2021 (8) TMI 1082 - AT - Income Tax

Deduction u/s 80GGA - Allegation of Bogus Donation - the name of the Trust appears at Serial No. 14 in the notification dated 11.08.2011 and the the Trust is eligible for accepting donation u/s 35AC - HELD THAT - The assessee in support of donation made, has filed copy of Bank Statement and receipt issued by the Trust acknowledging the receipt of donation made by the assessee. The assessment for AY 2014-15 was re-opened in the case of assessee to disallow the benefit of deduction claimed by the assessee under section 80GGA of the Act in respect of donation made to Navjeevan Charitable Trust. A perusal of the assessment order reveals that the AO has merely raised a suspicion that the possibility of Navjeevan Charitable Trust accepting donation and returning the amount back to the donors after charging some commission cannot be rulled out. No positive evidence is brought on record by the Revenue to substantiate that the donation money had infact travelled back to the assessee in the form of cash. The disallowance has been made merely on suspicion. See JADSTONE TRADING PVT. LTD. VERSUS ITO 10 (2) (1) MUMBAI. 2019 (6) TMI 1574 - ITAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
Disallowance of deduction under section 80GGA of the Income Tax Act for donation made to a charitable trust.

Analysis:
The appeal was against the disallowance of a deduction claimed under section 80GGA of the Income Tax Act for a donation made to a charitable trust. The Assessing Officer had disallowed the deduction on the suspicion that the trust might be returning the donation amount back to the donors in cash. However, the trust was duly notified under section 35AC at the time of donation, and there was no evidence to prove that the donation amount had been received back by the assessee. The Tribunal referred to similar cases where such disallowances were deleted due to lack of evidence of funds being returned to the donors.

The Department argued that during a search operation on the charitable trust, it was found that donations were being returned to donors in cash after charging a commission. The Department claimed that the assessee had taken undue advantage of these bogus donations. However, the Tribunal noted that there was no concrete evidence to support this claim and that the disallowance was made solely on suspicion.

In a similar case, the co-ordinate bench had set aside an addition made on similar grounds, stating that the addition was based on surmise and conjecture and lacked any evidence of funds being received back by the assessee. Following this precedent and considering the lack of evidence in the present case, the Tribunal set aside the impugned order and allowed the appeal of the assessee.