Tribunal allows appeal, directs deletion of deduction disallowance under Section 35(1)(ii). Emphasizes need for evidence.

The Tribunal allowed the appeal, directing the deletion of the disallowance of Rs. 1,75,00,000 under Section 35(1)(ii) deduction claim. The issues regarding the ex parte order by CIT(A) and the validity of Section 147 proceedings were not pressed and therefore not deliberated upon. The judgment underscored the necessity of substantial evidence and due process in tax disallowance cases, emphasizing that suspicion alone cannot justify disallowances.

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Issues Involved:
1. Ex parte order by CIT(A).
2. Validity of Section 147 proceedings.
3. Disallowance of Section 35(1)(ii) deduction claim of Rs. 1,75,00,000/-.

Issue-wise Detailed Analysis:

1. Ex parte order by CIT(A):
The appellant's counsel stated that the assessee does not wish to press the issue that the CIT(A) erred in passing the lower appellate order ex parte. Therefore, this issue was not considered further in the judgment.

2. Validity of Section 147 proceedings:
Similarly, the appellant's counsel also chose not to press the issue regarding the validity of Section 147 proceedings. Consequently, this issue was not deliberated upon in the judgment.

3. Disallowance of Section 35(1)(ii) deduction claim of Rs. 1,75,00,000/-:
The primary contention was whether the lower authorities erred in treating the assessee’s Section 35(1)(ii) deduction claim as a mere accommodation entry. The CIT(A) had dismissed the deduction claim, citing that the School of Human Genetic and Population Health (SGH&PH) was involved in a scam and had approached the Income Tax Settlement Commission with a disclosure of Rs. 15.75 Crores for FY 2011-12 to 2013-14. Furthermore, the Central Board of Direct Taxes (CBDT) had rescinded the approval granted to SGH&PH with effect from 01.04.2007, deeming that the approval had never been issued for any tax benefit under the Income Tax Act, 1961.

The Tribunal considered the appellant's arguments and noted that the issue of Section 35(1)(ii) deduction for contributions made to SGH&PH was no longer res integra. The Tribunal referred to its co-ordinate bench’s decision in Prakash Ply Centre Pvt. Ltd. vs. DCIT, where a similar disallowance was declined. The Tribunal reiterated that the assessee cannot suffer due to the withdrawal of the notification granting approval to SGH&PH, especially when the donation was made while the approval was still valid.

The Tribunal also cited several precedents where similar disallowances were deleted, emphasizing that the assessee should not be penalized for the subsequent rescission of the approval. It was highlighted that the statements recorded during surveys and the lack of cross-examination opportunities could not solely substantiate the disallowance. The Tribunal concluded that suspicion, however strong, cannot replace evidence.

The Tribunal adopted the detailed reasoning from previous judgments and directed the Assessing Officer to delete the impugned disallowance of Rs. 1,75,00,000/- under Section 35(1)(ii). The appellant's appeal was partly allowed in these terms.

Conclusion:
The Tribunal allowed the appeal concerning the disallowance of the Section 35(1)(ii) deduction claim, directing the deletion of the disallowance of Rs. 1,75,00,000/-. Other issues regarding the ex parte order and the validity of Section 147 proceedings were not pressed by the appellant and thus were not adjudicated. The judgment emphasized the importance of substantial evidence and due process in tax disallowance cases.

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