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Issues: (i) whether the assessees were entitled to weighted deduction under section 35(1)(ii) for donations made to the recipient research institution; (ii) whether the reassessment in the connected appeals was validly reopened; (iii) whether the notice issued under section 143(2) in the lead appeal was without jurisdiction.
Issue (i): whether the assessees were entitled to weighted deduction under section 35(1)(ii) for donations made to the recipient research institution.
Analysis: The deduction claim depended on the genuineness of the donations and not merely on the recipient's prior approval status. Material from survey and post-survey proceedings showed that the recipient institution had functioned as part of an organized accommodation-entry mechanism, with brokers arranging donations and the amounts being routed back after retention of commission. The assessees failed to produce independent evidence to displace the Revenue's material or to establish a bona fide transaction worthy of deduction.
Conclusion: The claim for weighted deduction under section 35(1)(ii) was not allowable and was rightly disallowed against the assessees.
Issue (ii): whether the reassessment in the connected appeals was validly reopened.
Analysis: The reopening was founded on information from the Investigation Wing supported by material gathered in survey and enquiry proceedings indicating that the donations claimed by the assessees were bogus. That information constituted tangible material to form a reason to believe that income had escaped assessment. The reasons were not based on mere suspicion and the objections were duly disposed of.
Conclusion: The reopening under section 147 was valid and the challenge to reassessment failed.
Issue (iii): whether the notice issued under section 143(2) in the lead appeal was without jurisdiction.
Analysis: The scrutiny notice was issued in the course of a computer-selected scrutiny process. The subsequent allocation of work under CBDT instructions operated as a distribution of cases and did not invalidate the initial scrutiny jurisdiction. The procedural routing of the case did not create a jurisdictional defect in the notice or the assessment.
Conclusion: The notice under section 143(2) was not without jurisdiction.
Final Conclusion: The common order sustained the Revenue's action on the deduction issue and upheld the reassessment and jurisdictional objections, resulting in dismissal of all appeals.
Ratio Decidendi: A deduction claim under section 35(1)(ii) can be denied where survey and enquiry material establishes that the donation was part of an accommodation-entry scheme, and reassessment is sustainable when the Assessing Officer has tangible information showing escapement of income.
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