Orissa High Court
Principal Commissioner Of Income vs Indrani Patnaik on 3 January, 2025
Bench: Arindam Sinha, M.S. Sahoo
IN THE HIGH COURT OF ORISSA AT CUTTACK
ITA No.5 of 2021
Principal Commissioner of Income .... Appellant
Tax (Central)
Represented By Adv. -
Mr. S.C. Mohanty, Advocate
(Senior Standing Counsel)
Mr. A.Kedia, Advocate
(Junior Standing Counsel)
-versus-
Indrani Patnaik .... Respondent
Represented By Adv. -
Mr. J. Sahoo, Senior Advocate
Ms. Kajal Sahoo, Advocate
Mr. R. Ghosh, Advocate
CORAM:
THE HON'BLE MR. JUSTICE ARINDAM SINHA
AND
THE HON'BLE MR. JUSTICE M.S. SAHOO
ORDER
03.01.2025
Order No.
04. 1. Revenue seeks admission of its appeal against order dated
26th August, 2020 made by the Income Tax Appellate Tribunal,
Cuttack Bench in ITA nos.389,390/CTK/2017, ITA nos.393 and
394/CTK/2017 pertaining to assessment years, 2012-13 and 2013-
14. Mr. Mohanty, learned advocate, Senior Standing Counsel
appears on behalf of revenue. Mr. Sahoo, learned Senior Advocate
appears on behalf of respondent-assessee on having been noticed by
coordinate Bench.
2. The Tribunal having had passed said order, being a common
order pertaining to assessment years, 2012-13 and 2013-14, revenue
has preferred two appeals. One appeal being ITA no.5 of 2021 was
dealt with by us on judgment dated 18th December, 2024. This is the
other appeal. Issus in both appeals are same except that in this
appeal there is an additional issue regarding donation, added to the
assessee's income at ₹1.75 crores.
3. By said judgment dated 18th December, 2024 we dismissed
the other appeal. As such, we have to consider the additional issue
in this appeal, whether it gives rise to a substantial question of law
for its admission.
4. Mr. Mohanty relies on paragraph 4 of assessment order
dated 26th February, 2016 to submit, the claimed donation was
found to be a bogus transaction. The order talks about survey
carried out in respect of, inter alia, the donee institute. He submits,
the institute was engaged in connivance with donors to indulge in
devious scheme of tax evasion. In the circumstances, deletion of the
addition gives rise to a substantial question of law.
5. Mr. Sahoo draws attention to impugned order on
submission, the Tribunal is the last fact finding forum. He points
out from paragraphs 55 to 57 that the donee institute had
registration under section 35 in Income Tax Act, 1961 subsisting in
the financial year pertaining to the assessment year in question, i.e.,
2013-14. Survey on the institute was carried out subsequently in
year 2015. That does not necessarily mean the institute can be said
to be not duly registered on the date it received the donation. There
is no mechanism for donors to ascertain whether duly registered
institutions are genuinely engaged in scientific research or not. It is
for the purpose they are required to obtain such registration.
6. He relies on section 35(1)(ii) and the explanation to submit,
the Act itself explains that the deduction to which the assessee is
entitled in respect of any sum paid to, inter alia, a research
association shall not be denied mainly on the ground that
subsequent to the payment of such sum, the approval had been
withdrawn. He cites view taken by a Division Bench of the High
Court of Gujarat in R/ Tax Appeal no.881 of 2019 (PCIT-3
Versus M/s. Thakkar Govindbhai Ganpatlal Huf) on oral order
dated 20th January, 2020. Referring to the proposed question of
law in that case, as reproduced in paragraph 2 of the order he
submits, the appeal was not admitted. The proposed question is
relevant to present appeal. Where there has been finding of fact that
his client duly made the donation through banking channel and
there was no evidence of any part of the donation returned, the
survey having had been made later cannot automatically empower
the Assessing Officer (AO) to add the deductible amount to the
income. Findings of fact being thus, no question of law, let alone a
substantial question of law arises for admission of the appeal.
7. In M/s. Thakkar Govindbhai (supra) the assessee had
made donation to an institution called Herbicure Foundation. It
appears from the assessment order, three institutes suffered conduct
of survey. The donee institute along with Herbicure Foundation and
another institute were found to be working together, to accept bogus
donations, deduct commission and return proceeds to the donees
through brokers and others. On behalf of respondent assessee
reliance was on paragraphs 6, 7 and 9 in the oral order
[M/s.Thakkar Govindbhai (supra)]. We reproduce below
paragraph-8 from the order.
"8. It is also found that the Herbicure Foundation has
confirmed that the amount has been utilized for scientific
research vide confirmation dated 29.09.2016. Accordingly,
the onus placed upon the assessee was discharged."
8. It appears from the assessment order, respondent was issued
show cause notice dated 22nd January, 2016 based on enquiry report
of the survey. The question put to the assessee by the notice is
reproduced below.
"On the above, it is clear that accommodation
entry was made with the above institution. Please explain
why the donation claimed at Rs.1,75,00,000/- U/s.35 given
to School of Human Genetics & Population Health should
not be disallowed."
In response, as appears from quote of the response reproduced in
the assessment order, the assessee replied by saying in effect, 'no
comment'. In the circumstances, we are inclined to admit the appeal
on the substantial question of law as below.
Is the finding on fact regarding there being no
evidence of proceeds of the donation returned to the
assessee, perverse?
9. By consent list the appeal for hearing on 29th January, 2025.
(Arindam Sinha)
Judge
(M.S. Sahoo)
Judge
Jyostna
