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Facts
The assessee claimed deduction under Section 80G for donations made to M/s. Aadhar Foundation for Assessment Years 2020-21 and 2021-22. A search and seizure action on Aadhar Foundation revealed its involvement in providing bogus donations. Consequently, the PCIT initiated proceedings under Section 263, holding that the assessment orders were erroneous and prejudicial to the revenue because the AO allowed the Section 80G deduction without proper inquiry, despite information available about the donee entity's activities.
Held
The Income Tax Appellate Tribunal upheld the PCIT's order under Section 263. It was found that the Assessing Officer failed to apply his mind and conduct necessary inquiries regarding the Section 80G deduction, even though information indicating bogus donations by the donee entity was available. This non-application of mind rendered the assessment orders erroneous and prejudicial to the interest of the revenue.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise assessment orders where the AO allowed Section 80G deduction without proper inquiry, despite information available about the donee entity's involvement in bogus donations, thus rendering the orders erroneous and prejudicial to the revenue.
Sections Cited
263, 80G, 143(3), 132, 194J, 40(a)(ia), 80GGB, 80GGC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
ORDER PER ANNAPURNA GUPTA, AM: Both appeals related to the same assessee and are against separate orders passed by the Ld. Principal Commissioner of Income Tax, PCIT, Ahmedabad-3 (in short “PCIT”), dated 27.03.2025 & 25.03.2025; respectively passed under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relate to Assessment Years (A.Ys.) 2020-21 & 2021-22.
At the outset itself, it was stated that the reason for exercising revisionary jurisdiction by the Ld. PCIT in both the & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 2 – appeals of the assessee was identical, relating to the claim of deduction on account of donation made to a charitable entity in terms of Section 80G of the Act, which entity, as per the Ld. PCIT, was involved in providing bogus donations and, therefore, according to the Ld. PCIT, assessment orders for both the years was erroneous for having allowed the assessee’s claim of deduction u/s.80G of the Act to such bogus donations made. Since, the issue involved in both the appeals is identical, therefore, both the appeals were taken up together for hearing and are being disposed of by this common and consolidated order.
Identical ground challenging the order passed u/s.263 of the Act have been raised before us in both the appeals and for the sake of convenience we are reproducing grounds raised in A.Y. 2020-21:
“1. The Learned Pr. Commissioner of Income Tax, Ahmedabad -3 has erred in passing an order w/s.263 of the IT. Act, 1961 setting aside the Assessment Order passed u/s 143(3) r.ws.1448 of the LT. Act, 1961 did.22.09.2022 which is neither erroneous nor prejudicial to the interest of the Revenue 2. The Learned Pr. Commissioner of Income Tax, Ahmedabad-3 has erred in passing an order us. 263 of the LT. Act, 1961 since the issues sought to be revised have been examined in the assessment proceedings hence the same being illegal and bad in law requires to be quashed.
3. The Learned Pr. Commissioner of Income-Tax, Ahmedabad -3 has erred in not appreciating the fact that all information and related material and evidences had been furnished at the assessment stage relating to the issues raised in the revision proceedings. The A.O. after examining the evidences and other material considering the same after due application of mind has passed the assessment order.
The Learned Pr. Commissioner of Income Tax, Ahmedabad -3 has erred in invoking revisionary powers ux.263 of the Act holding that the assessing officer has not applied his mind regarding not disallowing bogus deduction claimed u/s.80G of the Act to Aadhar Foundation and not verifying the deduction of & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 3 – professional fees expenses as per provisions of Section 194Jr.w.s.40(a)(ia) of the Act.
5. The appellant craves leave to add, alter, amend or modify any of the grounds of appeal
on or before the date of hearing of appeal.”
4. The facts relating to the issue are that the Ld.PCIT noted the AO had erroneously allowed the assessee’s claim of deduction u/s.80G of the Act on account of donation made to a charitable entity M/s. Aadhar Foundation when there was an information available with the Department that this entity was involved in providing bogus donation. In A.Y. 2020-21, the assessee had made a payment of Rs.14 Lakhs to M/s. Aadhar Foundation and in A.Y. 2021-22, the assessee had made a donation of Rs.28,50,000/- to this entity and claimed deduction u/s.80G of the Act in both the years. With respect to these donations, which was allowed in the assessment framed u/s.143(3) of the Act, the PCIT’s order reveals that the information in possession of the Department of M/s. Aadhar Foundation being involved in providing bogus donation, emanated from the search and seizure action u/s.132 of the Act being conducted on 02.02.2021 in the case of Political Parties and Charitable Organizations group, covering mainly three registered unrecognized political parties alongwith two charitable organizations, which included M/s. Aadhar Foundation to which the assessee had given donation. The Ld. PCIT has noted that large number of incriminating material and evidences were found revealing that the parties’ bank accounts were used solely for the purpose of receiving funds in the form of donations and re-routing the same through various layers of dummy concerns to the original & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 4 – owners either in cash or through banking channel. The purported donors, in turn, claimed bogus deduction u/s.80G of the Act. These facts are noted at para 4 and 4.1 of his order for A.Y. 2020- 21 as under:
“4 The assessee had donated Rs 14,00,000/- to M/s Aadhar Foundation (PAN: AADTA6700A) and deduction amounting to Rs.7,00,000/- has been claimed u/s 80G of the Act. 4.1 A search and seizure action u/s 132 of the I.T. Act, 1961 was conducted on 02.02.2021 in the case of "Political Parties and Charitable Organizations Group". The search operation covered mainly 3 registered unrecognized Political Parties namely Manvadhikar National Party (MNP), Kisan Adhikar Party (KAP) and Kisan Party of India (KPI) alongwith 2 charitable Organization namely All India Social Education Charitable Trust (AISEC) and Aadhar Foundation (AF) run by two group of individuals. One group comprises of Ram Bhawan Ojha and his brother Tribhawan Ramkalp Ojha, controlling two Political Parties namely Manvadhikar National Party and Kisan Adhikar Party along with one Charitable Organization called All India Social Education Charitable Trust. The second group is of Shri Saumil Kintbhai Bhadiadra who was looking after activities of one Political Party by the name Kisan Party of India and one Charitable Organization called Aadhar Foundation. During the course of search operation large number of incriminating material and evidences were found that the parties bank accounts were used solely for the purpose of receiving funds in form of donations and re-routing the same through various layers of dummy concerns to the original donors either in cash or through banking channels. Purported donors claimed bogus deduction u/s. 80GGB & 80GGC of the Act to evade tax. Thus it had been established that M/s Aadhar Foundation was engaged in bogus donation racket and the donations received by it were not genuine donations, but the donation amounts had been returned to the donor after charging small commission, enabling the assesses showing the donation to claim deduction wrongly under section 80G. As M/s Aadhar Foundation was engaged in providing such bogus donation receipts during the relevant period, the claim of deduction u/s 80G of the Act was required to be disallowed. In this regard, the assessee had submitted the copy of the receipt of donation given to M/s Aadhar Foundation, however seeing the Modus & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 5 – operandi as mentioned above, the assessee is not eligible for deduction claimed u/s 80G of the Act.”
The order of the Ld. PCIT further reveals that the only contention raised by the assessee before the Ld. PCIT was that the impugned donation given by the assessee to M/s. Aadhar Foundation was a genuine donation and the assessee had no knowledge of said entity being involved in giving any bogus donation. The assessee is noted to have filed all documents evidencing the fact of having given genuine donation to the said entity. The Ld. PCIT, after considering this contention of the assessee, held that the assessee’s main claim of being ignorant about the wrong doing of the trust did not help the case of the assessee since the information available on record revealed that M/s. Aadhar Foundation was involved in giving bogus donation and the assessee having given donation to such party and its case having been taken up for scrutiny on account of deduction under chapter VIA of the Act, the AO not having examined the assessee’s claim of deduction u/s.80G of the Act in the light of information available, the assessment order passed was erroneous causing prejudice to the Revenue. His findings in this regard are contained at para 4.4 of his order as under:
“4.4 The assessee may claim ignorance about wrong doing by the trust. However, it is clearly established in the search that cash was returned back to the donors after deduction of certain part as illegal commission / kickback to the office bearers. Thus, if not the assessee company, some of employees might have received back the amount in cash. In any case, as it was not a genuine donation, the same is not allowable. The Assessing Officer was required to disallow the amount, but he has not done so particularly when the finding of this search had been widely & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 6 – circulated within the Department and particularly when the reason for selection of the case under CASS was 'deduction under Chapter – VIA.”
At para 7 of his order, the Ld.PCIT has noted that it is apparent that in the present case the AO has not made any conscious attempt to examine the issue on the basis of material on record and, therefore, it tantamounts to mistake in not considering the relevant point. Having noted so the Ld. PCIT held the assessment order to be erroneous causing prejudice to the Revenue and restored the issue back to the AO for verification afresh.
Before us, the only contention of the Ld. Counsel for the assessee was that the assessment order in the present case was passed on 22.09.2022, and the information regarding M/s. Aadhar Foundation indulging in providing alleged bogus donation came to be available with the Department on account of search conducted on 02.02.2021. Therefore, during the pendency of assessment proceedings in the case of the assessee, the AO was in possession of this information and, it is to be presumed therefore that he had allowed assessee’s claim of deduction u/s.80G of the Act after considering and in the light of the information in his possession. Ld. Counsel for the assessee, however, admitted that no enquiry specifically was made by the AO on the claim of deduction u/s.80G of the Act in the light of information with the AO/Department about the said entity providing bogus donation.
In the light of the above, we do not find any merit in the argument of the Ld. Counsel for the assessee that there was no error in the assessment order in allowing assesses claim of & 1181/Ahd/2025 [Sakar Healthcare Ltd. vs. PCIT] A.Ys. 2020-21 & 2021-22 - 7 – deduction on account of donation made to M/s Aadhar Foundation, u/s 80G of the Act. The admitted fact being that there was information on record of M/s. Aadhar Foundation indulging in providing bogus donations and the AO admittedly having not examined the claim of deduction of the assessee u/s.80G of the Act, in the light and in the backdrop of this information, undoubtedly the assessment order passed in the present case was erroneous causing prejudice to the Revenue. We have no hesitation in upholding the order of the Ld. PCIT holding so.
In the light of the above, the order passed by the Ld. PCIT for both the years is upheld. Grounds raised by the assessee for both the years is dismissed.
In the result both the appeals of the assessee are dismissed.
This Order pronounced on 10/09/2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 10/09/2025 S. K. SINHA TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,