PARAG VINODCHANDRA SHAH HUF,AHMEDABAD vs. ITO WARD-3(3)(2), AHMEDABAD, AHMEDABAD

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ITA 801/AHD/2026Status: DisposedITAT Ahmedabad28 October 2026AY 2013-146 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of the weighted deduction of Rs. 17,50,000/- claimed by the assessee under Section 35(1)(ii) of the Act is not sustainable in law and is hereby deleted. The Tribunal noted that it is an admitted position that at the time the donation was made by the assessee, Bioved Research Society held a valid approval under Section 35(1)(ii) of the Act, and the cancellation/withdrawal of approval occurred subsequently. The Tribunal respectfully followed the judgment of the Hon'ble Gujarat High Court in PCIT v. M/s Thakkar Govindbhai Ganpatlal HUF, which affirmed the deletion of an identical disallowance where the certificate enabling donation was cancelled long after the date of donation. The Tribunal also referred to coordinate bench decisions in Rashmiben Sharadbhai Patel v. DCIT and Inspiron Engineering Pvt. Ltd. v. DCIT, which held that subsequent withdrawal of approval does not lead to disallowance if the donation was made to an organization with a valid approval at that time. The revenue failed to provide any material to distinguish these precedents. Accordingly, all grounds raised by the assessee were allowed.

What were the facts?

The assessee, Parag Vinodchandra Shah HUF, filed its return for Assessment Year 2013-2014. Subsequently, the Assessing Officer (AO) initiated reassessment proceedings under Section 147, having received information that the approval granted to Bioved Research Society, Allahabad, under Section 35(1)(ii) of the Income Tax Act, 1961, was withdrawn. The assessee had claimed a weighted deduction of Rs. 17,50,000/- for payments made to Bioved Research. The AO disallowed this deduction, and the National Faceless Appeal Centre (NFAC), Delhi (CIT(A)), upheld the disallowance. The assessee appealed to the Income Tax Appellate Tribunal (ITAT). The dispute centers on the admissibility of the deduction claimed for the Assessment Year 2013-2014.

What were the issues?

1. Whether the disallowance of the claim of deduction under Section 35(1)(ii) of Rs. 17,50,000/- in respect of Bioved Research Society is illegal, unlawful, and against the principles of natural justice, considering the order passed by the CIT(A) for AY 2013-14. 2. Whether the CIT(A) erred in passing a non-speaking or unreasoned order, failing to consider the assessee's explanation and evidence, thereby violating principles of natural justice and confirming the disallowance. 3. Whether the CIT(A) erred by upholding the disallowance without providing the copy of relied-upon material and an opportunity for cross-examination, constituting a gross violation of natural justice. Assessee's Contentions: The assessee argued that at the time of donation, Bioved Research Society held a valid approval under Section 35(1)(ii). The subsequent withdrawal of approval does not disentitle the assessee to the deduction, citing the Explanation to Section 35(1)(ii). Reliance was placed on the Gujarat High Court's decision in PCIT v. M/s Thakkar Govindbhai Ganpatlal HUF and ITAT Ahmedabad Bench decisions in Rashmiben Sharadbhai Patel v. DCIT and Inspiron Engineering Pvt. Ltd. v. DCIT. Revenue's Contentions: The revenue relied on the orders of the AO and CIT(A), stating that the CBDT revoked Bioved Research's approval due to its involvement in accommodation entries. The revenue contended that the assessee failed to prove the genuineness of the transaction.

Which sections of the Income-tax Act were involved?

Section 35(1)(ii),Section 147,Section 148,Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC” BENCH, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL "SMC” BENCH, AHMEDABAD SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER AND SHRI R. GOVINDARAJAN, ACCOUNTANT MEMBER ITA No.801/AHD/2026 (Assessment Year: 2013-2014) Parag Vinodchandra Shah HUF 304,Snehshrushti Apartments, Sambhav Press Road, Bodakdev, Ahmedabad-380015, Gujarat [PAN:AALHP2978M] …………. Appellant Vs Income Tax Office Ward-3(3)(2), Ahmedabad Nr. Sachin Tower, Vejalpur Ahmedabad-380051, Gujarat …………. Respondent Appearance For the Appellant/Assessee : Shri S N Divetia, & Shri Samir Vora, A.R. For the Respondent/Department : Smt. AnanyaKulshresth, Sr.DR Date Conclusion of hearing : 19.08.2026 Pronouncement of order : 28.10.2026

O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present appeal has been preferred by the Assessee against the Order, dated 28/01/2026, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 08/09/2021, passed under Section 147 of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2013-2014.

2.

The Assessee has raised following grounds of appeal: 1.1 The order passed by U/s.250 passed on 28.01.2026 for A.Y. 2013-14 by NFAC.CIT(A), Delhi [for short CIT(A)”] upholding the disallowance of claim of deduction u/s 35(1)(ii) of Rs. 17,50,000/-, is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld. CIT(A) has erred in law OR on facts in passing a non- speaking OR reasoned order as well as without considering the explanation and evidences produced by the appellant and thereby confirming the impugned disallowance. Thus, the impugned order of CIT(A) has been passed grossly against the principles of natural justice. 1.3 The ld.CIT(A) has grievously erred in law and OR on facts in upholding the impugned disallowance without furnishing the copy of material relied upon as well as without providing opportunity to cros examine the concerned parties so that there was gross violation of principles of natural justice and disallowance was liable to be deleted. 2.1 The ld. CIT(A) has grievously erred in law and OR on facts in upholding the disallowance of the claim of deduction u/s 35(1)(ii) of Rs. 17,50,000/- in respect of Bioved Research Society, Allahabad. 2.2 That in the facts and circumstances of the ld. CIT(A), ought not to have upheld the disallowance of claim of deduction u/s 35(1)(ii) of Rs. 17,50,000/- in respect of Bioved Research Society, Allahabad, 3.1 The observations made and conclusion reached by both the lower authorities in respect of the impugned disallowance of claim u/s 35(1)(ii) is denied in so far as the same are against the appellant. 3. The relevant facts in brief are that the Assessee is a Hindu Undivided Family. For the Assessment Year 2013-1014, the Assessee filed return of income on 19/07/2013 declaring total income of INR.18,32,047/- which was processed under Section 143(1) of the Act. Subsequently, information was received by the Assessing Officer to the effect that the approval granted to M/s Bioved Research Society, Allahabad [for short ‘Bioved Research’] under Section 35(1)(ii) of the Act in the case of was withdrawn vide Notification No.3/2019. The Assessing Officer noted that the Assessee had claimed weighted deduction under Section 35(1)(ii) of the Act amounting to INR.17,50,000/- in respect of payments made to Bioved Research. The Assessing Officer was of the view that the deduction claimed by the Assessee was inadmissible. Therefore, the Assessing Officer issued a notice under Section 148 of the Act on 20/03/2020 for reopening the assessment. Since the Assessee failed to furnish a reply to the notice issued during the reassessment proceedings, the Assessing Officer completed the assessment under Section 147 of the Act vide Assessment Order, dated 08/09/2021, disallowing the weighted deduction of INR.17,50,000/- claimed under Section 35(1)(ii) of the Act.

4.

Being aggrieved, the Assessee preferred an appeal before the Learned CIT(A)/NFAC. Before the Learned CIT(A), the Assessee submitted that the claim was supported by documentary evidence, including a copy of the donation receipt, bank statement, registration certificate, and approval order. It was further submitted that the approval was withdrawn by the CBDT on 25/01/2019, whereas the donation was made much prior to the withdrawal, and therefore, under the Explanation to Section 35(1)(ii) of the Act, the disallowance was unjustified. However, the Learned CIT(A) upheld the disallowance vide impugned Order, dated 28/01/2026.

5.

Being aggrieved by the order passed by the Learned CIT(A), the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in paragraph 2 above.

6.

Grounds Nos. 1.1 to 3.1 raised by the Assessee are directed against the disallowance of weighted deduction of INR.17,50,000/- claimed under Section 35(1)(ii) of the Act in respect of donation made to Bioved Research. We have heard both the sides on the aforesaid grounds and have perused the material available on record.

7.

The Learned Authorised Representative for the Assessee reiterated the submission made before the authorities below and vehemently contended that at the relevant point in time when the donation was made, Bioved Research was duly approved by the prescribed authority (CBDT) under Section 35(1)(ii) of the Act. It was submitted that the subsequent withdrawal or cancellation of approval cannot disentitle the Assessee from claiming deduction under Section 35(1)(ii) of the Act. In support, the Assessee placed reliance upon the following decisions:

(a) Judgment of the Hon’ble Gujarat High Court in PCIT v. M/s Thakkar Govindbhai Ganpatlal HUF (Tax Appeal No. 881 of 2019, dated 20/01/2020).

(b) Decision of the Ahmedabad Bench of the Tribunal in the cae of Rashmiben Sharadbhai Patel v. DCIT (ITA No. 266/AHD/2021 for AY 2014-15, order dated 16/10/2023) and in the case of Inspiron Engineering Pvt. Ltd. v. DCIT (ITA No. 968/Ahd/2018).

8.

Per contra, the Learned Departmental Representative relied upon the orders of the Assessing Officer and the Learned CIT(A), contending that the CBDT had revoked the approval of Bioved Research due to its involvement in accommodation entries, and therefore, the disallowance was correctly confirmed by the lower authorities. It was submitted that the Assessee had failed to prove that the transaction between the Assessee and Bioved Research was a genuine transaction.

9.

We have given thoughtful consideration to the rival submissions. It is admitted position that at the time when the donation was made by the Assessee, Bioved Research Society held a valid approval under Section 35(1)(ii) of the Act. The cancellation/withdrawal of approval occurred subsequently.

10.

During the course of hearing the Learned Authorised Representative for the Assessee had placed on record the judgment of the Hon’ble Gujarat High Court in the case of The Principal Commissioner of Income Tax-3 v. M/s Thakkar Govindbhai Ganpatlal HUF (R/Tax Appeal No. 881 of 2019, dated 20/01/2020), wherein the Hon’ble High Court dismissed the Revenue's appeal and affirmed the deletion of an identical disallowance made under Section 35(1)(ii) of the Act, observing that the certificate enabling donation was cancelled long after the date of donation by the Assessee.

11.

We find that an identical issue involving identical facts and circumstances came up for consideration before the Coordinate Bench of this Tribunal in the case of Rashmiben Sharadbhai Patel v. DCIT (ITA No. 266/AHD/2021, AY: 2014-2015, order dated 16/10/2023) and Inspiron Engineering Pvt. Ltd. v. DCIT (ITA No. 968/Ahd/2018), wherein the Tribunal held that where a donation is given to an organization holding valid approval under Section 35(1)(ii) of the Act at the time of making such donation, the subsequent withdrawal of registration/approval would not lead to disallowance of deduction claimed by the Assessee under Section 35(1)(ii) of the Act.

12.

The Revenue has failed to bring on record any material to distinguish the above judgment of the Hon’ble Gujarat High Court and the decisions of the Coordinate Benches of the Tribunal, either on facts or in law. Therefore, respectfully following the same, we hold that the disallowance of weighted deduction of INR.17,50,000/- claimed by the Assessee under Section 35(1)(ii) of the Act is not sustainable in law and is hereby deleted.

13.

Accordingly, in terms of above, Grounds Nos. 1.1 to 3.1 raised by the Assessee are allowed.

14.

In result, present appeal preferred by the Assessee is allowed.

Order pronounced on 28.10.2026

Sd/- Sd/- (R. Govindarajan) (Rahul Chaudhary) Accountant Member Judicial Member

िदनांकDated :28.10.2026 अहमदाबाद Ahmedabad; True Copy HC.PS

Digitally signed by JEETENDRA JEETENDR DEVENDRABHAI UPADHYAY आदेशक��ितिलिपअ�ेिषत/Copy of the Order forwarded to : DN: c=IN, o=PERSONAL, title=6087, A 2.5.4.20=7e5568a89b633f174b2 1. 8a80f5e63c638da40b7313fb47e अपीलाथ�/ The Appellant DEVENDRA baefda841cf59d1703, 2. ��यथ�/ The Respondent. postalCode=380059, st=Gujarat, serialNumber=816dc56e896211 3. संबंिधतआयकरआयु�/ Concerned CIT BHAI a1a21ccc4abc94ddc94458f4a1b 4. 37be8e1854e9399295106d4, आयकरआयु�(अपील) / The CIT(A) cn=JEETENDRA DEVENDRABHAI 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, UPADHYAY UPADHYAY Date: 2026.10.30 16:12:26 6. गाड�फाईल /Guard file. +05'30' आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad

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