IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH

MUMBAI
BEFORE SHRI. RAHUL CHAUDHARY, JUDICIAL MEMBER
AND
SMT. RENU JAUHRI, ACCOUNTANT MEMBER

ITA No. 6266/MUM/2024

(Assessment Year: 2012-13)
&
ITA No. 6265/MUM/2024
(Assessment Year: 2013-14)

Raman And Weil Private Dy. Commissioner of

Limited Income Tax, Circle 1(3)(1)
Vs.
Office No. 36/37, 3rd Floor, Mittal 460, M.K. Road, Aayakar
Chambers, Opp. Inox Theatre, Bhavan, Mumbai 400020
Nariman Point, Mumbai 400021.

थायीलेखासं ./जीआइआरसं ./PAN/GIR No: AAACR5065M
(Appellant) (Respondent)

िनधारतीकीओरसे/ Assessee by: Shri. Dharan Gandhi, Adv.

/Revenue by: Shri R. R. Makwana SR. DR

Date of Hearing 23.07.2025

Date of Pronouncement 17.10.2025

आदे श/O R D E R

PER RENU JAUHRI [A.M]:

This appeal is filed by the assessee against the order of the National

Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)"]

dated 08.10.2024& 25.10.2024 passed u/s. 250 of the Income-tax Act, 1961

[hereinafter referred to as "Act"] for Assessment Year [A.Y.] 2012-13& 2013-

14.

2. The assessee has raised the following grounds of appeal:

“ITA No. 6266/Mum/2024
1. In confirming the disallowance u/s 35AC of donation given of Rs. 25,00,000 to
Navjeevan Charitable Trust.
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2. In doing so basis statements made by some trustees of Navjeevan Charitable

without giving the appellant an opportunity to cross examine them and without
considering the evidence adduced by the appellant.

3. In not adjudicating on the issue of the assessment order being passed without any
date or DIN.

The appellant retains the right to add, alter or amend the grounds as may be
advised from time to time.

ITA No. 6265/Mum/2024

1. In confirming the disallowance u/s 35AC of donation given of Rs. 10,00,000 to
Navjeevan Charitable Trust.

2. In doing so basis statements made by some trustees of Navjeevan Charitable

Trust without giving the appellant an opportunity to cross examine them and
without considering the evidence adduced by the appellant.

3. In not adjudicating on the issue of the assessment order being passed without any
date or DIN.”

ITA No. 6266/MUM/2024

(Assessment Year: 2012-13)

As identical issues are involved in both the appeals, these are

being disposed off by a common order.

3. Brief facts of the case are that the assessee company filed its return for

A.Y. 2012-13 on 28.09.2012 declaring total income of Rs. 6,94,59,246/-.

The case was selected for scrutiny and assessment u/s. 143(3) was

completed at an income of Rs. 7,19,10,030/-. Subsequently the case was

reopened based on the information received from the Investigation wing

that the assessee had given donation of Rs. 25,00,000/- during the year

to M/s. Navjeevan Charitable Trust for the purpose of deduction u/s.

35AC of the Act which was not a genuine transaction.

3.2 Accordingly, notice u/s. 148 was issued in response to which the

assessee file return declaring same income as in the original return.

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During the reassessment proceedings, the assessee was questioned

about the impugned transaction and statement of Shri. Devdas

Prabhakaran Nair, Advisor of the assessee company was also

recorded u/s. 131 of the Acct. In his statement, he accepted that

donation had been given to Navjeevan Charitable Trust but claimed

that he was not awre about the bogus activities of the Trust. Ld. AO

noted that during search conducted on 27.10.2014 u/s. 132 of the Act

on Navjeevan Charitable Trust, it had been found that it was in

receipt of donation from various parties through banking channel

and the donation was returned back to the parties as payment of

expenses. The trustees of the Trust accepted that the donors gave

cheques to the trust so that they claim deduction u/s. 35AC and

received back the amount in cash. Further the recognition of the

Trust was withdrawn by the National Committee vide notification

dated 30/11/2016 and the registration u/s. 12AA (3) was also

cancelled vide order dated 20/12/2016 by the PCIT (Central)-I,

Mumbai.

3.3 In the background of these facts and circumstances ld. AO did not

find the submission of the assessee tenable and disallowed the

donation of Rs. 25,00,000/- claimed b y the assessee.

Aggrieved, the assessee preferred an appeal before ld. CIT(A).

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3.4 Ld. CIT(A) confirmed the order of the ld. AO after noting that the

facts of this case were distinguishable from those of the following

two decisions relied upon by the assessee:

i. Ravindra K. Reshamwala V DCIT in ITA No.

2648/Mum/2022.

ii. Mrunal H Shah Vs. ACIT in ITA No. 4878/Mum/2019.

Aggrieved, the assessee is now in appeal before the Tribunal.

4. Before us ld. AR has argued that the addition was made by the ld. AO on

the basis of statements made by trustees of Navjeevan Charitable Trust

without giving the assessee an opportunity to cross examine them.

It has been submitted that at the time of making the donation, the

trust had a valid approval u/s. 35AC which was subsequently withdrawn

on 30.11.2016. Ld. AR pointed out that the assessee could not be denied

the claim of deduction in view of specific provision in section 35AC,

whereas an explanation has been inserted by the Taxation Laws

(Amendment) Act, 2006 w.e.f 01.04.2006 relevant provisions are as

under:

“Section 35AC
Expenditure on eligible projects or schemes
35AC. (1) Where an assessee incurs any expenditure by way of payment of
any sum to a public sector company or a local authority or to an association
or institution approved by the National Committee for carrying out any
eligible project or scheme, the assessee shall, subject to the provisions of this
section, be allowed a deduction of the amount of such expenditure incurred
during the previous year :
Provided that a company may, for claiming the deduction under this sub-
section, incur expenditure either by way of payment of any sum as aforesaid
or directly on the eligible project or scheme.
(2) The deduction under sub-section (1) shall not be allowed unless the
assessee furnishes along with his return of income a certificate—
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(a) where the payment is to a public sector company or a local authority or

an association or institution referred to in sub-section (1), from such public
sector company or local authority or, as the case may be, association or
institution;
(b) in any other case, from an accountant, as defined in
the Explanation below sub-section (2) of section-288,
in such form, manner and containing such particulars (including particulars
relating to the progress in the work relating to the eligible project or scheme
during the previous year) as may be prescribed.
Explanation.—The deduction, to which the assessee is entitled in respect of
any sum paid to a public sector company or a local authority or to an
association or institution for carrying out the eligible project or scheme
referred to in this section applies, shall not be denied merely on the ground
that subsequent to the payment of such sum by the assessee,—
(a) the approval granted to such association or institution has been
withdrawn; or
(b) the notification notifying the eligible project or scheme carried out by the
public sector company or local authority or association or institution has
been withdrawn.
(3) Where a deduction under this section is claimed and allowed for any
assessment year in respect of any expenditure referred to in sub-section (1),
deduction shall not be allowed in respect of such expenditure under any
other provision of this Act for the same or any other assessment year.
(4) Where an association or institution is approved by the National
Committee under sub-section (1), and subsequently—
(i) that [the Principal Chief Commissioner of Income-tax (Exemption) or the
Chief Commissioner of Income-tax (Exemption)] is satisfied that the project
or the scheme is not being carried on in accordance with all or any of the
conditions subject to which approval was granted; or
(ii) such association or institution, to which approval has been granted, has
not furnished to the [Principal Chief Commissioner of Income-tax
(Exemption) or the Chief Commissioner of Income-tax (Exemption)], after
the end of each financial year, a report in such form and setting forth such
particulars and within such time as may be prescribed,
the [Principal Chief Commissioner of Income-tax (Exemption) or the Chief
Commissioner of Income-tax (Exemption)] may, at any time, after giving a
reasonable opportunity of showing cause against the proposed withdrawal
to the concerned association or institution, withdraw the approval:
Provided that a copy of the order withdrawing the approval shall be
forwarded by the [Principal Chief Commissioner of Income-tax (Exemption)
or the Chief Commissioner of Income-tax (Exemption)] to the Assessing
Officer having jurisdiction over the concerned association or institution.
(5) Where any project or scheme has been notified as an eligible project or
scheme under clause (b) of the Explanation, and subsequently—
(i) the [Principal Chief Commissioner of Income-tax (Exemption) or the
Chief Commissioner of Income-tax (Exemption)] is satisfied that the project
or the scheme is not being carried on in accordance with all or any of the
conditions subject to which such project or scheme was notified; or
(ii) a report in respect of such eligible project or scheme has not been
furnished after the end of each financial year, in such form and setting forth
such particulars and within such time as may be prescribed,
such notification may be withdrawn in the same manner in which it was
issued:
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Provided that a reasonable opportunity of showing cause against the

proposed withdrawal shall be given by the 30a[Principal Chief
Commissioner of Income-tax (Exemption) or the Chief Commissioner of
Income-tax (Exemption)] to the concerned association, institution, public
sector company or local authority, as the case may be:
Provided further that a copy of the notification by which the notification of
the eligible project or scheme is withdrawn shall be forwarded to the
Assessing Officer having jurisdiction over the concerned association,
institution, public sector company or local authority, as the case may be,
carrying on such eligible project or scheme.
(6) Notwithstanding anything contained in any other provision of this Act,
where—
(i) the approval of the National Committee, granted to an association or
institution, is withdrawn under sub-section (4) or the notification in respect
of eligible project or scheme is withdrawn in the case of a public sector
company or local authority or an association or institution under sub-
section (5); or
(ii) a company has claimed deduction under the proviso to sub-section (1) in
respect of any expenditure incurred directly on the eligible project or scheme
and the approval for such project or scheme is withdrawn by the National
Committee 31[or the Principal Chief Commissioner of Income-tax
(Exemption) or the Chief Commissioner of Income-tax (Exemption), as the
case may be,] under sub-section (5),
the total amount of the payment received by the public sector company or
the local authority or the association or the institution, as the case may be, in
respect of which such company or authority or association or institution has
furnished a certificate referred to in clause (a) of sub-section (2) or the
deduction claimed by a company under the proviso to sub-section (1) shall be
deemed to be the income of such company or authority or association or
institution, as the case may be, for the previous year in which such approval
or notification is withdrawn and tax shall be charged on such income at the
maximum marginal rate in force for that year.
(7) No deduction under this section shall be allowed in respect of any
assessment year commencing on or after the 1st day of April, 2018.
Explanation.—For the purposes of this section,—
(a) "National Committee" means the Committee constituted by the Central
Government, from amongst persons of eminence in public life, in accordance
with the rules made under this Act;
(b) "eligible project or scheme" means such project or scheme for promoting
the social and economic welfare of, or the uplift of, the public as the Central
Government may, by notification in the Official Gazette, specify in this
behalf on the recommendations of the National Committee.”

Ld. AR has further placed reliance on the explanatory

memorandum to the Finance Act 2003 which explains as under:

“Amounts/donations received to be taxed as income in cases of

withdrawal of approval to associations/institutions or withdrawal of
notification in respect of eligible projects or schemes

Under the existing provisions of section 35AC a deduction of the

amount of expenditure incurred during the previous year by way of
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payment of any sum to a public sector company or a local authority or to an

association or institution approved by the National Committee for carrying
out any eligible project or scheme is allowed. Eligible project or scheme
means a project or a scheme for promoting the social and economic welfare
of, or upliftment of, the public as the Central Government may, by
notification in the Official Gazette, specify in this behalf on the
recommendations of the National Committee. Correspondingly, section
80GGA provides for a deduction in the case of assessees not carrying on any
business or profession. Sub-section (4) of the said section provides that
where National Committee is satisfied that the project or scheme is not being
carried on in accordance with all or any of the conditions, it may withdraw
the approval earlier granted to the association or institution. Sub-section (5)
also provides for withdrawal of the notification where the project or scheme
is not being carried out in accordance with all or any of the conditions on the
basis of which such project or scheme was notified.

It is proposed to amend section 35AC to provide that in cases where

the National Committee withdraws the approval granted by it to an
association or institution on the ground that the project or scheme is not
being carried out in accordance with all or any of the conditions subject to
which the approval was granted or the notification through which a project
or scheme was notified is withdrawn, the entire amount of contribution or
donation received by the company or authority or association or institution,
as the case may be, or the deduction claimed by a company in respect of any
expenditure incurred directly on the eligible project or scheme, the approval
for which is withdrawn by the National Committee, shall be deemed to be the
income of the company or authority or association or institution, as the case
may be, of the year in which such approval or notification is withdrawn.
Such income will be taxed at the maximum marginal rate as if such income
was not exempt under any provision of the Income-tax Act. This will be
notwithstanding to the exemption otherwise available to such company or
authority or association or institution under any provision of this Act

The proposed amendment will take effect from 1st April, 2003 and
will, accordingly, apply in relation to the assessment year 2003-2004 and
subsequent years.”

In view of above legal provisions and the decisions of the

co-ordinate benches in the case of Ravindra K. Reshamvala

(supra) & other cases, it was argued that the assessee could not be

deemed the deduction claimed u/s. 35AC of the Act.

5. On the other hand, ld. DR argued that the Trust was only providing

accommodation entries by taking bogus donations in cheque which were

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returned in cash on commission basis. The trust had accordingly been

assessed on the commission income.

Ld. DR further placed reliance on the decision of the co-ordinate

bench in the case of M/s. Govindram & Co. V ACIT in ITA No. 1474 &

1475/Mum/2019 wherein it has been held as under:

“The facts remain uncontroverted are

i. M/s. Navjeevan Charitable Trust is a bogus trust only run for the
purpose of accommodation entry for interested parties who want to
obtain the certificate for non-genuine donation for claiming
deduction u/s.35AC of the Act.

ii. Neither M/s. Navjeevan Charitable Trust, nor by any of the

beneficiary or broker has been able to lay down an iota of evidence to
show that the trust has carried out any charitable activity during its
entire existence.

iii. During Search and Seizure operation u/s. 132 and Survey
operation u/s. 133A covering the main player of the scam, no trace of
any documents, no books of accounts has been found which can
indicate any actual charitable activity by the Trust.

iv. The crucial finding of the investigation wing, that so-called

donation deposited by cheque has ultimately been withdrawn in cash,
has not at all been rebutted.

V. The specifics given by the associates explaining how the cheque

was given, cash was accepted and its subsequent utilization has not
been retracted either during the investigation carried out by the
Investigation wing, Mumbai or during the assessment proceeding or
during the appellate proceeding.

In view of the above, it is held that the appellant is part and parcel of
scam of non-genuine donation in order to claim deduction u/s.35AC of the
Act. The candid confession by Mr.Manish M.Shah and ultimate withdrawal
of deduction under section 35AC for the year under consideration, have not
been disapproved then, I have no reasons to interfere with the findings of the
AO. The denial of deduction u/s.35AC of the Act is upheld and an amount of
Rs. 15,00,000/-claimed as deduction and added to the total income is
confirmed. The ground of appeal filed on this issue is therefore dismissed."

012. We find that all the judicial precedents available were prior to the
decision of Honourable supreme court in case CIT V Batanagar Education
trust [2021] 129 taxmann.com 30 (sc) where cancellation of registration of
The Trust u/s 12 A as well as 80 G were upheld. When the recipient of
donation has confirmed that donation were taken in lieu of cash and no
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activity is done, it would be too naïve to believe that assessee has donated
sum in / good faith.

013. We do not find any infirmity in the order of the learned CIT(A) and
accordingly, we do not find merit in this appeal.”

6. We have heard the rival submissions and considered the material placed

on record as well as judicial pronouncements relied upon by both the

parties.

(i) Admittedly, the donee, M/s. Navjeevan Charitable Trust enjoyed the

approval u/s. 35AC w.e.f F.Y. 2010-11 onwards till withdrawal of the

same by the notification dated 30.11.2016 issued by the Department of

Revenue, Ministry of Finance, Government of India.

(ii) The donation by the assessee was made in F.Y. 2011-12 [& F.Y. 2012-13]

and at the relevant time, the trust was having requisite valid approval.

(iii) Under the provisions of section 35AC, subsection (6) deals with the

situation where the approval granted is subsequently withdrawn, and it

states as under:

“(6) Notwithstanding anything contained in any other provision of this Act,

where-

(1) the approval of the National Committee, granted to an association or

institution, is withdrawn under sub-section (4) or the notification in respect
of eligible project or scheme is withdrawn in the case of a public sector
company or local authority or an association or institu-tion under sub-
section (5); or

(ii) a company has claimed deduction under the proviso to sub-section (1) in
respect of any expenditure incurred directly on the eligible project or scheme
and the approval for such project or scheme is withdrawn by the National
Committee 29 [or the Principal Chief Commissioner of Income-tax
(Exemption) or the Chief Commissioner of Income-tax (Exemption), as the
case may be,] under sub-section (5), the total amount of the payment
received by the public sector company or the local authority or the
association or the institution, as the case may be, in respect of which such
company or authority or association or institution has furnished a
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certificate referred to in clause (a) of sub-section (2) or the deduction

claimed by a company under the proviso to sub-section (1) shall be deemed
to be the income of such company or authority or association or institution,
as the case may be, for the previous year in which such approval or
notification is withdrawn and tax shall be charged on such income at the
maximum marginal rate in force for that year.”

Thus, in case of withdrawal, the total amount received by the

donee is to be charged at the maximum marginal rate in force during the

year of withdrawal.

Thus the intent behind inserting this subsection w.e.f 01.04.2003

is to tax the entire donations in the hands of the donee. The donors

having claimed deduction u/s. 35AC before the withdrawal of

notification are not to be taxed in respect of impugned amount as has

been clarified by way of an explanation inserted in subsection (2) of

section 35AC w.e.f 01.04.2006, which states as under:

“Explanation-The deduction, to which the assessee is entitled in respect of any

sum paid to a public sector company or a local authority or to an association or
institution for carrying out the eligible project or scheme referred to in this
section applies, shall not be denied merely on the ground that subsequent to the
payment of such sum by the assessee,-
(a) the approval granted to such association or institution has been
withdrawn; or

(b) the notification notifying the eligible project or scheme carried out by the
public sector company or local authority or association or institu-tion has
been withdrawn.”

7. We note that in this case, Ld. AO had received information from the

Investigation wing in respect of search/survey action conducted against

the trust during which the donee trust was found to be providing

accommodation entries and the amounts received were returned to the

parties after deduction of commission as stated by the trustee in

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statement recorded on oath. Based on this information, the assessment

was reopened and the ld.AO recorded the statement under section 131 of

Shri Devdas Prabhakaran Nair, Advisor of assessee company. He

reiterated that the assessee had made genuine payment of the impugned

donation to M/s. Navjeevan Charitable Trust. However, Ld. AO did not

accept the claim of the assessee and relying solely upon the report of

Investigation wing and statement of the trustee recorded by the wing,

made the impugned addition in the hands of the assessee after

disallowing the claim of deduction u/s. 35AC of the Act. The assessee is

aggrieved and has objected to the same as no opportunity to cross

examine the trustee was given and the evidence filed by assessee was

rejected without any cogent reason.

8. After careful consideration of the facts and circumstances in the light of

legal provisions, we are of the considered view that the entire donations

received by the trust have to be added in its hands in the year of

withdrawal of notification and charged at the maximum marginal rate.

Accordingly, disallowance of the claim of deduction u/s 35 AC in the

hands of the assessee could not have been made more so without

establishing that it had made a bogus donation and money was received

back in cash.

Hence, we hereby delete addition of Rs. 25,00,000/- on account

of disallowance of deduction claimed u/s 35 AC of the Act.

9. In the result, assessee’s appeal is allowed.

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ITA No. 6265/MUM/2024

(Assessment Year: 2013-14)

10. As fact and issues involved in this year are identical except that the

amount claimed u/s. 35AC is Rs. 10,00,000/-, the above decision for

A.Y. 2012-13 will apply mutatis mutandis in this year also. Accordingly,

the addition of Rs. 10,00,000/- is hereby deleted.

11. In the result, both the appeals are allowed.

Order is pronounced in the open court on 17.10.2025

Sd/- Sd/-
RAHUL CHAUDHARY RENU JAUHRI
(JUDICIAL MEMB ER) (ACCOUNTANT MEMBER)

Place: Mumbai
Dated: 17.10.2025
Anandi.Nambi
Stenographer

आदे शकीितिलिपअे िषत/Copy of the Order forwarded to:

1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. आयकरआयु! / CIT
4. िवभागीयितिनिध, आयकरअपीलीयअिधकरणDR, ITAT, Mumbai
5. गाड फाईल / Guard file.

सािपतित //True Copy//

आदे शानु सार / BY ORDER,

सहायकपं जीकार (Asstt. Registrar)

आयकरअपीलीयअिधकरण / ITAT, Bench,
Mumbai.