Rs 20 lakh donation deduction denied under Section 35(1)(ii) for expired scientific research trust approval

ITAT Ahmedabad dismissed the appeal challenging disallowance of Rs.20,00,000 deduction u/s 35(1)(ii) for donations to scientific research trust. The assessee donated to M/s. Shri Arvindo Institute of Applied Scientific Research Trust, whose approval u/s 35(1)(ii) expired on 31.03.2006, making it ineligible to receive donations for scientific research. AO disallowed the expenditure as unexplained u/s 69C. CIT(A) upheld the disallowance. ITAT confirmed that donation to an entity without valid approval cannot qualify for weighted deduction u/s 35(1)(ii), dismissing the appeal.

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Issues:
- Disallowance of deduction under Section 35(1)(ii) of the Income Tax Act, 1961 for Assessment Year 2016-17 based on false documents.
- Disallowance of expenditure as unexplained under Section 69C of the Act and addition back to total income.
- Reopening of assessment under Section 147 due to income escaping assessment.

Analysis:
1. Disallowed Deduction under Section 35(1)(ii): The appellant's claim for deduction under Section 35(1)(ii) was disallowed as the entity to which the donation was made was not recognized for scientific research purposes. The CBDT circular highlighted a bogus donation racket, leading to the disallowance. The assessing officer disallowed the expenditure of Rs. 20,00,000 as unexplained under Section 69C, with an additional Rs. 15,00,000 for weighted deduction, confirmed by the First Appellate Authority. The Ld. CIT(A) upheld the disallowance, emphasizing the lack of statutory approval for the donation, rendering it non-deductible.

2. Disallowed Expenditure under Section 69C: The assessing officer invoked Section 69C for unexplained expenditure, adding back Rs. 20,00,000 to the total income. However, it was noted that the source of the expenditure being unexplained was not specified. The Ld. CIT(A) acknowledged the incorrect invocation of Section 69C but upheld the disallowance of the deduction due to the donation being made to an ineligible entity under Section 35(1)(ii), leading to the sustained disallowance.

3. Reopening of Assessment under Section 147: The assessing officer reopened the assessment under Section 147 due to income escaping assessment, citing the lack of recognition for the entity receiving the donation. The office was satisfied that income had escaped assessment for the appellant, leading to the initiation of proceedings. The assessing officer's reasons for reopening were deemed valid, as the case was within four years from the end of the assessment year, with the necessary sanction obtained. The grounds against the reopening were rejected, affirming the correctness of the reassessment.

In conclusion, the appeal was dismissed as the disallowance of the deduction and expenditure was upheld due to the donation being made to an entity not eligible for scientific research donations. The Ld. CIT(A)'s decision was found just and proper, leading to the dismissal of the appellant's appeal.

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