Deduction for approved donation survives later withdrawal of approval; unsupported bogus donation and commission addition fails.

Deduction under section 35(1)(ii) is not defeated merely because the donee institution's approval is withdrawn later, where the donation was made through banking channels while approval was in force and no specific adverse material links the assessee to any bogus arrangement. The statutory explanation protects a claim already made on a validly approved donation, so a general investigation report alone is insufficient to deny the deduction. An addition under section 69C based on alleged bogus donation and supposed commission payment also fails where it rests only on the same unproved assumption and there is no cogent evidence of actual commission payment.

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Issues: (i) whether deduction claimed under section 35(1)(ii) could be denied on the basis of a general investigation report and subsequent withdrawal of approval granted to the donee institution; (ii) whether the addition made under section 69C on the premise of a bogus donation and alleged commission payment could be sustained.

Issue (i): whether deduction claimed under section 35(1)(ii) could be denied on the basis of a general investigation report and subsequent withdrawal of approval granted to the donee institution.

Analysis: The donation was made through banking channels to an institution that held approval under section 35(1)(ii) at the time of payment, and the claim had been accepted in the original assessment. The reassessment was founded on a later investigation report, but no specific adverse material connecting the assessee's transaction to any bogus arrangement was brought on record. The statutory explanation to section 35(1) protects the deduction where approval is withdrawn after the payment has already been made, and the subsequent cancellation of approval cannot by itself defeat an otherwise allowable claim.

Conclusion: The denial of deduction under section 35(1)(ii) was unjustified and the assessee was entitled to the allowance.

Issue (ii): whether the addition made under section 69C on the premise of a bogus donation and alleged commission payment could be sustained.

Analysis: The addition rested on the same assumption that the donation was non-genuine. Once the disallowance of the deduction failed, the inference of unexplained commission also lost its basis. Independently, no cogent evidence was brought on record to establish actual commission payment by the assessee, and the addition was founded only on suspicion and adverse inference.

Conclusion: The addition under section 69C was not sustainable and was deleted.

Final Conclusion: The assessee succeeded on the substantive tax issues, resulting in deletion of the disallowance and the related addition, while the challenge to the reopening notice did not require adjudication.

Ratio Decidendi: A deduction under section 35(1)(ii) cannot be denied merely because the approval of the donee institution is withdrawn later, and a tax addition based only on a general investigation report without specific incriminating material linking the assessee to the alleged bogus transaction is unsustainable.

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