Tribunal allows appeal, overturns disallowance under Income Tax Act, shifting burden to Assessing Officer

The Tribunal allowed the appeals, ruling in favor of the appellant and deleting the disallowance of the deduction under section 35AC of the Income Tax Act. The Tribunal found that the appellant had provided prima facie evidence of the donation, shifting the burden to the Assessing Officer to conduct further inquiry. As no substantial evidence of the donation being returned in cash was provided by the AO and no fault was found in the appellant's documents, the disallowance was deleted. The decision for the Assessment Year 2009-10 was held applicable to subsequent years as well.

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Issues:
Disallowance of deduction under section 35AC of the Income Tax Act.

Analysis:
The appellant filed an appeal against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of a deduction claimed under section 35AC of the Income Tax Act. The appellant had made a donation of Rs. 3,00,000 to Navjeevan Charitable Trust, which was disallowed by the Assessing Officer based on suspicion and lack of genuine expenses by the Trust. The appellant argued that all conditions for claiming the deduction were met, and relevant documents were procured before making the donation. However, the AO disallowed the claim due to findings from search actions on the Trust and lack of evidence regarding the donation recipient. The CIT(A) upheld the disallowance, noting the absence of new evidence supporting the claim during the appeal.

During the proceedings before the Appellate Tribunal, the appellant provided various documents to substantiate the donation, including official notifications, registration details, and bank statements. The appellant highlighted that the donation was made through account payee cheques and that no evidence existed of the donation being returned in cash. The appellant also emphasized that no findings of bogus transactions were made against them, and regulatory approvals were in place when the donation was made. Citing a relevant Tribunal decision, the appellant sought deletion of the disallowance.

The Departmental Representative supported the disallowance based on findings from the search action on the Trust, indicating lack of genuine expenses and cash returns for donations. After considering the submissions and evidence, the Tribunal found that the appellant had provided prima facie evidence of the donation, shifting the burden to the AO to conduct further inquiry. As the AO failed to provide substantial evidence of the donation being returned in cash and no fault was found in the appellant's documents, the Tribunal deleted the disallowance. Referring to a precedent, the Tribunal emphasized that disallowance based on mere suspicion without further proof was unjustified. The decision for the Assessment Year 2009-10 was held applicable to subsequent years as well.

In conclusion, the Tribunal allowed the appeals, ruling in favor of the appellant and deleting the disallowance of the deduction under section 35AC of the Income Tax Act.

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