2023 (2) TMI 310 - AT - Income Tax

Weighted deduction u/s 35(1)(ii) in respect of donations paid to one NGO - information received from the Directorate of Investigation Wing of the Income Tax Department, Kolkata, whereby, the modus operandi and non-genuineness of the donation was brought to light - HELD THAT - Despite giving opportunity, the appellant could not prove the genuineness of the alleged bogus donations. The appellant had not discharged the onus lying upon him proving the genuineness of the donations and also failed to rebut the allegation of the AO, which clearly means that he had also participated to the fraudulent activity committed by the said organization i.e. NGO s viz. School of Human Genetics and Population Health. Thus, the doctrine of fraud can be squarely invoked to the facts of the present case. Accordingly, the ratio of the decisions placed by the ld. AR have no application to the facts of the present case, inasmuch as, those cases were decided on the premises that there was no allegation that amount of donation was paid back in cash to the donors and also there was no allegation that the NGO was engaged in the fraudulent activities. Since, we held that the doctrine of fraud is applicable to the facts of the present case, even the principles of natural justice have no application, therefore, we uphold the orders of the lower authorities and dismiss the ground of appeal filed by the assessee. Appeal filed by the assessee stands dismissed.

Summary

Issues:
Allowability of deduction u/s 35(1)(ii) for alleged bogus donations to NGO's.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The appellant, engaged in the business of builders, developers, and promoters, declared a total income of Rs. 39,55,040/- for the year. However, the Assessing Officer completed the assessment at a total income of Rs. 68,40,040/- disallowing the weighted deduction u/s 35(1)(ii) for donations of Rs. 15,00,000/- to an NGO based on information suggesting non-genuineness of the donations. The Assessing Officer also disallowed a donation of Rs. 2,60,000/- to another foundation. The appellant contended before the CIT(A) that the disallowance was unjustified and requested an opportunity for cross-examination, but the CIT(A) upheld the decision based on evidence of the NGO's involvement in accommodation entries for bogus donations.

The main issue in the appeal was the allowability of deduction u/s 35(1)(ii) for alleged bogus donations to the NGO. The Assessing Officer concluded that the NGO provided accommodation entries for bogus donations, receiving service charges and refunding the donations in cash. Despite opportunities, the appellant failed to prove the genuineness of the donations, leading to the inference that the appellant participated in the fraudulent activity. The doctrine of fraud was invoked, distinguishing previous cases where donations were not refunded in cash and NGOs were not engaged in fraudulent activities. The Tribunal upheld the lower authorities' orders, dismissing the appeal filed by the assessee. The principle of natural justice was deemed inapplicable due to the applicability of the fraud doctrine to the case.

In conclusion, the Tribunal dismissed the appeal, upholding the decision of the lower authorities regarding the disallowance of deductions for alleged bogus donations to the NGO. The appellant's failure to prove the genuineness of the donations and rebut the Assessing Officer's allegations led to the invocation of the fraud doctrine, justifying the disallowance and dismissal of the appeal.