGHT OF CROSS EXAMINATION IS NOT ABSOLUTE AS IN THE INSTANT CASE OVE N PRIMARY ONUS THAT FELL ON THE ASSESSEE DID NOT STAND DISCHARGED. HAD AS SESSEE DISCHARGED ITS PRIMARY ONUS, BUT STILL THE AUTHORITIES PROCEED TO P REJUDICE ASSESSEE BASED SOLELY ON THE INCRIMINATING STATEMENTS/AFFIDAVITS OF THIRD PARTIES WILL BECOME ABSOLUTE. IT IS NOT A CASE THAT THE AUTHORITIES BELOW HAV E MERELY/SOLELY RELIED ON THE STATEMENT/AFFIDAVITS OF THIRD PARTIES NAMELY HAW ALA DEALERS RECORDED AT THE BACK OF THE ASSESSEE TO CAUSE PREJUDICE TO THE AS SESSEE RATHER PRIMARY ONUS THAT LAY ON THE ASSESSEE WAS NOT DISCHARGED BY T HE ASSESSEE. THUS, WE JAYSHREE KIRIT SHAH 4 UPHOLD/SUSTAIN THE ORDERS OF LEARNED CIT(A) IN WHICH WE DO NOT FIND ANY INFIRMITY, WHICH WE CONFIRM/SUSTAIN. THE ASSESSEE FA ILS IN THIS GROUND. WE ORDER ACCORDINGLY.' 7.2.8 IN THIS REGARD, THE PIVOTAL POINT TO BE NOTED HE RE IS WHETHER THE APPELLANT HAS PROVED THAT THE DONATION GIVEN BY HER HA S BEEN UTILIZED BY THE SAID TRUST IN CARRYING OUT SCIENTIFIC & INDUSTRIAL R ESEARCH ACTIVITIES FOR WHICH IT HAD BEEN NOTICED BY THE INCOME TAX AUTHORITIES TO A VAIL THE BENEFITS OF SECTION 35(L)(U)OF THE LT. ACT, 1961. UNLESS THE APP ELLANT HAS MADE SURE THAT THE SAID TRUST IS INTO SCIENTIFIC RESEARCH, IT IS VERY UN LIKELY THAT THE APPELLANT WOULD DONATE SUCH A HUGE AMOUNT OF MONEY. IN THIS REG ARD, IF IS CONSIDERED APPROPRIATE TO TAKE SUPPORT OF THE RATIO LAID DOWN BY THE HON'BLE ITAT C' BENCH, MUMBAI IN ITS ORDER DATED 21.06.2017 WHEREIN THE HON'BLE TRIBUNAL IN ADJUDICATING THE ISSUE RELATING TO SECTION 35(1)(IV ) HAS HELD AS UNDER:- 11. WE FAIL TO UNDERSTAND HOW THE ASSESSEE INCURS ON LY CAPITAL EXPENDITURE ON R&D RELATING TO ITS OWN BUSINESS WITHOUT I NCURRING ANY REVENUE EXPENDITURE ON R&D. THEREFORE, WHEN THE ASSESSEE ACCEPTS THAT THE REVENUE EXPENDITURE ON R&D IS RELAT ING TO THE BUSINESS OF THE PARENT COMPANY LOGICALLY IT MUST FOLLO W THAT THE CAPITAL EXPENDITURE ON R&D ALSO BELONGS 'TO THE PARENT COMPANY. THE ASSESSEE CANNOT BLOW HOT AND COLD AT THE SAME TIME BY C LAIMING CAPITAL EXPENDITURE ON R&D ON ITS OWN ACCOUNT AND REVE NUE EXPENDITURE ON R&D IN THE ACCOUNT OF ITS PARENT COMPANY . IN ANY CASE OF THE MATER, THE ASSESSEE HAS NOT BROUGHT ANY EVIDENC E BEFORE US TO CONCLUSIVELY PROVE THAT THE CAPITAL EXPENDITURE CLAIME D A DEDUCTION U/S.35(1)(IV) OF THE ACT IS RELATED TO R&D ACTIVITIES CA RRIED ON FOR ASSESSEE'S OWN BUSINESS. IN THAT VIEW OF THE MATTER, ON E OF THE CONDITIONS OF THE SECTION 35(1)(IV)OF THE ACT IS NOT J USTIFIED. IN OTHER WORDS, THE ASSESSES HAS FAILED TO PROVE THAT THE SCIEN TIFIC RESEARCH IN RELATION TO WHICH CAPITAL EXPENDITURE WAS INCURRED IS C ARRIED ON FOR ASSESSEE'S OWN BUSINESS. THAT BEING THE CASE, ASSESSE E IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 35(1)(IV) OF THE ACT . RESULTANTLY THE ASSESSING OFFICER WAS IN ERROR WHILE ALLOWING DEDUC TION CLAIMED UNDER SECTION 35(1)(IV) OF THE ACT WHICH HAS CAUSED PREJUD ICE TO THE REVENUE. THEREFORE, CIT WAS JUSTIFIED IN REVISING THE ASSESS MENT ORDER BY INVOKING HIS POWERS UNDER SECTION 263 OF THE ACT. BEFO RE PARTING WE MAY BRIEFLY ANALYZE THE DECISIONS CITED BEFORE ITS. IN CASE OF CIT V. SANDOZ INDIA LTD. (74 TAXMAN 225), THE CLAIM OF CAP ITAL EXPENDITURE WAS IN RESPECT OF AN APPROACH ROAD TO THE R&D FACILITIE S OF THE ASSESSEE. THE DEPARTMENT DISALLOWED ASSESSEE'S CLAIM OF DEDUCTION UNDER 'SECTION 35(1)(IV) OF THE ACT ON THE REASONING TH AT THE ROAD CAN BE USED NOT ONLY BY ASSESSEE BUT BY OTHERS ALSO. IN TH IS CONTEXT THE HON'BLE HIGH COURT HELD THAT PRIMARILY THE EXPENDITUR E INCURRED FOR THE APPROACH ROAD WAS RELATED TO THE BUSINESS OF THE A SSESSEE. THE FACT THAT THE APPROACH ROAD MAY BENEFIT THIRD PARTIES WO ULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE DEDUCTION. HO WEVER, THE FACTS IN ASSESSEE'S CASE ARE DIFFERENT AS DISCUSSED BY US EARLIER, THE ENTIRE R&D ACTIVITIES, WAS CARRIED ON BY THE ASSESSEE FOR THE BENEFIT OF ITS PARENT COMPANY AND NOT FOR ITSELF. THEREFORE, ONE OF THE BASIC JAYSHREE KIRIT SHAH 5 CONDITIONS OF SECTION 35(L)(IV) OF THE ACT IS NOT FUL FILLED. SIMILARLY, IN CASE OF THE ACIT V. CONSOLIDATED ENERGY CONSULTANTS LTD (63 SOT 10) (INDORE TRIBUNAL) IT WAS FOUND AS A FACT THAT THE ASSESS EE WAS DOING RESEARCH IN THE FIELD OF DEVELOPMENT OF WIND POWER O N ITS OWN WHICH WAS USED FOR THE BENEFIT OF PUBLIC. THEREFORE, IT WAS HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 35 (1)(IV) OF THE ACT HOWEVER, THE FACTS ARE DIFFERENT IN CASE OF THE ASSES SEE, AS THE ASSESSEE IS NOT DOING ANYTHING FOR THE BENEFIT OF THE PU BLIC. ON THE OTHER HAND, IN CASE OF CIBA INDIA (P.) LTD. V. INCOM E TAX OFFICER, 9(1)3, MUMBAI (SUPRA) THE TRIBUNAL HELD THAT ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 35(1)(IV) OF THE ACT A S THE CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH RELATED TO ITS SUBS IDIARIES. THE ITA NOS. 4240/MUM/2013 (AY.2007-08) M/S SI GROUP INDIA LTD OTHER DECISIONS CITED BY THE LEARNED. AR WERE FOUND TO BE FACTUALLY DISTINGUISHABLE, HENCE, NOT APPLICABLE TO THE ASSESSEE 'S CASE. IN VIEW OF THE AFORESAID UPHOLDING THE IMPUGNED ORDER OF LD. CIT WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 12. IN THE RESULT ASSESSEE'S APPEAL IS DISMISSED. 8. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE THE ITAT. 9. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. I NOTE THAT THE ASSESSEE HAS SUBMITTED THE NECESSARY EVIDENCE FOR THE PAYMENT AS NOTED ABOVE BY LEARNED CIT(A) HIMSELF. L EARNED CIT(A) IS PASSING A PECULIAR ORDER, WHEN HE SAYS THAT THE PARTY TO WHOM PAYMENT HAS BEEN MADE HAS BEEN MADE FOUND TO BE BOGUS ENTITY, AT THE SAME TIME LEARNED CIT(A) SAYS THAT SINCE ASSESSEE HAS NOT PRODUCED THE PARTY OR O BTAINED A CONFIRMATION, IT CANNOT BE SAID THAT THE PAYMENT IS MADE TO THE SAID PARTY. IT IS FURTHER STRANGE THAT THE ASSESSEES PLEA OF CROSS EXAMINATION OPPOR TUNITY THE SAID PARTY IS BEING REJECTED BY COUNTER OBSERVATION THAT THE SAME PARTY HAS NOT BEEN PRODUCED BY THE ASSESSEE. BE AS IT MAY I NOTE THAT THE ISSUE IS SQUARELY COVERED AGAINST THE REVENUE BY THE DECISION OF THE ITAT IN THE CASE OF SOPARIWALA EXPORTS PVT. LTD. (ITA NO.2039/MUM/2018 VIDE ORDER DATED 17.6.2021) HAS DECIDED THE IDENTICAL ISSUE IN FAVOU R OF THE ASSESSEE BY OBSERVING AS UNDER :- 11. UPON CAREFUL CONSIDERATION WE NOTE THAT IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE AFORESAID DECISIONS OF THE ITAT. WE MAY REFER TO THE DECISION IN THE CASE OF KITCHEN ESSENTIALS (SUPRA) AS UNDER :- JAYSHREE KIRIT SHAH 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD INCLUDING THE DECISIONS CITED BY THE ID. AR. T HE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS MADE DONATIONS OF RS.5 0 LAKHS TO THE 'THE SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH' A ND CLAIMED DEDUCTION U/S.35(1)(II) OF THE ACT EQUAL TO RS.87,50, 000/- BEING 175% OF THE AMOUNT PAID. A SURVEY WAS CONDUCTED AT THE OFFIC E PREMISES OF THE SCHOOL NAMELY, 'THE SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH' U/S.133A OF THE ACT ON 27.01.2015 AND IT WAS O BSERVED BY THE SURVEY TEAM THAT THIS INSTITUTE IN CONNIVANCE WITH DONOR S, BROKERS AND ACCOMMODATION ENTRY PROVIDERS HAS INDULGED IN A DUVI OUS SCHEME OF TAX EVASION, UNDER WHICH BOGUS DONATIONS WERE RECEIV ED FROM DONORS AND MONEY USED TO BE RETURNED BACK TO THE DONORS IN LI EU OF COMMISSION, EVEN WHILE THE DONOR AVAILED OF DEDUCTION S U/S.35(1)(II) OF THE ACT. THE REGISTRATION OF THE INSTITUTION WAS CANCELL ED BY THE GOVERNMENT OF INDIA WITH RETROSPECTIVE EFFECT AND IT W AS HELD THAT THE INSTITUTION HAS MISUSED THE EXEMPTION. HOWEVER, UND ER SIMILAR FACTS AND CIRCUMSTANCES, VARIOUS COORDINATE BENCHES HAVE T AKEN THE VIEW THAT MERE ADMISSION ON THE PART OF THE OFFICE BEARERS OF THE BODY/TRUST, THE ASSESSEE CANNOT BE PENALIZED AND THE AM OUNT OF DONATIONS CLAIMED BY THE ASSESSEE ON ACCOUNT OF PAYME NT TO THE SAID SCHOOL CANNOT BE DENIED. IN THE CASE OF NARBHERAM VIS HRAM QUA, ITA NO.42&43/KOL/2018, ORDER DATED 27.07.2018, THE KOLKA TA BENCH OF THE TRIBUNAL UNDER SIMILAR CIRCUMSTANCES AND FACTS HAS HELD AS UNDER:- '13 WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT THE ASSESSES HAS CHALLENGED DISALLOWANCE OF WEIGHTED DEDUCTION O F RS.4,81,25,0007- FOR A.Y. 2013-14 AND DISALLOWANCE OF WEIGHTED DEDUC TION OF RS.10,50,00,000/-, FOR A.Y. 2014-15, CLAIMED BY HIM UNDER SECTION 35(L)(II) OF THE ACT IN RESPECT OF THE AMOUNTS OF D ONATIONS MADE TO TWO INSTITUTIONS VIZ. 'MATRIVANI INSTITUTE EXPERIMENTAL RESEARCH & EDUCATION' (HEREINAFTER REFERRED TO AS 'MATRIVANI') AND 'THE S CHOOL OF HUMAN GENETICS AND POPULATION HEALTH' (HEREINAFTER REFERR ED TO AS 'SHG'). THE ASSESSEE FIRM IN A.Y. 2014-15, MADE DONATION OF RS, 2,00,00,000/ TO MATRIVANI AND RS,4,00,00,000/ TO SHG AND CLAIMED WE IGHTED DEDUCTION OF RS.10,50,00,000 UNDER SECTION 35(L)(II) OF THE I NCOME TAX ACT, 1961, BEING 175% OF THE AGGREGATE SUM OF RS.6,00,00,000/- (RS,2,00,00,000 + RS,4,00,00,000) DONATED TO THESE TWO INSTITUTES WHI CH WERE APPROVED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SECTI ON 35(1) (II) OF THE ACT READ WITH RULE 5C AND SE OF THE INCOME TAX RULE S, 1962. IN THE ASSESSMENT YEAR 2013-14, THE ASSESSEE CLAIMED WEIGH TED DEDUCTION OF RS.4,81,25,000/- UNDER SECTION 35(1) (II) OF THE AC T, WHICH IS 175% OF THE AMOUNT OF DONATION BEING THE SUM OF RS.2,75,00,0007 - IN RESPECT OF THE DONATION GIVEN TO 'THE SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH'. WE NOTE THAT THE NOTIFICATIONS TO THIS EFF ECT, THAT THESE TWO INSTITUTIONS VIZ. 'MATRIVANI' AND 'SHG', WERE APPRO VED BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF SECTION 35(1)(II) OF THE ACT, WAS PUBLISHED IN THE GAZETTE OF INDIA. HOWEVER, THE DEDUCTION CLA IMED BY THE ASSESSEE WAS DENIED BY THE ASSESSING OFFICER ON THE BASIS OF THE ALLEGATIONS JAYSHREE KIRIT SHAH 7 CONTAINED IN THE REPORT OF THE INVESTIGATION WING O F KOLKATA THAT THE SAID DONATIONS WERE BOGUS. THE REASONS STATED THEREIN, I N SHORT, WERE THAT STATEMENTS OF SOME KEY PERSONS OF THESE TWO DONEE I NSTITUTIONS WERE RECORDED BY THE INVESTIGATION AUTHORITY IN COURSE O F SURVEY PROCEEDINGS IN THEIR CASES. THE SAID KEY PERSON, IN THEIR STATE MENTS, ACCEPTED TO HAVE RECEIVED DONATIONS FROM VARIOUS ENTITIES IN LI EU OF CASH RETURNED TO THEM AFTER DEDUCTING COMMISSION THERE FROM. 14. WE NOTE THAT, DURING THE COURSE OF HEARING, BEF ORE US, THE ID COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THE SUMS PAID TO ' MATRIVANI AND 'SHG, WERE GENUINE DONATIONS AND BOTH OF THE INSTITUTIONS WERE ADMITTEDLY REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961. WE NOTE THAT BOTH OF THE SAID TWO INSTITUTIONS VIZ, 'MATRIVANI' AND 'SHG', ARE SCIENTIFIC RESEARCH ASSOCIATION APPROVED AS SUCH BY CENTRAL GOVERNMENT UNDER SECTION 35(L)(II) OF THE INCOME TA X ACT, 1961 VIDE NOTIFICATION, BEARING NO. 229/2007 (F.N0.203/135/20 07/ITA-II) DATED 21.08.2007 AND NOTIFICATION NO. 4/2010 (F. NO. 2B/A /2009,/ITA-II DATED 28.01.2010 RESPECTIVELY, PUBLISHED IN OFFICIA L GAZETTE OF INDIA. THE ASSESSEE CATEGORICALLY DENIED THAT IT EVER RECE IVED BACK THE AMOUNTS OF DONATIONS IN CASH OR IN KIND FROM THE SA ID INSTITUTIONS AND FROM ANY PERSON WHATSOEVER IN LIEU OF THE VARIOUS A MOUNTS DONATED TO THESE TWO INSTITUTIONS, WE NOTE THAT IN THE STATEME NTS, OF KEY PERSONS AND ALLEGED BROKERS RECORDED BY THE INVESTIGATION W ING IN COURSE OF SURVEY PROCEEDINGS, IN THEIR CASES AND THE EXTRACTS OF WHICH WAS PROVIDED TO THE ASSESSES IN THE SHOW CAUSE NOTICE, THE NAME OF THE ASSESSEE FIRM DOES NOT APPEAR ANYWHERE. IT IS TO BE NOTED THAT NONE OF THOSE PERSONS IMPLICATE THE ASSESSEE TO HAVE MADE B OGUS DONATIONS AND THAT CASH WAS PAID TO THE DONORS ASSESSEE IN LI EU OF THE ALLEGED BOGUS DONATION AFTER DEDUCTING THEIR COMMISSION. WE NOTE THAT THE STATEMENTS OF THE VARIOUS PARTIES AND PERSONS WERE RECORDED BEHIND THE BACK OF THE ASSESSEE AND THE AS SESSING OFFICER DID NOT ALLOW OPPORTUNITY OF CROSS EXAMINATION. WE NOTE THAT IN ABSENCE OF OPPORTUNITY OF CROSS-EXAMINATION NO RELIANCE COULD BE MADE ON SUCH STATEMENTS TO DRAW ANY ADVERSE INFERENCE AGAINST TH E ASSESSEE FIRM. THE ASSESSEE FIRM DENIED ITS KNOWLEDGE OF THE STATE MENTS MADE BY THESE INSTITUTES WHICH WERE RELIED ON BY THE INVEST IGATION WING AND THE ASSESSING OFFICER. WE NOTE THAT NOT PROVIDING THE O PPORTUNITY OF CROSS- EXAMINATION IS AGAINST THE PRINCIPLE OF NATURAL JUS TICE AND FOR THAT WE RELY OF-THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DHARAM PAL PRERN CHAND LTD. [2007] 295 ITR 105, 108 (DEL). WE NOTE THAT ON IDENTICAL FACTS, THE SIMILAR PROPOSITION WA S UPHELD BY THE COORDINATE BENCH OF KOLKATA IN THE CASE OF RAJDA PO LYMERS, ITA NO.333/KOL/2017FOR ASSESSMENT YEAR 2013-14 WHEREIN IT WAS HELD AS FOLLOWS:- '10. ....THUS WE NOTE FROM THE ENTIRE FACTS AND CIR CUMSTANCES, THAT THE AO GOT SWAYED AWAY WITH THE STATEMENT RECORDED ON O ATH OF MR. SWAPAN RANJAN DASGUPTA DURING SURVEY CONDUCTED AT T HE PREMISES OF M/S. HERBICURE. WE HAVE REPRODUCED QUESTION NO. 22 AND 23 AND JAYSHREE KIRIT SHAH 8 ANSWERS GIVEN BY SHRI SWAPAN RANJAN DASGUPTA, WHERE IN HE ADMITS TO PROVIDE ACCOMMODATION ENTRIES IN LIEU OF CASH. THIS INFORMATION WE SHOULD SAY CAN BE THE TOOL TO START AN INVESTIGATIO N WHEN THE ASSESSEE MADE THE CLAIM FOR WEIGHTED DEDUCTION. THE GENERAL STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA AGAINST DONATION MADE THE CL AIM OF ASSESSEE FOR DEDUCTION SUSPICIOUS. HOWEVER, WHEN THE AO INVE STIGATED, SHRI SWAPAN RANJAN DASGUPTA HAS CONFIRMED THAT M/S. HERB ICURE WAS IN RECEIPT OF THE DONATION AND IT HAS NOT GIVEN ANY RE FUND IN CASH, THEN THE SOLE BASIS OF DISALLOWANCE OF CLAIM AS A MATTER OF FACT DISAPPEARED. IT SHOULD BE REMEMBERED SUSPICION HOWSOEVER STRONG CAN NOT TAKE THE PLACE OF EVIDENCE. THE CONFIRMATION FROM SHRI SWAPA N RANJAN DASGUPLA FORTIFIES THE CLAIM OF THE ASSESSEE FOR WEIGHTED DE DUCTION U/S. 35(1)(II) OF THE ACT. THE SOLE BASIS OF THE ADDITION/DISALLOWANC E BASED ON STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE ALLOWED AS HELD BY HON'BLE SUPREME COURT IN KADER KHAN & SONS (SUPRA). MOREOVE R, WE NOTE THAT IF THE AO WAS HELL BENT DETERMINED TO DISALLOW THE CLA IM 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 HON'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. THEREFO RE, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ALLOW THE DEDUC TION OF RS.26,28,500/- U/S. 35(L)(II) OF THE ACT. 15. NOW, WE DEAL WITH THE ARGUMENTS OF ID DR FOR TH E REVENUE. WE NOTE THAT THE SOLITARY GRIEVANCE OF THE ID DR FOR THE RE VENUE IS THAT SINCE THE REGISTRATION HAD BEEN CANCELLED BY THE CBDT, WITH R ETROSPECTIVE EFFECT THAT IS, WITH EFFECT FROM 1 SL APRIL 2007, BY ISSUING NOTIFICATION DATED 06.09.2016, FOR BOTH THE INSTITUTIONS VIZ: 'MATRIVA NI' AND 'THE SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH', THEREFORE TH ESE INSTITUTIONS ARE NOT ENTITLED TO CLAIM BENEFIT UNDER SECTION 35 (1) (II) OF THE ACT. WE NOTE THAT THE WITHDRAWAL OF RECOGNITION U/S 35(L )(II) OF THE ACT IN THE HANDS OF THE PAYEE ORGANIZATIONS WOULD NOT AFFECT T HE RIGHTS AND INTERESTS OF THE ASSESSES HEREIN FOR CLAIM OF WEIGHTED DEDUCTION U/S 35(1 )(II) OF THE ACT, FOR THAT WE RELY ON THE JUDG MENT OF THE COORDINATE BENCH, KOLKATA, IN THE CASE OF M/S MACO CORPORATION INDIA (P) LTD, ITA NO.L6/KOL/2017, FOR ASSESSMENT YEAR 2013-14, WHEREI N IT WAS HELD AS FOLLOWS: '29. ALL THE THREE HIGH COURTS AFTER EXAMINING THE ISSUE, IN THE LIGHT OF THE OBJECT OF SECTION 12A OF THE ACT AND SECTION 21 OF THE GENERAL CLAUSES ACT HELD THAT THE ORDER OF THE CIT PASSED U NDER SECTION 12A IS QUASI JUDICIAL IN NATURE. SECOND, THERE WAS NO EXPR ESS PROVISION IN THE ACT VESTING THE CIT WITH POWER OF CANCELLATION OF R EGISTRATION FILL 01.10.2004; AND LASTLY. SECTION 21 OF THE GENERAL C LAUSES ACT HAS NO APPLICATION TO THE ORDER PASSED BY THE CIT UNDER SE CTION 12A BECAUSE THE ORDER IS QUASI JUDICIAL IN NATURE AND IT IS FOR ALL THESE REASONS THE CIT HAD NO JURISDICTION TO CANCEL THE REGISTRATION CERTIFICATE ONCE GRANTED JAYSHREE KIRIT SHAH 9 BY HIM UNDER SECTION 12A TILL THE POWER WAS EXPRESSLY CONFERRED ON THE CIT BY SECTION I2AAC3) OF THE ACT W.E.F. 01.10.2004. WE HOLD THAT THE RATIO DECIDENDI OF THE AFORESAID J UDGEMENT OF THE HON'BLE APEX COURT WOULD SQUARELY BE APPLICABLE TO THE FACTS OF THE INSTANT CASE. IN FACT THE ASSESSEE'S CASE HEREIN FA LLS ON A MUCH BETTER FOOTING THAN THE FACTS BEFORE THE HON'BLE APEX COUR T. IN THE CASE BEFORE HON'BLE APEX COURT, THE POWER OF CANCELLATION OF RE GISTRATION US 12A OF THE ACT WAS CONFERRED BY THE ACT ON THE ID CIT W.E. F. 1.10.2004 AND THE HON'BLE APEX COURT HELD THAT PRIOR TO THAT DATE , N O CANCELLATION OF REGISTRATION COULD HAPPEN. BUT IN THE INSTANT CASE, THERE IS ABSOLUTELY NO PROVISION FOR WITHDRAWAL OF RECOGNITION U/S 35(L)(I I) OF THE ACT. HENCE WE HOLD THAT THE WITHDRAWAL OF RECOGNITION U/S 35(L)(I I) OF THE ACT IN THE HANDS OF THE PAYEE ORGANIZATIONS WOULD NOT AFFECT T HE RIGHTS AND INTERESTS OF THE ASSESSEE HEREIN FOR CLAIM OF WEIGH TED DEDUCTION U/S 35(1)(H) OF THE ACT.' 16.1N VIEW OF THE AFORESAID FINDINGS IN THE FACTS A ND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VA RIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE DIRECT THE ID AO TO GRA NT DEDUCTION U/S 35(1 )(II) OF THE ACT, IN THE SUM OF RS. 4,81,25,00 0/- FOR A. Y, 2013-14 AND IN THE SUM OF RS. 10,50,00,000/-, FOR A. Y. 201 4-15, AS CLAIMED BY HIM UNDER SECTION 35(L)(II) OF THE ACT IN RESPECT O F THE AMOUNTS OF DONATIONS MADE TO TWO INSTITUTIONS VIZ. 'MATRIVANI INSTITUTE EXPERIMENTAL RESEARCH & EDUCATION' AND THE SCHOOL OF HUMAN GENET ICS AND POPULATION HEALTH'. ACCORDINGLY, THE GROUNDS 1 TO 4 RAISED BY THE ASSESSEE FOR A.Y. 2013-14 AND THE GROUNDS 1 TO 5 RAISED BY THE ASSESSEE FOR A. Y. 2014-15 ARE ALLOWED.' 9. SIMILARLY IN VARIOUS OTHER DECISIONS THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY DISREGARDIN G THE REVENUE'S CONTENTIONS THAT THE REGISTRATION OF THE SCHOOL HAS BEE N CANCELLED BY THE CBDT WITH RETROSPECTIVE EFFECT BY ISSUING NOTIFICATI ON AND, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO BENEFIT U/S.3 5(1)(II) OF THE ACT. THE FACTS BEFORE US BEING MATERIALLY SAME INVOLVING THE SAME SCHOOL, NAMELY, 'THE SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH', WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL, HOLD THAT THE DEDUCTION U/S. 3 5(1)(II) OF THE ACT CANNOT BE DENIED TO THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO GRANT DEDUCTION U/S. 35(1)(II) OF THE ACT. APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-2014 (ITA NO.6672/MUM/2017) IS HEREBY ALLOWED. 12. WE NOTE THAT FACTS IN THE PRESENT CASE ARE IDENTICA L. THE WITHDRAWAL OF THE APPROVAL TO THE PAYEE HAS TAKEN PLACE SUBSEQUENT TO TH E PAYMENT BY THE ASSESSEE. THE ASSESSEES CASE DULY FOLLOWS UNDER SE CTION 35(1)(II) OF THE ACT WHICH READ AS UNDER :- SECTION 35(1)(II) : AN AMOUNT EQUAL TO ONE AND ONE HALF TIMES OF ANY SUM PAID TO A RESEARCH ASSOCIATION WHICH HAS AS ITS O BJECT THE JAYSHREE KIRIT SHAH 10 UNDERTAKING OF SCIENTIFIC RESEARCH OR TO A UNIVERSITY , COLLEGE OR OTHER INSTITUTION TO BE USED FOR SCIENTIFIC RESEARCH : PROVIDED THAT SUCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION FOR THE PURPOSES OF THIS CLAUSE ( A ) IS FOR THE TIME BEING APPROVED, IN ACCORDANCE WIT H THE GUIDELINES, IN THE MANNER AND SUBJECT TO SUCH CONDITIONS AS MAY BE PRESCRIBED; AND ( B ) SUCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INS TITUTION IS SPECIFIED AS SUCH, BY NOTIFICATION IN THE OFFICIAL GA ZETTE, BY THE CENTRAL GOVERNMENT : PROVIDED FURTHER THAT WHERE ANY SUM IS PAID TO SUCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION IN A PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY OF APRIL, 2021, THE DEDUCTION UNDER THIS CLAUSE SHALL BE EQUAL TO THE SUM SO PAID; 13. HENCE THE PAYEE WAS DULY APPROVED WHEN THE PAYM ENT WAS DONE. BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE ASSESSE E COULD HAVE DONE THE IMPOSSIBLE AND KNOWN THAT SUBSEQUENTLY THE APPROVAL WILL BE WITHDRAWN. ACCORDINGLY, FOLLOWING THE ABOVE SAID PRECEDENT AND N OTING THAT IT IS NOT THE CASE THAT HON'BLE BOMBAY HIGH COURT HAS REVERSED THE D ECISION, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW. THE ASSESSEE IS THEREF ORE HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 35(1)(II) OF THE ACT. 10. RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE I SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 21.10.2021. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBE R MUMBAI; DATED : 21/10/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI