JAY VIJAYKUMAR SHAH,MUMBAI vs. DCIT, CIRCLE 42 (2) (1), , MUMBAI

Ground Nos. 1 and 2 raised by the assessee are interrelated and interconnected and relate to the order of the Ld. CIT(A) in upholding the action of the AO in disallowing the amount of Rs.1,00,000/- under Section 80GGC of the Act. Therefore, I have decided to adjudicate these grounds through the present consolidated order.

I have heard the counsel for both the parties, perused the material placed on record, the judgments cited before me, and also the orders passed by the Revenue Authorities. From the records, I noticed that the assessee had claimed a deduction of Rs.1,00,000/-, being 50% of the donation of Rs.2,00,000/-, under Section 80G of the Act. The AO, however, made the disallowance by invoking Section 80GGC, holding the donation to be non- genuine, whereas, in fact, no deduction was claimed by the assessee under Section 80GGC of the Income-tax Act. Rather, the deduction claimed by the assessee was under Section 80G of the Income-tax Act.

The assessee had made a donation of Rs.2,00,000/- vide Receipt No. 153 through the regular banking channel by account payee cheque to a registered charitable public trust, namely, All India Social Education Charitable Trust. The reason for making the disallowance by the AO was that he had received information that the said trust was not carrying out any genuine activities. Based on this information, the case of the assessee was reopened under Section 147 read with Section 144B of the Income-tax Act, and accordingly statutory notices were issued seeking a reply from the assessee. After considering the replies filed by the assessee, the AO assessed the total income by invoking the provisions of Section 80GGC of the Income-tax Act, holding that the donations made to All India Social Education Charitable Trust were bogus in nature.

On the contrary, in order to substantiate that the donation made by the assessee to All India Social Education Charitable Trust was genuine, it has been brought on record that the said charitable trust is a non-profit organization established in the year 2005 and registered with the Charity Commissioner, Gujarat State, vide Registration No. E-17166, Ahmedabad. The said charitable trust had also been granted registration by the Director of Income-tax (Exemption) vide Registration No. DIT(E)/AACTA1516D/208/209/80G(5)/1282 dated 20.08.2009, which was valid with effect from 01.04.2008 onwards under Section 80G of the Income-tax Act, 1961, and was thus eligible to receive public donations. It has also been brought on record that the said trust is registered on the Government website under the DARPAN Portal and is also listed on the website of the Income-tax Department as an exempt institution.

It is an admitted fact that the donation of Rs.2,00,000/- was made by the assessee through the proper banking channel. The All India Social Education Charitable Trust, Ahmedabad, is a Gujarat-based trust engaged in activities relating to providing social education to poor and uneducated persons and assisting people in fighting against crime and corruption. The main object of the said trust, as submitted by the Ld. AR, was to provide social education to poor and uneducated persons who were suffering from unjustified actions of society and other related issues.

After having gone through the entire facts of the present case, I notice that the sole basis for making the addition or disallowance by the AO was the information received from the DIT(Investigation), Ahmedabad, without making any independent inquiry into the facts of the present case. Even the notice issued under Section 148A of the Act was based upon the information received from the Investigation Wing alleging that the said charitable trust had admitted that it was providing accommodation entries in respect of donations. However, while issuing the notice under Section 148A, passing the order under Section 148A(d), and subsequently issuing notice under Section 148, the AO himself was not sure whether the alleged donation amount had been returned to the assessee in cash, through RTGS, or by way of a fixed deposit.

Apart from this, the Assessing Officer did not even verify, while issuing the notice under Section 148, whether the deduction claimed by the assessee was under Section 80G, 80GGC, or Section 80GGC(b) of the Act.

Since the said charitable trust had been granted recognition by the Ministry of Finance, the Ld. AR submitted that the assessee had made the donation relying upon such recognition. It was further submitted that the Ministry of Finance had undertaken the necessary due diligence before granting such registration, which, according to the assessee, continues to remain valid. Even during the course of hearing, the Ld. DR was not in a position to place any material on record to establish that the registration granted to the said charitable trust had been withdrawn or cancelled.

The AO has relied solely upon the statements recorded by the Investigation Wing in the case of All India Social Education Charitable Trust. However, such statements were never supplied to the assessee despite a specific request, nor was any opportunity of cross-examination afforded to the assessee in respect of the persons whose statements formed the basis of the addition.

It is also an undisputed fact that the registration granted to the said trust under Section 80G was valid during the year under consideration. As submitted by the assessee, inquiries were also made before the AO regarding the status of the registration of the trust, and even the AO was not certain regarding the present status of such registration. Nevertheless, the fact remains that the registration of the trust was valid and operative on the date on which the assessee made the donation.

In this regard, reliance has been placed upon the decisions of the Coordinate Benches of the ITAT, wherein, under similar facts and circumstances, identical disallowances made by the Department were deleted. The same are as follows:

Therefore, considering the totality of the facts and circumstances of the present case and respectfully following the decisions of the Coordinate Benches of the ITAT, I direct the AO to delete the disallowance made by invoking the provisions of Section 80GGC and to allow the deduction claimed by the assessee under Section 80G of the Act. Consequently, Ground Nos. 1 and 2 raised by the assessee stand allowed.

Since I have already allowed Ground Nos. 1 and 2, the remaining ground, being consequential in nature, does not require any separate adjudication in view of the findings recorded hereinabove. Accordingly, the same stands dismissed as infructuous.

In the result, appeal filed by the Assessee stands allowed.