2025 (12) TMI 478 - AT - Income Tax

Reassessment under section 147 upheld; weighted deduction denied for donation misused under section 35(1)(ii) after CBDT notice

ITAT Ahmedabad upheld the validity of reassessment proceedings initiated against the assessee under section 147, holding that fresh tangible information ... Validity of reopening of assessment - disallowance of deduction in lieu of donation given as per section 35(i)(ii) to a recognized institution on the grounds that are imaginary without considering our reply properly - HELD THAT:- The assessee paid Rs. 30 lakhs to M/s. Bioved Research Society on 25.03.2015; however, the CBDT vide notification No. 3/ 2019 dated 25.01.2019 withdrew the approval given to M/s. Bioved Research Society with effect form 01.04.2019, and also recorded that the Society had misused the provisions of Section 35(1)(ii) by providing accommodation entries to donors to enable them to claim false weighted deductions. This is a fresh information received by the Assessing Officer to reopen the assessment; therefore, the reopening of the assessment is good in law. Donation made by the assessee cannot be allowed as a deduction under section 35(1)(ii) of the Act. Decided against assessee. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether reassessment proceedings initiated under sections 147/148, based on subsequent CBDT information regarding withdrawal of approval under section 35(1)(ii) of the donee institution, were valid in law. 1.2 Whether deduction claimed under section 35(1)(ii) in respect of donation made to an institution whose CBDT approval under that provision stood withdrawn with retrospective effect could be allowed. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening under sections 147/148 based on CBDT withdrawal of approval to donee institution Interpretation and reasoning 2.1 The assessee had made a donation of Rs. 30,00,000 to a research institution on 25.03.2015 and claimed deduction of Rs. 52,50,000 under section 35(1)(ii). 2.2 Subsequently, CBDT Notification No. 3/2019 dated 25.01.2019, circulated on 28.02.2019, withdrew the approval earlier granted to the said institution under section 35(1)(ii) with effect from 01.04.2011 and recorded that the institution had misused the provision by providing accommodation entries to donors for bogus weighted deductions. 2.3 The Tribunal held that such notification and findings of misuse constituted fresh tangible information coming to the Assessing Officer after completion of the original assessment under section 143(3), and directly impacted the allowability of the deduction earlier granted. 2.4 On these facts, the Tribunal concluded that the Assessing Officer was justified in forming a belief that income had escaped assessment and in reopening the assessment; the reopening was therefore 'good in law'. Conclusion 2.5 Reassessment proceedings under sections 147/148, founded on the subsequent CBDT notification withdrawing approval of the donee institution and recording misuse of section 35(1)(ii), are valid and sustainable. Issue 2 - Allowability of deduction under section 35(1)(ii) for donation to institution whose approval was withdrawn Legal framework (as discussed) 2.6 Section 35(1)(ii) provides weighted deduction on sums paid to an approved research association or institution; eligibility depends on the institution being duly approved for the relevant period. 2.7 The CBDT notification in question withdrew the approval of the recipient institution with effect from 01.04.2011 and recorded that the institution was engaged in providing accommodation entries and facilitating false weighted deductions; the withdrawal was described as substantive and not technical. 2.8 The Tribunal relied on its earlier coordinate bench decision concerning donations to another institution (Shri Arvindo Institute of Applied Scientific Research Trust), where it had held that: (i) the trust was not approved under section 35(1)(ii) for the relevant years; (ii) CBDT communications showed that certificates were forged and donations were bogus; and (iii) even bona fide claims cannot be allowed if ineligible in law. Interpretation and reasoning 2.9 The Tribunal noted parity of facts between the present case and the earlier cases: donation made to an institution whose approval stood withdrawn for the relevant period and which was found to have misused section 35(1)(ii) for bogus deductions. 2.10 Following the reasoning of the coordinate bench in the earlier decision, the Tribunal emphasized that what is material is legal eligibility of the donee under section 35(1)(ii) during the relevant year, not the assessee's or Assessing Officer's bona fide belief or the fact that payment was made through banking channels and receipts/certificates were produced. 2.11 As the CBDT notification clearly withdrew approval with effect from a date prior to the donation and recorded substantive misuse, the institution was not a validly approved entity under section 35(1)(ii) at the time of donation; consequently, the assessee's claim of weighted deduction was legally ineligible. Conclusion 2.12 The donation made to the said institution, whose approval under section 35(1)(ii) stood withdrawn with effect from 01.04.2011, does not qualify for deduction under section 35(1)(ii); the disallowance of Rs. 52,50,000 is upheld and the appeal is dismissed in toto.