Tax Tribunal Denies Weighted Deduction for Non-Genuine Donation

The Tribunal upheld the disallowance of a weighted deduction claimed under section 35(1)(ii) of the Income Tax Act, 1961, as the donation of Rs. 25,00,000 made to a society for handicapped persons was deemed non-genuine. The donation was deposited into a fictitious account at Axis Bank, Kolkata, and the real trust did not receive the funds. The Tribunal dismissed the appeal, emphasizing the transaction's sham nature and the assessee's failure to prove the donation's genuineness. The order was pronounced on May 21, 2019, in Chennai.

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Issues Involved:
1. Disallowance of weighted deduction claimed under section 35(1)(ii) of the Income Tax Act, 1961.
2. Verification of the genuineness of the donation made by the assessee.
3. Examination of the fictitious bank account and its implications on the donation claim.

Issue-wise Detailed Analysis:

1. Disallowance of Weighted Deduction:
The primary issue in this case was whether the assessee was entitled to a weighted deduction under section 35(1)(ii) of the Income Tax Act, 1961, for a donation of Rs. 25,00,000 made to M/s. Bharosha (Society for Welfare of Handicapped Persons). The assessee claimed a weighted deduction of Rs. 43,75,000 for the assessment year 2011-12. The Assessing Officer disallowed this deduction, noting that the donation was deposited into a fictitious account at Axis Bank, Kolkata, which was opened without compliance with KYC norms. The CIT(A) confirmed this disallowance, and the Tribunal remitted the issue back to the Assessing Officer for re-examination.

2. Verification of Genuineness of Donation:
The Tribunal directed the Assessing Officer to verify the chain of transactions and the role of Axis Bank officials in opening the fictitious account. The verification report from the ADIT (Inv.), Durgapur, revealed that the Society for Welfare of Handicapped Persons did not maintain any account with Axis Bank. The fictitious account was opened with forged documents, and the funds deposited were misappropriated. The society lodged an FIR and initiated legal proceedings, including a writ petition before the High Court of Kolkata.

3. Examination of Fictitious Bank Account:
The investigation revealed that the Axis Bank account was fictitious and did not belong to the real trust. The funds deposited in this account were not received by the actual society. The Assessing Officer's verification confirmed that the donation did not reach the donee, and the society did not issue a valid receipt to the assessee. The assessee's objections, including the status of the police complaint and the transfer of funds, were addressed by the Assessing Officer, who maintained that the onus was on the assessee to prove the genuineness of the transaction.

Conclusion:
The Tribunal concluded that the donation claimed by the assessee was not genuine, as the funds were deposited into a fictitious account, and the real trust did not receive the donation. The assessee failed to provide evidence to substantiate the claim. Consequently, the appeal filed by the assessee was dismissed, and the disallowance of the weighted deduction under section 35(1)(ii) of the Income Tax Act, 1961, was upheld. The Tribunal emphasized that the transaction was sham and bogus, and the assessee could not claim the deduction without proving the genuineness of the donation. The appeal was dismissed, and the order was pronounced on May 21, 2019, in Chennai.

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