Weighted deduction claim under Section 35(1)(ii) denied as donee institute's approval had expired making deduction ineligible for assessment year.

ITAT Ahmedabad upheld CIT's revision order u/s 263 against assessee's weighted deduction claim u/s 35(1)(ii) for donation made. The donee institute's approval expired on 31/03/2006, making the deduction claim for A.Y. 2015-16 patently ineligible despite assessee's bonafide belief and supporting documents. CBDT advisory in December 2018 confirmed the institute was not approved during the relevant year. The assessment order allowing ineligible deduction was erroneous and prejudicial to revenue, warranting valid revisionary jurisdiction exercise. Appeal decided against assessee.

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Issues Involved:
1. Whether the order passed by the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act was erroneous and prejudicial to the interest of the revenue.
2. Whether the assessee was eligible to claim the weighted deduction under section 35(1)(ii) of the Income Tax Act for donations made to a Scientific Research Institute.

Summary:

Issue 1: Erroneous and Prejudicial Order by CIT
The assessee contended that the CIT's order under section 263 of the Income Tax Act was erroneous on facts and contrary to the provisions of the law. The CIT had held that the order passed by the Assessing Officer (AO) under section 143(3) was erroneous and prejudicial to the interest of the revenue. The CIT directed a fresh assessment considering the issue of weighted deduction under section 35(1)(ii). The CIT invoked Explanation 2 to sub-section (1) of section 263, stating that the assessment order was passed without proper enquiry and verification of facts, despite the assessee submitting that necessary inquiries were made during regular proceedings.

Issue 2: Eligibility for Weighted Deduction under Section 35(1)(ii)
The CIT noted that the approval granted to the Scientific Research Institute, M/s. Shri Arvindo Institute of Applied Scientific Research Trust, for receiving donations under section 35(1)(ii) had expired long before the impugned year. The assessee had claimed a weighted deduction of 175% on donations amounting to Rs. 70 lakhs. The CIT found that the AO had not made necessary inquiries before allowing this ineligible claim, rendering the assessment order erroneous and prejudicial to the revenue.

Arguments by Assessee:
The assessee argued that the AO had examined the issue during assessment and allowed the claim based on documents showing the Institute's approval for receiving donations under section 35(1)(ii). The assessee relied on documents provided by the Institute and contended that there was no reason to doubt the claim. The assessee also cited decisions from the ITAT Mumbai Bench and ITAT Rajkot Bench, arguing that the AO had taken a plausible view and conducted due inquiries.

Arguments by Revenue:
The Revenue contended that the Institute's approval had expired on 31/03/2006, and the Institute was fraudulently accepting donations based on forged documents. The CBDT had issued an advisory in December 2018, informing field officers about the fraudulent activities of the Institute. The Revenue argued that the allowance of the claim was an error, causing prejudice to the revenue.

Tribunal's Findings:
The Tribunal found that the Institute was not approved for receiving donations under section 35(1)(ii) during the impugned year. The allowance of the claim was patently incorrect, rendering the assessment order erroneous and prejudicial to the revenue. The Tribunal held that even if the assessee and the AO had bonafidely claimed and allowed the deduction based on documents, the claim was not allowable as per law. The Tribunal upheld the CIT's order, dismissing the assessee's appeal.

Conclusion:
The Tribunal concluded that the assessment order was erroneous and prejudicial to the revenue as it allowed a patently ineligible claim of weighted deduction under section 35(1)(ii). The appeal of the assessee was dismissed.

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