Tribunal Allows Rs. 10,00,000 Deduction; Overturns Additions, Upholds Valid Trust Donation Recognition u/s 35AC.

The Tribunal ruled in favor of the assessee, allowing the deduction of Rs. 10,00,000 under section 35AC, as the donation was made when the trust had valid recognition. The reopening of the assessment under section 147 was not addressed, as the decision was based on merits. The appeal was partly allowed, overturning the additions made by the AO and confirmed by the CIT(A).

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Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Addition of Rs. 10,00,000/- on account of a donation to Navjeevan Charitable Trust under section 35AC.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee contested the reopening of the assessment under section 147, arguing that the notice issued under section 148 dated 08.03.2016 was barred by limitation as per the first proviso to section 147. The assessee claimed that all necessary facts were fully and truly disclosed during the original assessment proceedings, which culminated in an order under section 143(3) dated 22.01.2013. The Assessing Officer (AO) received information from Pr. DIT (Inv.), Mumbai, indicating that the assessee had made a donation to Navjeevan Charitable Trust, which was involved in a racket of accepting donations and returning cash after retaining a commission. The AO argued that the reassessment proceedings were correctly initiated based on specific information and new material evidence uncovered by the investigation wing, thereby justifying the reopening of the assessment despite the limitation period. The CIT(A) upheld the AO's decision, dismissing the appeal and confirming the reopening of the assessment.

2. Addition of Rs. 10,00,000/- on Account of Donation to Navjeevan Charitable Trust:
The AO added Rs. 10,00,000/- to the assessee's income, claiming that the donation to Navjeevan Charitable Trust was bogus. The AO's investigation revealed that the trust was engaged in hawala activities, accepting donations through cheques and returning cash after retaining a commission. The trust was found to have stopped functioning and was derecognized by the CBDT retrospectively. The CIT(A) upheld the AO's decision, confirming the addition.

The assessee argued that the donation was made when the trust had valid recognition under section 35AC, and any subsequent withdrawal of recognition should not impact the claim. The assessee relied on the decision of the coordinate bench of the Tribunal in the case of DCIT circle-12(1), Kolkata vs. Maco Corporation (India) Pvt. Ltd., where it was held that the payer's entitlement to deduction is not affected by the subsequent withdrawal of recognition granted to the payee organization. The Tribunal found the issue at hand identical to the Maco Corporation case and ruled in favor of the assessee, allowing the deduction of Rs. 10,00,000/- under section 35AC. The Tribunal emphasized that the withdrawal of recognition does not affect the rights of the assessee if the donation was made when the trust had valid recognition.

Conclusion:
The Tribunal ruled in favor of the assessee on the merits, allowing the deduction of Rs. 10,00,000/- under section 35AC. The reopening of the assessment under section 147 was not decided upon as the issue was resolved on merits. The appeal was partly allowed, setting aside the additions made by the AO and confirmed by the CIT(A).

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