2021 (9) TMI 220 - AT - Income Tax

Deduction u/s. 35(1)(ii) being 175% debited towards donation to Herbicure Healthcare Bio-Herbal Research Foundation HHBHRF - survey was carried out by the revenue and one of the official of HHBRF has categorically stated that HHBRF has given bogus entry and returned back money to the donors.- HELD THAT - As decided in M/S. THAKKAR GOVINDBHAI GANPATLAL 2019 (7) TMI 1559 - ITAT AHMEDABAD AO is harping upon an information supplied by the survey team of Calcutta. He has not specifically recorded statement of representatives of the donee. He has not brought on record a specific evidence wherein donee has deposed that donations received from the assessee was paid back in cash after deducting commission. On the basis of a general information collected from the donee, the donation made by the assessee cannot be doubted. Neither representatives of the donee have been put to cross-examination, nor any specific reply deposing that such donation was not received, or if received the same was repaid in cash, has been brought on record. In the absence of such circumstances, donation given by the assessee to the donee, on which the assessee no mechanism to check the veracity, can be doubted, more particularly, when certificate to obtain donation has been cancelled after two years of the payment of donation. It is fact which has been unearthed subsequent to the donations. Therefore, there cannot be any disallowance on this issue. - Decided in favour of assessee.

Summary

Issues:
Appeal against confirmation of deduction under Section 35(1)(ii) based on information from DDIT, Kolkata, and cancellation of certificate by CBDT with retrospective effect.

Analysis:
1. The appeal challenges the confirmation of a deduction under Section 35(1)(ii) by the Ld. CIT(A) based on information received from DDIT, Kolkata. The Assessee contests the claim of ?87,50,000, arguing that it relies on presumption and lacks evidence of cash receipt. The AO did not conduct an independent inquiry and relied solely on the information received.

2. The Assessee claimed a deduction for a donation to Herbicure Healthcare Bio-Herbal Research Foundation. Supporting documents included a donation letter, receipt, and registration details. However, information from DDIT, Kolkata revealed a bogus donation syndicate involving the Foundation, leading to the disallowance of the deduction by the AO.

3. The Ld. CIT(A) dismissed the Assessee's appeal, citing proof from the survey that the Foundation engaged in fraudulent activities. The Assessee failed to establish the Foundation's credibility as a genuine research organization. The Assessee then appealed to the ITAT for redressal.

4. The ITAT analyzed the case, considering the evidence presented by both parties. While the survey indicated fraudulent activities, the Assessee provided a certificate from the Ministry of Science and Technology valid at the time of donation. Additionally, a CBDT Circular in effect during the donation supported the Assessee's position.

5. Referring to a previous ITAT Bench order involving a similar case, the ITAT found in favor of the Assessee. The Bench highlighted the lack of specific evidence against the Assessee and the absence of cross-examination of the Foundation's representatives. The ITAT concluded that the donation could not be doubted without concrete proof.

6. Given the observations and the consistency with the previous Bench ruling, the ITAT allowed the Assessee's appeal, overturning the lower authorities' decisions. The appeal was allowed, emphasizing the lack of substantial evidence against the Assessee.

7. The ITAT's decision was pronounced in open court on 24-08-2021, ultimately dismissing the Revenue's appeal and allowing the Assessee's appeal based on the evidence and legal provisions presented during the proceedings.