2022 (2) TMI 1139 - AT - Income Tax

Disallowance of deduction on donation made u/s 35(1)(ii) - bogus donations - HELD THAT - As relying on KAUSTUBHBHAI DHIRAJLAL PATEL 2021 (2) TMI 956 - ITAT AHMEDABAD we do not hesitate to allow the appeal filed by the assessee by deleting the disallowance made by revenue relating to the claim of donation made by the assessee to School of Human Genetics Population Health(SHG PH). We, therefore, delete such disallowance made by revenue.- Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of the assessment under section 147 of the Act.
2. Disallowance of deduction claimed under section 35(1)(ii) of the Act.

Validity of Reopening of Assessment (Section 147):
The appeal was filed against the order dated 31.12.2018 by the Ld. Commissioner of Income-tax (Appeals)-5, Ahmedabad regarding the assessment year 2014-15. The grounds raised by the assessee challenged the re-assessment proceedings under section 147 of the Act. The appellant argued that the notice under section 148 was invalid as there was no escapement of income as defined in section 147. It was contended that the re-assessment was initiated mechanically without proper application of mind. The appellant also objected to the proceedings initiated by the Assessing Officer (AO). However, the CIT(A) upheld the re-assessment proceedings, stating that the appellant's appearance during the assessment precluded raising objections later. The Tribunal dismissed the first ground as the appellant did not press it during the hearing.

Disallowance of Deduction under Section 35(1)(ii) of the Act:
The second ground of appeal focused on the disallowance of a deduction claimed under section 35(1)(ii) of the Act amounting to ?12,25,000. The AO disallowed the claim based on information received regarding bogus donations made to Herbicure Health Care Bio Herbal Research Foundation. The appellant argued that the AO failed to provide material evidence to prove the donations were bogus or obtained as commission. Additionally, the AO did not provide an opportunity for cross-examination of the director of the institution involved. The Tribunal referred to similar cases where deductions for donations were allowed based on judicial precedents. Relying on these precedents, the Tribunal allowed the appeal and deleted the disallowance of ?12,25,000 under section 35(1)(ii) of the Act.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the disallowance of the deduction claimed under section 35(1)(ii) of the Act. The judgment highlighted the importance of providing substantial evidence before disallowing deductions and emphasized the need for fair procedures during reassessment proceedings.