Income Tax Appellate Tribunal - Mumbai
Hiren M Shah, Mumbai vs Asst Cit 17(2), Mumbai on 15 January, 2019
आयकर अपीलीय अिधकरण "एच" यायपीठ,
यायपीठ, मुब
ं ई
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI
BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
&
SHRI RAM LAL NEGI, JUDICIAL MEMBER
आयकर अपील सं./ITA Nos.6672 & 6673/M UM/2013
( िनधा रण वष / Assessment Years :2013-2014 & 2014-2015)
Kitchen Essentials, Vs. ACIT, Circle-4, thane
Gala No.10, 12 Kunal Industrial
Estate, Gauraipada, Near State
Bank of India, Vasai (East),
Thane-401208
थायी ले खा सं . /PAN No. : AAGFK 2728 K
(अपीलाथ /Appellant) .. ( यथ / Respondent)
िनधा रती की ओर से /Assessee by : Shri Firoze B. Andhyarujina &
Shri Kirit Sanghvi, AR
राज की ओर से /Revenue by : Shri Manoj Kumar Singh, CITDR
सुनवाई क तारीख / Date of Hearing : 01/01/2019
घोषणा क तारीख/Date of Pronouncement 15/01/2019
आदेश / O R D E R
Per Shri Rajesh Kumar, AM:
These appeals by assessee arise out of the order of the CIT(A) -3, Mumbai, both dated 21.09.2017, which in turn has arisen out of the order passed by the Assessing Officer u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") relating to A.Y. 2013-2014 & 2014- 2015.
2. Since the assessee has raised similar grounds of appeal in both the aforesaid appeals, except different figures, therefore, both the appeals of the assessee have been heard together and disposed off by this consolidated order. For the sake of convenience, first, we shall take up the appeal of the assessee for assessment year 2013-2014 in ITA No.6672/Mum/2017 and the facts mentioned therein are taken into 2 ITA No.6672&6673/17 consideration in deciding both the appeals, wherein the grounds raised by the assessee read are as under :-
"1) Whether on the facts and circumstances of the case and in law the learned CIT (A) erred in not assigning reasons for rejecting the submissions of the appellant made before him, and thereby failed in passing a speaking order.
2) Whether on the facts and circumstances of the case and in law the learned CIT(A) erred in not appreciating that the denial by the AO to the demand made by the appellant for cross examination of the parties on whose statement the AO was placing reliance for making the impugned disallowance, resulted in violation of the principles of natural justice rendering the impugned Order invalid in law.
3) Whether on the facts and circumstances of the case and in law the learned CIT(A) was justified in confirming disallowance of the claim of the Appellant made under s.35(1)(ii) the I.T.Act, 1961 for Rs.87,50,000/- by upholding the conclusion of the AO that the contribution of Rs.50,00,000/- to School of Human Genetics & Population Health was not genuine
4) Whether on the facts and circumstances of the case and in law the learned CIT(A) was justified in accepting the theory of the AO based on the of preponderance of probability and thus making the additions purely on the basis of presumptions , surmises and conjectures.
5) Whether on the facts and circumstances of the case and in law the learned CIT(A) was justified in drawing from the instances that are irrelevant to the issues involved in the appeal, an inference that the contribution made by the appellant was non genuine."
3. At the outset, ld. AR did not press the grounds No.1 & 2 and argued the grounds No.3 to 5 in both the appeals. Accordingly, we dismiss the ground Nos.1 & 2 raised by the assessee in both the appeals as not pressed and proceed to decide the grounds No.3 to 5 in the ensuing paras.
4. Facts in brief are that the assessee is engaged in manufacturing and exporting of stainless steel utensils and other kitchenware items and 3 ITA No.6672&6673/17 filed its return of income on 29.10.2013 disclosing total income at Rs.54,34,460/-, which was processed u/s.143(1) of the Act. Thereafter the case of the assessee was selected for scrutiny under CASS and notice u/s.143(2) & 142(1) of the Act were issued and duly served upon the assessee. During the course of assessment proceedings, the AO noticed that the assessee had made donation of Rs.50,00,000/- to M/s. School of Human Genetics & Population Health (SHG & PH), Kolkata. The assessee has claimed deduction of Rs.87,50,000/-, being 175% of the paid amount. The AO after receiving information from the investigation wing that the said assessee is engaged in accepting bogus donations u/s.35(1)(ii) of the Act. A survey u/s.133A carried out on 27.01,2015 at the office premises of SHG&PH. During survey proceedings, statements of Secretary/Treasurer/President and other persons were recorded wherein they admitted to be engaged in providing bogus donations entries to donors and described in details the modus operandi followed. During survey proceedings, survey team concluded that the whole purpose was to receive donations via cheques/RTGS and after deducting commission, the money used to be returned. Summons u/s 131 were issued to various persons , whose statements form part of the order. During the course of assessment proceedings the assessee filed evidences, which included statements of treasurer, secretary, copy of Settlement Commission order and other bills and vouchers including duplicate receipts of donations issued, bank statements, letters of SGH & PH asking for donations, copies of documents indicating approval granted 4 ITA No.6672&6673/17 to SHG & PH for eligibility to accept donations. Accordingly, the AO issued a show cause notice to the assessee to which the assessee replied, however, the AO did accept the explanation of the assessee for the various reasons stated in the assessment order and disallowed the claim of deduction of donation of Rs.87,50,000/- by holding that the entire activities of the trust are sham and not genuine by relying on the decision in the case of Jankinath Sarangi vs. State of Orissa, Union of India , Anr. Vs..P.K. Roy & Ors. And Sumati Dayal vs. Commissioner of Income Tax (1995) 80 Taxman 89 and framed the assessment u/s.143(3) of the Act, dated 30.12.2016.
5. Being aggrieved with the assessment order passed by the AO, the assessee preferred appeal before the CIT(A), however, the CIT(A) confirmed the disallowance made by the AO.
6. Ld. AR before us submitted that the issue involved in the present case is squarely covered by the various decisions of the coordinate benches of the Tribunal, wherein the coordinate benches have decided the issue in favour of the assessee. Ld. AR also referred to the decision of Kolkata Bench of the Tribunal in the case of Narbheram Vishram Vs. DCIT, ITA Nos.42&43/Kol/2018 for the assessment year 2013-2014 & 2014-2015. Ld. AR submitted that in this case the facts are identical as the donation was also made to "The School of Human Genetics and Population Health", which is an institution approved by the Central Government vide Notification dated 2009 for the purpose of exemption u/s.35(1)(ii) of the Act. Ld. AR further submitted that in the present case 5 ITA No.6672&6673/17 also the assessee has made donations to the same trust which were claimed u/s.35(1)(ii) of the Act to the tune of Rs.87,50,000/- against the contribution of Rs.50,00,000/-. To support his contentions, ld. AR also relied on the following decisions :-
i) Zenith Credit Corporation Vs. ITO, ITA No.718/Kol/2018, order dated 20.07.2018;
ii) Tushar Chawda Vs. ITO, ITA No.2362/Kol/2017, order dated 21.03.2018;
iii) DCIT Vs. Maco Corporation India (P) Ltd. ITA No.378/Kol/2017, order dated 13.04.2018; and
iv) M/s P.R.Rolling Mills Pvt. Ltd. Vs. DCIT, ITA No.529/JP/2018, order dated 07.07.2018.
Ld. AR submitted that since the facts in these cases are quite common and similar, therefore, following the said decisions the appeal of the assessee should be allowed.
7. Ld.DR, on the other hand, relied heavily on the order of authorities below and submitted that approval granted u/s 35(1)(ii) to "The School of Human Genetics and Population Health" was withdrawn by the Government of India with retrospective effect when it was found that the said institution was engaged in hawala operations and misused the exemption. The DR further submitted that the office bearers of the trust have categorically admitted that the trust was involved in the bogus tax evasion schemes and, therefore, the order of CIT(A) needs to be upheld. Moreover, the said institution has approached the Settlement Commission and the request of the trust was rejected by the Settlement Commission by observing that the said institution has misused the exemption granted 6 ITA No.6672&6673/17 to accept donation u/s 35(1)(ii) , and, therefore, the order of CIT(A) needs to be confirmed.
8. We have heard the rival submissions and perused the material on record including the decisions cited by the ld. AR. The undisputed facts are that the assessee has made donations of Rs.50 lakhs to the "The School of Human Genetics and Population Health" and 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 office 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 observed by the survey team that this institute in connivance with donors, brokers and accommodation entry providers has indulged in a duvious scheme of tax evasion, under which bogus donations were received from donors and money used to be returned back to the donors in lieu of commission, even while the donor availed of deductions u/s.35(1)(ii) of the Act. The registration of the institution was cancelled by the Government of India with retrospective effect and it was held that the institution has misused the exemption. However, under similar facts and circumstances, various coordinate benches have taken the view that mere admission on the part of the office bearers of the body/trust, the assessee cannot be penalized and the amount of donations claimed by the assessee on account of payment to the said school cannot be denied. In the case of Narbheram Vishram Gua, ITA No.42&43/Kol/2018, order dated 27.07.2018, the 7 ITA No.6672&6673/17 Kolkata Bench of the Tribunal under similar circumstances and facts has held as under :-
"13 we have given a careful consideration to the rival submissions and perused the materials available on record, we note that the assessee has challenged disallowance of weighted deduction of Rs.4,81,25,000/- for A.Y. 2013-14 and disallowance of weighted deduction 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 donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' (hereinafter referred to as 'Matrivani') and 'The School of Human Genetics and Population Health' (hereinafter referred 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 weighted deduction of Rs.10,50,00,000 under section 35(l)(ii) of the Income 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 which were approved by the Central Government for the purposes of section 35(l)(ii) of the Act read with Rule 5C and SE of the Income Tax Rules, 1962. In the assessment year 2013-14, the assessee claimed weighted deduction of Rs.4,81,25,000/- under section 35(1) (ii) of the Act, which is 175% of the amount of donation being the sum of Rs.2,75,00,000/- in respect of the donation given to 'The School of Human Genetics and Population Health'. We note that the Notifications to this effect, that these two institutions viz; 'Matrivani' and 'SHG', were approved 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 claimed by the assessee was denied by the Assessing Officer on the basis of the allegations contained in the report of the Investigation Wing of Kolkata that the said donations were bogus. The reasons stated therein, in short, were that statements of some key persons of these two donee institutions were recorded by the Investigation authority in course of survey proceedings in their cases. The said key person, in their statements, accepted to have received donations from various entities in lieu of cash returned to them after deducting commission there from.
14.We note that, during the course of hearing, before us, the Id Counsel for the assessee submitted that, the sums paid to "Matrivani1 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 Tax Act, 1961 vide Notification, bearing No. 229/2007 (F.No.203/135/2007/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 Official Gazette of India. The assessee categorically denied that it ever received back the amounts of donations in cash 8 ITA No.6672&6673/17 or in kind from the said Institutions and from any person whatsoever in lieu of the various amounts donated to these two institutions, we note that in the statements, of key persons and alleged brokers recorded by the Investigation Wing in course of survey proceedings, in their cases and the extracts of which was provided to the assessee 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 bogus donations and that cash was paid to the donors assessee in lieu 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 Assessing 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 the assessee firm. The assessee firm denied its knowledge of the statements made by these institutes which were relied on by the Investigation Wing and the Assessing Officer. We note that not providing the opportunity of cross-examination is against the principle of natural justice 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 was upheld by the Coordinate Bench of Kolkata in the case of Rajda Polymers, ITA No.333/Kol/2017,for Assessment Year 2013-14 wherein it was held as follows: "10. ....Thus we note from the entire facts and circumstances, 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 accommodation 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 against donation made the claim of assessee for deduction suspicious. However, when the 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 basis of disallowance 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 Dasgupla fortifies the claim of the assessee for weighted deduction u/s. 35(1)(ii) of the Act. The sole basis of the addition/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 Hon'ble Supreme Court in Andaman Timber (supra).9
ITA No.6672&6673/17
11. In the light of the aforesaid facts and circumstances, we cannot sustain the order of the authorities below. Therefore, we set aside the impugned order and direct the AO to allow the deduction ofRs.26,28,500/- u/s. 35(l)(ii) of the Act.
15. Now, we deal with the arguments of Id DR for the Revenue. We note that the solitary grievance of the Id DR for the Revenue is that since the registration had been cancelled by the CBDT, with retrospective effect that is, with effect from 1sl April 2007, by issuing notification dated 06.09.2016, for both the institutions viz: 'Matrivani' and 'The School of Human Genetics and Population Health', therefore these 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 the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1 )(ii) of the Act, for that we rely on the judgment 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, wherein 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 under Section 12A is quasi judicial in nature. Second, there was no express provision in the Act vesting the CIT with power of cancellation of registration fill 01.10.2004; and lastly. Section 21 of the General Clauses Act has no application to the order passed by the CIT under Section 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 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 judgement of the Hon'ble Apex Court would squarely be applicable to the facts of the instant case. In fact the assessee's case herein falls on a much better footing than the facts before the Hon'ble Apex Court. In the case before Hon'ble Apex Court, the power of cancellation of registration 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 , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(l)(ii) of the Act. Hence we hold that the withdrawal of recognition u/s 35(l)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1 )(H) of the Act."10
ITA No.6672&6673/17 16.1n view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we direct the Id AO to grant deduction u/s 35(1)(ii) of the Act, in the sum of Rs. 4,81,25,000/- for A.Y, 2013-14 and in the sum of Rs.10,50,00,000/-, for A.Y. 2014- 15, as claimed by him under section 35(l)(ii) of the Act in respect of the amounts of donations made to two Institutions viz. 'Matrivani Institute Experimental Research & Education' and The School of Human Genetics 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 disregarding the revenue's contentions that the registration of the school has been cancelled by the CBDT with retrospective effect by issuing Notification and, therefore, the assessee is not entitled to benefit u/s.35(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.35(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.
10. Now, we shall take up appeal of the assessee for the assessment year 2014-2015 in ITA No.6673/Mum/2017, wherein the issue involved is identical to one as decided by us in appeal of the assessee for assessment year 2013-2014 in ITA No.6672/Mum/2017 by holding that the assessee is entitled to deduction u/s.35(1)(ii) of the Act. Therefore, the findings given by us in the appeal of the assessee for the assessment year 2013-2014 in ITA No.6672/Mum/2017 shall apply mutatis mutandis 11 ITA No.6672&6673/17 to the present appeal of the assessee for assessment year 2014-2015 in ITA No.6673/Mum/2017 as well. Accordingly, this appeal of the assessee is also allowed.
11. In the result, both appeals of the assessee are allowed.
Order pronounced in the open court on 15/01/2019.
Sd/- Sd/-
(RAM LAL NEGI) (RAJESH KUMAR)
लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai;
याियक सद य / JUDICIAL MEMBER
दनांक Dated 15/01/2019
कु .िम/Prakash Kumar Mishra, Sr.PS.
.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. थ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A), Mumbai
4. आयकर आयु / CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुं बई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
स यािपत ित //True Copy//
आदेशानुसार/ BY ORDER,
(Assistant Registrar)
आयकर अपीलीय अिधकरण, मुबं ई / ITAT, Mumbai