2019 (9) TMI 1541 - AT - Income Tax

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 ... Deduction u/s.35AC on account of donation given by the appellant - During the course of search, one of the trustees accepted that all the expenses were bogus and the donations received in cheques were returned in cash to all the donors after deducting nominal commission - HELD THAT:- After the assessee has adduced evidence to establish prima facie the payment of donation to Navjeevan Charitable Trust, the onus shifted to the AO. However, the AO failed to conduct any inquiry before making disallowance of the above claim of the assessee. The AO has not brought on record that donation given by the assessee was subsequently returned back in cash, except a mere bald statement in the assessment order ‘that survey action conducted on some of the donors have conclusively proved that the Trust indeed returned the donation in cash’. The AO has not found any fault in the documents filed by the assessee during the course of assessment proceedings. In CIT v. A And A Bakery P. Ltd.[2007 (3) TMI 235 - DELHI HIGH COURT] it is held that “it is for the taxpayer tp prove the expenditure claimed by him, But the burden will shift, where the assessee had produced prima facie evidence as payment by cheque, so that no further proof may be expected. Disallowance prompted by mere suspicion in such cases was held unjustified. We delete the disallowance made by the AO. Facts being identical, our decision for the AY 2009-10 applies mutatis mutandis to AYs 2012-13 & 2014-15. - Decided in favour of assessee. 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.