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Facts
The assessee claimed a deduction of ₹26,25,000/- u/s 35(1)(ii) for a ₹15 lakh donation to the School of Genetics and Population Health, Kolkata. The assessment was reopened after the CBDT declared the institution bogus, and the AO disallowed the deduction, completing the assessment ex-parte as the assessee allegedly failed to respond to notices. The CIT(A) upheld this disallowance.
Held
The Tribunal observed that the assessee's claim of receiving notices after the assessment order was not properly considered by the CIT(A), and the Department provided no concrete evidence that the donation was bogus. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for fresh adjudication, ensuring the assessee a fair opportunity to present its case.
Key Issues
Whether the disallowance of deduction u/s 35(1)(ii) for a donation to a scientific research organization, declared bogus by CBDT, was justified, and whether the ex-parte assessment was procedurally valid given the assessee's claim of delayed notice receipt.
Sections Cited
143(3), 148, 35(1)(ii), 35, 147, 142(1), 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE “B” BENCH : PUNE
Before: SHRI RAMA KANTA PANDA, VICE- & Ms. ASTHA CHANDRA
I.T.A.No. 1071/PUN/2025 (Assessment Year 2013-2014) Simran Motors Pvt. Ltd., DCIT, Panvel Circle, Plot No. 2-8, Sector-15, Panvel Opp. Garden Hotel, Panvel, vs. Raigarh-410206 PAN : AALCS 0022 N (Appellant) (Respondent) For Assessee : Shri Bhadresh Doshi (virtual) For Revenue : Shri S. Sadananda Singh, JCIT Date of Hearing : 12.11.2025 Date of Pronouncement : 01.01.2026 ORDER PER : ASTHA CHANDRA, JM
This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), Delhi [“CIT(A)/NFAC”] dated 17/02/2025 pertaining to the Assessment Year (“AY”) 2013-14.
Briefly stated, the facts are that assessee is an automobile authorized dealer of Maruti Udhyog Ltd. (MUL) as well as authorized service centre of MUL. It has filed its return of income for A.Y. 2013-14 on 10/09/2013 declaring total income at ₹3,27,38,540/-. The case of the assessee was selected for scrutiny
2 ITA.No.1071/PUN/2025 (Simran Motors Pvt. Ltd.) under CASS and an order u/s. 143(3) of the Income Tax Act, 1961 (“Act”) was passed on 10/03/2016 assessing total income at ₹3,32,38,540/- by making ad-hoc addition of ₹ 5,00,000/- on account of unverifiable expenses. Subsequently, case of the assessee was reopened by issuance of notice u/s. 148 of the Act on 15/12/2016 for the reason that as per office memorandum issued by CBDT Board vide F.No. 203/09/2015/ITA.II, dated 21/09/2016, the name of the assessee was included in the list of bogus donations made to M/s. School of Genetics and Population Health, Kolkata. It was found that assessee had contributed ₹15,00,00/- to the said research organization/institution and claimed deduction of ₹26,25,000/- (175% of the said contribution) u/s. 35(1)(ii) of the Act. In response to the notice issued u/s. 148, assessee filed his return of income claiming deduction of ₹26,25,000/- u/s. 35 of the Act. A show-cause notice was issued by the Ld. Assessing Officer (“AO”) requesting the assessee to show-cause as to why the deduction u/s. 35(1)(ii) of the Act should not be disallowed and added back to the total income. The assessee failed to respond to the said show-cause notice. As no explanation was offered by the assessee, Ld.AO proceeded to complete the assessment at assessed income at ₹ 3,58,63,540/- by making addition of ₹ 26,25,000/- on account of bogus donations to the income of ₹ 3,32,38,540/- returned by the assessee vide order dated 31/10/2017 passed u/s. 143(3) r.w.s. 147 of the Act.
On appeal, Ld.CIT(A)/NFAC dismissed the appeal of the assessee by observing as under:-
3 ITA.No.1071/PUN/2025 (Simran Motors Pvt. Ltd.) “All the three grounds are directed against the disallowance of Rs 26,25,000/-claimed as deduction u/s 35(1)(ii) for a donation made to a Society called School of Human Genetics and Population health, Kolkata. The assessee donated Rs 15 Lakhs and claimed deduction u/s 35 (1)(ii) an amount equivalent to 175% of it, as is the Law. The AO disallowed it in view of CBDT Order F No 203/09/2015/ITA.II dtd 21-09-16. The Board had declared the entity as bogus. The assessee has argued that the said entity had all the papers and documents etc in order, like PAN, ITR, bank statement, registration deed, Sec 12 AA certificate etc, etc and so on & so forth. So, there is no question of the donation being bogus. Above all, the assessee has argued that the donation was given on 31-3-13, whereas the Board's order is dtd 21-9-16. So, how come, it can be denied the allowance! I have considered the entire matter carefully. Hon'ble CBDT is the highest body in the IT Department in our country which actually governs the department. In fact, the Board is just next to the Government itself. If it has found the Society to be bogus, can any one find fault with it ! As for the paper-documentation of the Society, it seems to have been done on the same pattern as in case of unexplained Cash Credits, Bogus Share premium, Penny Stock, etc etc. Not much credence can be given to the paper documentation, in view of Board's order. As for the donation having been made earlier than the Board's order, it seems that the assessee is hit collaterally, even if it is assumed that it was not aware of the real doings of the Society. It might have been taken for a ride. But, any allowance on this ground of the assumed innocence, would be justifying the wrong-doing of a bogus society. That is not possible to do. All one can say is that the assessee should have done its due diligence before making donation, considering the huge tax benefits involved. A donation-simplicitor was not required in this case, if at all. On the contrary, the assessee should have been cautious. Keeping in view the above, the plea of the assessee is considered to be without merits. Grounds are dismissed.
Dissatisfied, assessee is in appeal before this Tribunal raising the following grounds of appeal:- “On the facts and circumstances of the case and in law the CIT(A) has erred in confirming the disallowance of deduction of ₹ 26,25,000/- claimed by the appellant u/s. 35(1)(ii) in respect of the contribution paid to School of Genetics and Population Health towards its scientific research activities”
5. Ld. AR submitted that no evidence has been brought on record by the Ld.AO to establish that the contribution made by the assessee to M/s. School of Genetics and Population Health, Kolkata is bogus donation. He contended that during the assessment 4 ITA.No.1071/PUN/2025 (Simran Motors Pvt. Ltd.) proceedings, notice u/s. 142(1) of the Act was issued on 10/10/2017. Show-cause notice, providing the reasons for reopening and asking the assessee to show-cause as to why the deduction claimed u/s. 35(1)(ii) should not be disallowed, was issued by the Ld.AO on 13/10/2017. The said notice was received by the assessee only on 02/11/2017. The assessment order has been passed by the Ld.AO on 31/10/2017. It is, thus, evident that assessee received notices after passing of the assessment order by the Ld.AO. Learned counsel for the assessee placed on record an affidavit of the Director of the assessee in support of its above claim. He further submitted that assessee had brought this fact to the notice of the Ld. CIT(A)/NFAC, but he failed to consider the same and dismissed the appeal of the assessee. He submitted that matter may be set aside to the file of Ld.AO to verify the claim of the assessee regarding receipt of notice u/s. 142(1) as well as show- cause letter, subsequent to the passing of assessment order by the Ld.AO.
The Ld. DR, on the other hand, supported the orders of Ld.AO as well as Ld.CIT(A)/NFAC.
We have heard Ld. Representatives of both the parties and perused the material available on record. We find that Ld.AO has completed the assessment ex-parte qua the assessee as the assessee failed to offer any explanation in respect of alleged bogus donations made to M/s. School of Genetics and Population Health, Kolkata. Before the Ld. CIT(A)/NFAC, assessee made elaborate submissions in respect of its claim of deduction u/s. 35(1)(ii) of the Act of ₹ 26,25,000/- being 175% of ₹ 15,00,000/- donation given by 5 ITA.No.1071/PUN/2025 (Simran Motors Pvt. Ltd.) the assessee to M/s. School of Genetics and Population Health, Kolkata including the receipt of notice/show-cause notice post the date of assessment order. We, however, observe that Ld.CIT(A)/ NFAC failed to consider the submissions of the assessee and dismissed the appeal of the assessee for the reasons already reproduced in preceding paragraph. Before us, the Ld.AR contended that notice u/s. 142(1) dated 10/10/2017 and show- cause letter dated 13/10/2017 were served on the assessee only on 02/11/2017, by the time, assessment order dated 31/10/2017 has already been passed, which has been supported by notarized affidavit of the Director of the assessee-company. Also Department has not brought any cogent material/documentary evidence to establish that the contribution made by the assessee to M/s. School of Genetics and Population Health, Kolkata is in the nature of bogus donation. Thus, in our view, the aforesaid claim of the assessee needs verification.
Considering the totality of the facts and in the circumstances of the case, we deem it fit to set aside the order of the Ld.CIT(A)/NFAC and restore the matter back to the file of Ld.AO for adjudication afresh on merits after due verification of the assessee’s claim as per fact and law. Needless to say, the assessee shall be provided with a reasonable opportunity by the Ld.AO to represent its case before him. The assessee is also hereby directed to provide requisite support in terms of submitting the details/documents as may be required on the appointed date without seeking any adjournment under any pretext, failing which Ld.AO shall be at liberty to pass appropriate order as per law. We hold and direct
6 ITA.No.1071/PUN/2025 (Simran Motors Pvt. Ltd.) accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
9. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in open Court on 01st January, 2026 Sd/- Sd/- [R.K. PANDA] [ASTHA CHANDRA] VICE-PRESIDENT JUDICIAL MEMBER Pune, Dated 01/01/2026 vr/- Copy to