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2019 (5) TMI 840 - AT - Income TaxDeduction u/s 35(1)(ii) denied - donation paid to M/s Heribicure Healthcare Bio Herbal Research Foundation - survey u/s 133A - statement was recorded from Shri Swapan Ranjan Dasgupta, Founder Director of HHBRF who admitted that they had received such donation and thereafter returned these donations in cash through some operators, to the donor, in lieu of a commission - HELD THAT - Nowhere in the statement recorded, the name of the assessee is stated, and there is no comment or evidence given against the assessee. What is clear is that donation was received by cheque from HHBRF, when the certificate issued to it by CBDT was still valid. There is no proof that this particular assessee, Shri Raj Karan Dassani, had got back the money in question in cash. On these facts the ratio laid down by the Hon ble Gujarat High Court in the case of Pr. CIT Surat vs. Tejua Rohit Kumar Kapadia 2017 (10) TMI 729 - GUJARAT HIGH COURT applies. The entire allegations made by Shri Swapan Ranjan Dasgupta, founder director of HHBRF is denied by Shri Kishan Bhawsinngka. No additions would be made on such statements which are not supported by corroborative evidence. The copies of the statements are not furnished nor was the assessee given a chance of cross-examination. Evaluating the evidence relied upon by the parties, we uphold the contention of the assessee that he is entitled to deduction u/s 35(1)(ii) - Decided in favour of assessee.
Issues Involved:
1. Validity of disallowance of deduction under Section 35(1)(ii) of the Income Tax Act, 1961. 2. Admissibility of statements and evidence collected during the survey. 3. Right to cross-examination of witnesses whose statements are relied upon by the Revenue. 4. Applicability of the principle of human probabilities in determining the genuineness of the donation. Detailed Analysis: 1. Validity of Disallowance of Deduction under Section 35(1)(ii): The assessee claimed a deduction under Section 35(1)(ii) for a donation made to Heribicure Healthcare Bio Herbal Research Foundation (HHBRF), which was initially approved as a scientific research organization. The deduction was disallowed by the Assessing Officer (AO) on the grounds that the donation was bogus, as HHBRF allegedly returned the donation in cash to the donor in lieu of a commission. 2. Admissibility of Statements and Evidence Collected During the Survey: The Revenue's case was based on statements recorded from various individuals during a survey under Section 133A, including Mr. Swapan Ranjan Dasgupta, Mr. Kishan Bhawsinghka, and Smt. Sujata Ghosh Dastidar. The AO concluded that HHBRF accepted donations and routed them back to donors in cash. However, the Tribunal noted that these statements were not corroborated by Mr. Kishan Bhawsinghka, who denied the allegations. The Tribunal emphasized that statements recorded during a survey do not have conclusive evidentiary value unless supported by corroborative evidence. 3. Right to Cross-Examination: The assessee argued that he was not given the opportunity to cross-examine the individuals whose statements were used against him. The Tribunal upheld this contention, citing various judicial precedents, including the Hon'ble Supreme Court's decision in Andaman Timber Industries Ltd. vs. Commissioner of Central Excise, which held that not allowing cross-examination of witnesses amounts to a violation of natural justice. The Tribunal concluded that the AO's reliance on these statements without providing an opportunity for cross-examination was unjustified. 4. Applicability of the Principle of Human Probabilities: The first appellate authority applied the principle of human probabilities, asserting that no businessman would donate more than 50% of his earnings to a cause unrelated to his business. However, the Tribunal disagreed, stating that the assessee's donation was made when HHBRF's approval under Section 35(1)(ii) was valid. The Tribunal emphasized that the assessee's claim for deduction should be allowed based on the material available on record and the bonafide belief at the time of donation. Conclusion: The Tribunal allowed the assessee's appeal, directing the AO to grant the deduction under Section 35(1)(ii). The Tribunal held that the statements used by the Revenue were not corroborated and the assessee was not given a fair opportunity for cross-examination. The Tribunal also noted that the assessee's donation was made in good faith when HHBRF's approval was valid, and hence, the deduction should not be denied based on subsequent events or uncorroborated statements.
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