2019 (5) TMI 1548 - AT - Income Tax

Tax Tribunal Denies Weighted Deduction for Non-Genuine Donation

Smt. Deviyani Dilip Patel Versus The Income Tax Officer, Non-Corporate Ward 3 (2), Chennai – 34.

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 ... Disallowance of weighted deduction u/s 35(1)(ii) - ingenuine donation given - sham transactions - whether, the donation given by the assessee was actually reached the donee and having accepted the donation, the donee has issued valid receipt to the assessee so as to enable the assessee to claim weighted deduction under section 35(1)(ii)? - HELD THAT:- From the efforts of the investigation wing of the Department, it reveals that bank A/c in Axis Bank, Kolkata does not belong to the real trust in Durgapur (i.e. Society for Welfare of Handicapped Persons, Durgapur) and the matter regarding the alleged payment of amounts into the said account is being investigated by various agencies including RBI & West Bengal State Police Department. Investigations have further revealed that the original trust at Durgapur has taken up the matter with the High Court, regarding mis-use of its Name & PAN, by miscreants. Thus, these facts point to the fact that the said Axis Bank account claimed to belong to BHAROSHA (i.e. Society for Welfare of Handicapped Persons, Durgapur), is fictitious. Thus, the entire investigation of the Department reveals that the entire transaction was sham. The matter of fictitious account operated in the Axis bank is subjudicial and not coming under the jurisdiction of the Income Tax Department. The claim of the assessee that the alleged payment of donation is genuine, is not acceptable, because, the assessee has not furnished any detail/evidence to prove that the donation offered by the assessee is genuine transaction since the donation was deposited in Axis Bank, where, society is not maintaining any account and the society also not confirmed having received the said donation. In case, if the assessee deposited the loan amount cheque in her bank account and thereafter, send the donation from her bank account, on receipt of the same by the donee, the amount would have been debited from assessee’s account and would be evident that the donee has received the donation. Actually, this was not done in this case. The assessee claims to have deposited the loan cheque into Axis Bank as a donation to the assessee, where, the donee has not maintaining any account, the incomplete transaction cannot be held as genuine and bonafide transaction and the transaction is nothing but bogus. When there is no piece of evidence that the assessee’s donation was remitted to donee’s bank account, the assessee cannot claim weighted deduction u/s 35(1)(ii) since there is no genuineness in the above transaction. - Decided against assessee. 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.