KIRAN ALUMINIUM INDIA PVT. LTD., MUMBAI V. ACIT CIRCLE 4(2)(2), MUMBAI

ITA 7429/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9729 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 26-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C SELVAMANI
• Keywords: Bogus purchase; Bonafide belief; Accommodation entries; Set aside
• Section: 143(3); 133A; 80G; 12A; 12AA; 13; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI C.N. PRASAD, JM ITA NO. 7429/MUM/2018 ( ASSESSMENT YEAR: 2014-15) KIRAN ALUMINUM INDIA PVT. LTD., 229-A, KEWAL INDUSTRIAL ESTATE, SENAPATI BAPAT MARG, LOWER PAREL (W), MUMBAI-490013. VS. A.C.I.T., CIRCLE-4(2)(2), AAYAKAR BHAVAN, NEW MARINE LINES, MUMBAI. PAN/GIR NO.AAACK 2073 L (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI KIRAN MEHTA (AR) REVENUE BY SHRI K.C. SELVAMANI (DR) DATE OF HEARING 18/12/2019 DATE OF PRONOUNCEMENT 06/01/2020 / O R D E R PER: R.C. SHARMA, A.M. THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LD. CIT(A)-9, MUMBAI DATED 26/10/2018 FOR THE A.Y. 2014 -15 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1 961 (IN SHORT, THE ACT). 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE RELATES T O DISALLOWANCE OF DEDUCTION U/S 35(1)(II) OF THE ACT IN RESPECT OF D ONATION OF RS. 30.00 LACS MADE TO HERBICURE HEALTH CARE BIO HERBAL RESEA RCH FOUNDATION (IN SHORT, HHCBHRF). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. OB SERVED THAT THE ASSESSEE HAD GIVEN DONATION TO HERBICURE HEALTH CAR E BIO HERBAL ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 2 RESEARCH CENTRE OF RS. 30.00 LACS AND CLAIMED DEDUC TION U/S 35(1)(II) OF RS. 52.50 LACS IN THE COMPUTATION OF INCOME. A SEAR CH AND SEIZURE ACTION WAS CONDUCTED ON THE SAID ENTITY AND REPORT RECEIVE D FROM INVESTIGATION WING IN KOLKATA BROUGHT OUT THE MODUS OPERANDI OF T HE TRUST TAKING DONATIONS AND RETURNING THE AMOUNT IN CASH. THE A.O . OBSERVED THAT THE CENTRAL GOVERNMENT HAD RETROSPECTIVELY WITHDRAWN TH E APPROVAL FOR DEDUCTION U/S 35(1)(II) GRANTED TO THE INSTITUTION VIDE NOTIFICATION NO. 79.2016/F NO. 203/135/ITA DATED 06/09/2016. ACCORDI NGLY, THE A.O. DISALLOWED RS. 52.50 LACS U/S 35(1)(II) OF THE ACT. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O., AG AINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 4. AT THE OUTSET, THE LD AR OF THE ASSESSEE PLACED ON RECORD THE ORDER OF THE ITAT KOLKATA BENCHES IN THE CASE OF DCIT VS. M/S DESMET REAGENT PVT. LTD. IN ITA NO. 15/KOL/2017 DATED10/10 /2018 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE DONATION GIVEN TO THE VERY SAME INSTITUTION I.E. HHCBHRF WAS ALLOWED U/S 35(1) (II) OF THE ACT. 5. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE LOWER AUTHORITIES. 6. WE HAD GONE THROUGH THE ORDER OF THE ITAT, KOLKA TA BENCHES DATED 10/10/2018 WHEREIN SIMILAR DISALLOWANCE MADE IN RESPECT OF DONATION GIVEN TO HHCBHRF AND CLAIMED DEDUCTION U/S 35(1)(II) OF THE ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 3 ACT WAS ALLOWED IN FAVOUR OF THE ASSESSEE AFTER HAV ING THE FOLLOWING OBSERVATION: 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSE E COMPANY HAS DONATED RS.60 LAKH TO M/S. HERBICURE HEALTHCARE BIO -HERBAL RESEARCH FOUNDATION (M/S. HHBHRF) AND CLAIMED WEIGHTED DEDUC TION 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 APPROVAL U/S. 35(1) OF THE ACT AS EVIDENT FROM THE NOTIFICATION DATED 14.03.2008 W HICH IS FOUND PLACED AT PAGE 1 OF PAPER BOOK AND THE RENEWAL OF RECOGNITION OF SCIENTIFIC & INDUSTRIAL RESEARCH ORGANISATION (SIRO) GIVEN VIDE LETTER DATED 13.08.2012 BY THE GOVT. OF INDIA, MINISTRY OF SCIENCE & TECHNO LOGY FROM 01.04.2012 UPTO 31.03.2015 FOUND PLACED AT PAGE 2 OF PAPER BOO K. THE DONATION AMOUNT OF RS. 60 LAKH HAS BEEN TRANSFERRED BY THE A SSESSEE THROUGH RTGS TO M/S. HHBHRFS IDBI BANK ACCOUNT ON 26.03.2013 WH ICH FACT IS DISCERNIBLE FROM PAGE 3 OF PAPER BOOK AND M/S. HHBH RF VIDE LETTER DATED 26.03.2013 RECEIPT NO. HHBHRF/26.03.13/010 HAS CONF IRMED THE RECEIPT OF THE SUM OF RS. 60 LAKH DONATION FROM ASSESSEE. W E NOTE THAT AT THE TIME WHEN THE ASSESSEE DONATED THE DONATION OF RS. 60 LA KH M/S. HHBHRF HAD APPROVED FROM CENTRAL GOVT. FOR THE PURPOSE OF CLAU SE (II) OF SUB-SECTION (1) OF SEC. 35 OF THE ACT READ WITH RULE 5C & 5B OF INC OME-TAX RULES, 1962 WITH EFFECT FROM 01.04.2007. THE CLAIM OF WEIGHTED DEDUC TION @ 175% HAS BEEN DECLINED BY AO TO THE ASSESSEE ON THE GROUND T HAT SUBSEQUENTLY VIDE NOTIFICATION NO. 82/2016 DATED 15.09.2016 AND NOTIF ICATION 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 THE LD. CIT(A) RIGHTLY ALLOWED THE CLAIM OF THE ASS ESSEE. IT IS NOT IN DISPUTE THAT M/S. HHBHRF WAS ENJOYING THE APPROVAL WITHIN T HE MEANING OF SEC. 35(1)(II) OF THE ACT AS ON THE DATE OF RECEIPT OF D ONATION AND RETROSPECTIVE CANCELLATION OF APPROVAL OF THE CONCERNED INSTITUTI ON, THE DEDUCTION CLAIMED IN RESPECT OF DONATION CANNOT BE DENIED. TH IS VIEW OF OURS HAS ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 4 BEEN APPROVED BY THE HONBLE BOMBAY HIGH COURT IN S EKSARIA BISWAN SUGAR FACTORY LTD. AND ANOTHER VS. INSPECTING ASSIS TANT COMMISSIONER AND OTHERS (1990) 184 ITR 123 AND THIS VIEW THIS TRIBUN AL HAS BEEN CONSISTENTLY TAKEN WHEN APPLICATION OF WEIGHTED DEDUCTION CLAIME D AGAINST M/S. HHBHRF HAS COME BEFORE US. MOREOVER, OUR VIEW IS FO RTIFIED BY THE EXPLANATION GIVEN U/S. 35(1)(II) OF THE ACT IS REPR ODUCED UNDER: SECTION 35(1)(II) - EXPLANATION. THE DEDUCTION, TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF ANY SUM PAID TO A RESEARC H ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION TO WHICH C LAUSE (II) OR CLAUSE (III) APPLIES, SHALL NOT BE DENIED MERELY ON THE GR OUND THAT, SUBSEQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESS EE, THE APPROVAL GRANTED TO THE ASSOCIATION, UNIVERSITY, CO LLEGE OR OTHER INSTITUTION REFERRED TO IN CLAUSE (II) OR CLAUSE (I II) 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 C LAIMED BY THE ASSESSEE FOR THE DONATION GIVEN TO M/S. HHBHRF IN THE FACTS AND CIRCUMSTANCES ABOVE. 5. MOREOVER, IN SIMILAR CASE OF M/S. SAIMED INNOVA TION ITA NO. 2231/KOL/2016 (FOR AY 2013-14), THE COORDINATE BENC H OF THIS TRIBUNAL D BENCH, WHEREIN THE AUTHOR OF THIS ORDER HAS IN DETA ILED DEALT WITH THE MERITS OF THE DISALLOWANCE OF THE WEIGHTED DEDUCTIO N CLAIM U/S. 35(1)(II) OF THE ACT FOR SIMILAR DONATION GIVEN TO M/S. HHBHRF( WHICH IS REFERRED IN THAT CASE AS M/S. HERBICURE )WHEREIN THE TRIBUNAL H AS OBSERVED AS UNDER: 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MEDICAL EQUIPMENTS. DUE TO THE RECESSIONARY TREND IN THE BUSINESS OF ME DICAL EQUIPMENT, THE ASSESSEE THOUGHT IT PRUDENT TO DIVERSIFY ITS BU SINESS AND VENTURED INTO MANUFACTURING AND MARKETING OF HERBAL PRODUCT. THE ASSESSEE REALIZED THAT SINCE IN THE BUSINESS OF BUYING HERBA L PRODUCTS SUBSTANTIALLY DEPENDED UPON THE CONTINUOUS UPGRADAT ION 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 ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 5 ASSESSEE WAS INTRODUCED TO M/S. HERBICURE BY A FRIE ND WHO WAS A CARDIOLOGIST DR. CHAKRABORTY AND THEN THE PARTNERS OF THE ASSESSEE FIRM VISITED TWO UNITS LOCATED AT PAILAN AND BARAL AND AFTER INSPECTING THE INSTITUTION AND SATISFYING THEMSELVE S AFTER TAKING NOTE OF VARIOUS CERTIFICATE ISSUED BY INCOME TAX AUTHORI TIES AND GOVT. OF INDIA (DETAILS WE WILL DISCUSS LATER) ON A BONA FID E BELIEF THEY DONATED THE AMOUNT TAKING INTO CONSIDERATION THAT THEY WOUL D 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 REGISTRATION U/S. 6(1)(A) OF THE FOREIGN CONTRIBUTI ON (REGULATION) ACT, 1976 WHICH WAS GRANTED TO IT ON 26.02.2008 VIDE REG ISTRATION NO.147120804. M/S. HERBICURE WAS ALSO RECOGNIZED IN THE YEAR 2006- 07 AS A SCIENTIFIC INDUSTRIAL RESEARCH ORGANISATION (SIRO) BY MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA. M/S. HERBI CURE WAS ALSO RECOGNIZED VIDE GAZETTE NOTIFICATION NO. 35/2008 DA TED 14.03.2008 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 LET TER 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 REQU ESTED 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 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 NOTIFICATION U/S. 35(1)(II) OF THE ACT, REN EWAL OF SIRO DATED 31.03.2015 VIDE ORDER DATED 13.08.2012 IN MEMO NO. 14/444/2006TUV BY THE MINISTRY OF SCIENCE & TECHNOL OGY, GOVT. OF INDIA. FCRA REGISTRATION RENEWAL OF 80G WHICH WAS R ENEWED 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. HERBICURE HAS ST ATED 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 SC IENCE AND TO CONSTANTLY STRIVE FOR EXCELLENCE AND GLOBAL LEADERS HIP IN THE FIELD OF ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 6 NEW DRUG DISCOVERY FROM NATURAL RESOURCES FOR THE P URPOSE OF PREVENTION AND MANAGEMENT OF BURDEN OF DISEASES AT AFFORDABLE COST AND ALSO TO PROVIDE LATER HEALTHCARE SERVICES, EDUCATION AND TRAINING ON SCIENTIFIC RESEARCH FOR THE WELFARE OF THE SOCIETY. 7. WE ALSO NOTE THAT SMT. SUJATA GHOSH DASTIDER HA S STATED IN HER LETTER TO AO DATED 27.01.2016 THAT SHE IS DIRECTOR OF M/S. HERBICURE AND THAT SHE WAS EX-EMERITUS PROFESSOR OF JADAVPUR UNIV ERSITY IN MICROBIOLOGY AND NOW LOOKS AFTER 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-ANTIBIOTI CS (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 AR E THE LETTERS BY THE ASSESSEE TO M/S. HERBICURE WHEREIN DESCRIPTION OF PAYMENT OF A SUM OF RS.7,51,000/- BY RTGS DATED 15.03.2013 ON BA NK OF BARODA TO M/S. HERBICURE ACCOUNT NO. 0060102000117470 WITH IDBI BANK, BRABOURNE ROAD BRANCH, KOLKATA. SIMILARLY, A PAYMEN T 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 SHOW S 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 BY THE FOUNDER DI RECTOR 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 WHICH IS REPRODUCED BELOW: Q. 22. LET ME REMIND YOU THAT AS ONE OF THE DIRECT ORS OF HERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION YOU ARE D UTY BOUND TO KEEP COMPLETE INFORMATION REGARDING TRANSACTIONS BE ING MADE BY THE SAID ENTITY AND THE GENUINENESS OF PERSONS/ENTI TIES WITH WHOM THE SAID TRANSACTIONS ARE BEING MADE. YOUR ATTENTIO N IS FURTHER BEEN DRAWN TO THE COMPUTER EXTRACTS TAKEN OUT OF THE TAL LY WHICH WAS FOUND IN YOUR E-MAIL. THESE PAGES ARE RELATED TO TH E BANK BOOK OF HERBICURE HEALTHCARE BIO-HERBAL RESEARCH FOUNDATION WHEREIN IT IS CLEARLY REFLECTED THAT THE AMOUNT OF RS.25 LAKH (IN TWO TRENCHES) RECEIVED FROM OCL INDIA LTD ON 15.07.2011, RS.25 LA KH RECEIVED FROM OCL INDIA LTD. ON 11.08.2011 & 17.08.2011 ARE IMMED IATELY BEING ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 7 TRANSFERRED TO A.S. ENTERPRISES WHICH IS A PAPER CO MPANY ON THE SAME DATES. SIMILAR TREND IS VISIBLE IN THE CASE OF DONATIONS RECEIVED FROM OTHER PARTIES WHERE JUST IMMEDIATELY AFTER THE RECEIPT OF DONATION AMOUNT THE SAME IS BEING TRANSFERRED TO TH E 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 REFL ECTED FROM YOUR BANK BOOK AS ABOVE. ANS. SIR, I WISH TO STATE THAT OUR CONCERN HERBICU RE HEALTH ARE BIO-HERBAL RESEARCH FOUNDATION WAS INCORPORATED IN THE YEAR 20 03 U/S 25 OF THE COMPANIES ACT, 1956 WHICH WAS RECOGNIZED IN 2006-07 AS A SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANIZATION (SIRO) BY THE MINISTRY OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA AND SUBSEQUENTLY WE BE CAME 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 W E FAILED TO PROCURE ANY GENUINE DONATIONS TILL 2010-11. THE SITUATION W AS BECOMING BAD TO WORSE DUE TO NON-AVAILABILITY OF FUNDS FOR NOT A GREEING 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 LARGER INTEREST OF THE AILING POPULATION WE HAD NO OTHER ALTERNATIVE BUT TO BECOME THE VICTIM OF THE CIRCUMS TANCES AGAINST OUR WILL AND PRINCIPLE. SUBSEQUENTLY, I WAS APPROACHED BY ONE MR KISHAN BH AWASINGKA WITH THE PROPOSAL TO ADOPT THE PREVALENT PRACTICE O F SCIENTIFIC AND RESEARCH ORGANIZATION OF GIVING ACCOMMODATION ENTRI ES ON COMMISSION TO DIFFERENT BENEFICIARIES IN THE GARB O F DONATION RECEIPTS TO BE FINALLY GIVEN BACK TO THEM IN THE FORM OF CAS H OR CHEQUE. SINCE WE WERE FACING SEVERE FINANCIAL CRISIS AND THE GENU INE DONATIONS WERE NOT COMING TO US WE WERE COMPELLED TO ACCEPT T HE PROPOSAL. Q.23. PLEASE EXPLAIN IN DETAIL THE MODUS OPERANDI O F GIVING THE ACCOMMODATION ENTRIES BY WAY OF ACCEPTING DONATIONS TO DIFFERENT BENEFICIARIES. ALSO STATE WHO IS THE/ARE THE BROKER /BROKERS (WHILE GIVING HIS MOBILE NO. AND ADDRESS) THROUGH WHICH YO U 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 ENTRIE S TO DIFFERENT BENEFICIARIES. ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 8 ANS. THE ENTIRE ACCOMMODATION ENTRIES OF BOGUS DONA TIONS ARE FACILITATED BY MR. KISHAN BHAWASINGKA HAVING HIS MOBILE NOS. 98 30087866 & 9883051515 WHO LIVES SOMEWHERE IN BHAWANIPORE NEAR NETAJI SUBHAS METRO STATION. THE MODUS IS LIKE THIS. THE I NFORMATION 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 ACCOMMODATION ENTRY BEING GIVEN TO A PARTY WHEN WE DIRECTLY RECEIVE COMMUNICATION FROM THE CONCERNED BANK THAT THE AMOUNT HAS BEEN CREDITED. THUS, THE ACCOMMODATION ENTRY IS COMPLETELY CONTROLLED AND MANAGED BY MR. KISHAN BHAWASINGKA. T HE 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 ACCOUNT OF BOGUS PURCHASE/EXPENSES ON THE ADVICE OF MR KISHAN BHAWASINGKA. THE REMAINING TRANSACTION IS ALSO MANAGED ON PAPER BY HIM ONLY WHICH HAPPENS IN THE FORM OF R OUTING OF THE DONATION AMOUNT THROUGH HIS BOGUS/PAPER COMPANIES I N 2 TO 3 LAYER. FINALLY, CHEQUE OF THE DONATION AMOUNT (AFTER DEDUC TING THE CUT OF COMMISSION CHARGED BY US AND BROKER MR KISHAN BHAWA SINGKA) IS GIVEN BACK TO THE ORIGINAL BENEFICIARY WHO GAVE DON ATION TO US. SOMETIMES, THE AMOUNT IS WITHDRAWN AT 3RD OR 4TH LE VEL AND CASH IS GIVEN BACK TO THE ORIGINAL BENEFICIARY (AFTER DEDUC TING THE CUT OF COMMISSION CHARGED BY US AND BROKER MR KISHAN BHAWA SINGKA) WHO GAVE DONATION TO US. IN THIS ENTIRE PROCESS OF PROVIDING ENTRY IN THE FO RM OF BOGUS DONATION TO DIFFERENT BENEFICIARY COMPANIES/ INDIVI DUALS A COMMISSION OF 5 % APPROX IS CHARGED BY US WHICH IS THE ACTUAL DONATION WE RECEIVE FRONT THAT PARTICULAR DONOR IN REALITY. THE COMMISSION OF ALMOST 5 TO 8 % IS CHARGED BY MR. KIS HAN BHAWNSINGKA FOR FACILITATING THE SAID ACCOMMODATION ENTRY. SUBSEQUENTLY, A SANCTION LETTER IS RECEIVED FROM TH E DONOR REFLECTING THE AMOUNT OF DONATION AND MODE OF PAYMENT. THE PAR TICULARS 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 ST ATEMENT THERE ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 9 IS NO OTHER EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED BACK THE DONATION AS SUGGESTED IN HIS GENERAL STATEMENT ABOU T 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 DONATI ON OR THAT THE AMOUNT DONATED TO IT (M/S. HERBICURE) WAS GIVEN BAC K TO THE ASSESSEE AFTER DEDUCTING THE COMMISSION. WE NOTE TH AT THE STATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE THE SOLE BASIS FOR MAKING THE DISALLOWANCE AS DECIDED BY THE HONB LE SUPREME COURT IN CIT VS. S. KADER KHAN SON (2013) 352 ITR 4 80 (SC). IN ANY CASE, IF THE AO WAS OF THE OPINION THAT THE STATEME NT OF SHRI SWAPAN RANJAN DASGUPTA, THE FOUNDER DIRECTOR OF M/S. HERBI CURE HAS ADVERSELY AFFECTED THE VERACITY OF THE DONATION MAD E BY THE ASSESSEE THEN HE WAS DUTY BOUND TO SUMMON SHRI SWAPAN RANJAN DASGUPTA AND ALLOWED THE ASSESSEE TO HAVE CROSS EXAMINED HIM , FAILING WHICH THE STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA COULD NOT BE USED AGAINST THE ASSESSEE TRUST AS HELD BY THE HONBLE S UPREME COURT IN ANDAMAN TIMBERS LTD. VS. COMMISSIONER OF CENTRAL EX CISE 62 TAXMAN 3. WE NOTE THAT THE AO HAD IN FACT, RECORDED THE FACT THAT THE PARTNERS OF THE ASSESSEE FIRM DESIRED TO CROSS EXAMINE THE FOUNDER DIRECTOR OF M/S. HERBICURE SHRI SWAPAN RANJ AN DASGUPTA REGARDING THE PURPORTED DEPOSITION MADE AT THE TIME OF SURVEY. HOWEVER, AO DID NOT GRANT HIM THAT OPPORTUNITY TO C ROSS EXAMINE SHRI SWAPAN RANJAN DASGUPTA. WE ALSO NOTE THAT THE AO ISSUED NOTICE U/S. 131 OF THE ACT TO THE PARTNERS OF THE A SSESSEE FIRM AND HAS RECORDED THEIR STATEMENT ON OATH ON 28.12.2015. WE NOTE FOR QUESTION NO. 14 AS TO HOW THE PARTNER KNEW ABOUT M/ S. HERBICURE, THE PARTNER OF THE ASSESSEE FIRM HAS ANSWERED THAT DR. BHUBAN CHAKRABORTY, A CARDIOLOGIST FRIEND INTRODUCED THEM TO M/S. HERBICURE AND TO QUESTION NO. 15 AS WHETHER THE PAR TNERS HAVE VISITED THE OFFICE OF M/S. HERBICURE TO WHICH THE P ARTNERS ANSWERED THAT THEY HAD VISITED THE PREMISES OF M/S. HERBICUR E ON TWO OCCASIONS AND FOR QUESTION NO. 16 AS TO WHETHER THE PARTNERS WERE SATISFIED WITH THE WORK OF SCIENTIFIC RESEARCH CARR IED ON BY THE SAID M/S. HERBICURE, THE PARTNERS OF THE ASSESSEE FIRM H AD REPLIED THAT DURING THEIR VISIT AT PAILAN AND BARAL THEY WERE SA TISFIED WITH THE SCIENTIFIC RESEARCH WORK AND FOR QUESTION NO. 17 TH E PARTNERS REPLIED THAT THEY HAD SEEN THE CERTIFICATE 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. HERBICUR E. WE NOTE THAT ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 10 THE AO ENQUIRED ABOUT DR. BHUBAN CHAKRABORTYS ADDR ESS FOR WHICH THE PARTNER REPLIED THAT THE DOCTOR RESIDES AT KSHU DIRAM SARANI, RATHTALA, KOLKATA. FOR QUESTION NO. 21 AS TO WHETHE R THEY KNEW ABOUT THE DIRECTORATE OF INVESTIGATION, KOLKATA CAR RIED OUT SURVEY U/S. 133A AND THAT ITS INVESTIGATION IS FOUND THAT THE ACTIVITIES WERE NOT GENUINE, THE PARTNERS REPLIED THAT THEY WERE NO T 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 CA RDIOLOGIST DR. BHUBAN CHAKRABRTY THEY MADE DONATION TO THE SAID CO NCERN. WE ALSO NOTE THAT THE AO ISSUED SUMMONS TO SHRI SWAPAN RANJ AN 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 M/S. HERBICURE IN WRITING TO THE AO AND CLE ARLY STATED THAT NO MONEY WAS REFUNDED BACK TO ASSESSEE FIRM, WHICH FAC T 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 ENA BLE OUR ACCOUNTS DEPTT FOR VERIFICATION AND SUBMISSION. HOWEVER, WE APPARENTLY OBSERVE FROM OUR RECORDS THA T FOLLOWING DONATIONS WERE RECEIVED BY US FROM M/S. SAIMED INNO VATION, THE ASSESSEE IN THE FINANCIAL YEARS MENTIONED AGAINST E ACH: 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 DONATI ONS 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 UNDE R STRICT MEDICAL SUPERVISION. AS SUCH, MY PERSONAL APPEARANCE MAY KI NDLY BE WAIVED ON COMPASSIONATE GROUND. I AM ATTACHING THE CURRENT MEDICAL PRESCRIPTION/ADVICE ALONG WITH MRI REPORTS FOR YOUR KIND RECORD. ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 11 HOWEVER, THE INFORMATION AS SUBMITTED ABOVE MAY PLE ASE RECORDED AS MY WITNESS. 10. THUS WE NOTE FROM THE ENTIRE FACTS AND CIRCUM STANCES, THAT THE AO GOT SWAYED AWAY WITH THE STATEMENT RECORDED ON OATH 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 ANSWERS GIVEN BY SHRI SWAPAN RANJAN DASGUPTA, WHERE IN HE ADMITS TO PROVIDE ACCOMMODATION ENTRIES IN LIEU OF CASH. T HIS INFORMATION WE SHOULD SAY CAN BE THE TOOL TO START AN INVESTIGA TION WHEN THE ASSESSEE MADE THE CLAIM FOR WEIGHTED DEDUCTION. THE GENERAL STATEMENT OF SHRI SWAPAN RANJAN DASGUPTA AGAINST DO NATION MADE THE CLAIM OF ASSESSEE FOR DEDUCTION SUSPICIOUS. HOW EVER, WHEN THE AO INVESTIGATED, SHRI SWAPAN RANJAN DASGUPTA HAS CO NFIRMED THAT M/S. HERBICURE WAS IN RECEIPT OF THE DONATION AND I T HAS NOT GIVEN ANY REFUND IN CASH, THEN THE SOLE BASIS OF DISALLOW ANCE OF CLAIM AS A MATTER OF FACT DISAPPEARED. IT SHOULD BE REMEMBERED SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE. THE CONFIRMATION FROM SHRI SWAPAN RANJAN DASGUPTA FORTI FIES 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 ST ATEMENT RECORDED ON OATH DURING SURVEY CANNOT BE ALLOWED AS HELD BY HONBLE SUPREME COURT IN KADER KHAN & SONS (SUPRA). MOREOVER, WE NO TE THAT IF THE AO WAS HELL BENT DETERMINED TO DISALLOW THE CLAIM O F THE ASSESSEE, THEN HE SHOULD HAVE GRANTED AN OPPORTUNITY TO CROSS EXAMINE SHRI SWAPAN 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 CIRCUM STANCES, WE CANNOT SUSTAIN THE ORDER OF THE AUTHORITIES BELOW. THEREFO RE, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ALLOW THE D EDUCTION OF RS.26,28,500/- U/S. 35(1)(II) OF THE ACT. 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 ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. 7. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER OF THE ITAT, KOLKATA BENCHES DATED 10/10/2018 IN THE CASE OF DCIT VS M/S DESMET REAGENT PVT. LTD. (SUPRA) AND FOUND ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 12 THAT THE ASSESSEE HAS GIVEN DONATION OF RS. 30,00,0 00/- TO HERBICURE HEALTHCARE BIO-HERBAL RESEARCH CENTER AND CLAIMED D EDUCTION U/S 35(1)(II) OF RS. 52,50,000/- IN THE COMPUTATION OF INCOME. THE ASSESSEE WAS INFORMED THAT A SEARCH ACTION HAD BEEN UNDERTAK EN IN CASE OF THE SAID ENTITY AND REPORT RECEIVED FROM THE INVESTIGAT ION WING IN KOLKATA CLEARLY BROUGHT OUT THE MODUS OPERANDI OF THE TRUST TAKING DONATIONS AND RETURNING THE AMOUNT IN CASH. A COPY OF THE STA TEMENT OF THE TRUSTEE MR. SWAPAN RANJAN DASGUPTA, RECORDED DURING THE COURSE OF THE SEARCH ACTION WAS PROVIDED TO THE AR. FURTHER IT WA S ALSO POINTED OUT THAT THE CENTRAL GOVERNMENT HAD RETROSPECTIVELY WIT HDRAWN THE APPROVAL FOR DEDUCTION U/S 35(1)(II) OF THE ACT GRANTED TO T HE INSTITUTION VIDE NOTIFICATION NO. 79/2016/F.NO.203/135/ITA DATED 6 TH SEPTEMBER, 2016. 8. IT WAS CONTENDED BY THE LD AR BEFORE THE A.O. TH AT THE CLAIM WAS VALID WHEN THE AMOUNT WAS DONATED AND HENCE THE ASS ESSEE IS FULLY ENTITLED TO CLAIM THE DEDUCTION U/S 35(1)(II) OF TH E ACT. HOWEVER, THE A.O. DID NOT AGREE WITH THE ASSESSEES CONTENTION A ND DECLINED THE CLAIM OF DEDUCTION U/S 35(1)(II) OF THE ACT. BY THE IMPUG NED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. WE FOUND TH AT THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION A RE PARI MATERIAL TO THE FACTS DISCUSSED BY THE ITAT KOLKATA BENCHES IN THE CASE OF DCIT VS M/S DESMET REAGENT PVT. LTD. (SUPRA). THEREFORE, RE SPECTFULLY FOLLOWING THE ORDER OF ITAT, KOLKATA BENCHES DATED 10/10/2018 IN THE CASE OF ITA NO. 7429/MUM/2018 KIRAN ALUMINUM INDIA P LTD. VS ACIT 13 DCIT VS M/S DESMET REAGENT PVT. LTD. (SUPRA), WE DO NOT FIND ANY MERIT IN THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 35(1) (II) OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY, 2020. SD/- SD/- (C.N. PRASAD) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 06/01/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//