Back
2025 Supreme(Online)(ITAT) 6826
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
DR. BRR KUMAR, VP, SHRI SIDDHARTHA NAUTIYAL, J
Axiomatic iTech Pvt. Ltd. – Appellant
Versus
Income Tax Officer – Respondent
I.T.A. No.191/Ahd/2025
For the Appellants/Petitioners: Shri S N Divatia, AR
For the Respondents: Shri C Dharani Nath, Sr. DR
The court ruled that disallowance of deductions cannot occur without proper hearing, emphasizing natural justice in tax proceedings.
Headnote:(A) Income-tax Act, 1961 - Section 35(1)(ii) - Deduction disallowed by Assessing Officer for donation due to rescission of approval of donee institution - Assessee argued that deduction cannot be denied as approval was valid at the time of donation, referencing statutory explanation. The CIT(A) upheld disallowance without new evidence from assessee. (Paras 3, 6, 8, 11, 12)
(B) Natural Justice - Principle of natural justice mandates parties be heard before adverse conclusions - CIT(A) did not afford adequate opportunity, resulting in injustice. (Para 11)
Facts of the case:
The assessee contested a disallowance of Rs. 43,75,000/- for a donation to an institution whose approval was rescinded post-donation. The appeal was dismissed ex parte due to non-compliance attributed to a prior consultant.
Findings of Court:
The lack of opportunity provided in the appellate forum necessitated remission of the matter back to the CIT(A) for a fresh hearing on merits.
Issues: The main issue concerned compliance with notices during the pandemic and whether the denial of deduction was justified despite timely submission of documents during the assessment.
Ratio Decidendi: The court emphasized the importance of adhering to natural justice principles, declaring the CIT(A)'s decision to be void due to failure to hear the assessee’s arguments and considering evidence against the disallowance.
Result: Appeal allowed for statistical purposes.
| Table of Content |
|---|
| 1. discussion on the implications of natural justice and the requirement of adequate hearing. (Para 1 , 7) |
| 2. issues concerning the disallowance of claims and application for the tax deductions. (Para 2 , 8) |
| 3. facts regarding the background of the donation and the corresponding appeals process. (Para 3 , 4 , 5) |
| 4. restoration of the appeal for re-examination based on the principles of natural justice. (Para 11 , 12) |
| 5. final disposition of the appeal based on procedural fairness. (Para 13 , 14) |
ORDER
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 02.06.2023 passed for A.Y. 2016-17.
2. The assessee has raised the following grounds of appeal:
“1.1 The order passed by U/s. 250 passed on 02.06.2023 by NFAC, [CIT(A)], Delhi (for short CIT(A)” upholding the disallowance of deduction u/s 35(1)(ii) of Rs. 43,75,000/- made by A.O. is wholly illegal, unlawful and against the principles of natural justice.
2.1 The ld. CIT(A), has grievously erred in law and or on facts in not appreciating that there could not be compliance to the notices claimed to be issued mainly on account of failure of the previous tax consultant and the appellant was under a genuine and bonafide belief that due compliance was being made by the previous tax consultant. Thus, there was a sufficient cause for failure to comply with the notices claimed to be issued by NFAC.
2.2 That the in the facts and circumstances of the ld. CIT(A), ought to have appreciated that there was a sufficient cause for failure to respond to the notices issued during the Corona Covid 2019 period i.e. January, 2020 to February, 2022 and thereafter only single notice was issued on 21.04.2023. Thus, there was gross violation of the principles of natural justice.
3.1 The ld. CIT(A) has grievously erred in law and or on facts in upholding the disallowance of deduction/s 35(1)(ii) of Rs. 43,75,000/- made by A.O, though it was supported by various documents/evidence and the appellant had no reason to disbelieve the same.
3.2 That the in the facts and circumstances of the ld. CIT(A), ought not to have upheld the disallowance of deduction u/s 35(1)(ii) of Rs. 43,75,000/- made by A.O.”
3. The brief facts of the case are that the assessee filed its return of income for the Assessment Year 2016-17 on 15.09.2016 declaring total income of Rs. 1,38,535/-. The return was processed under section 143(1) of the Income- tax Act, 1961 (the “Act”), and later selected for limited scrutiny through CASS for the purpose of verifying the “large deduction claimed under section 35(1) of the Act.” During the scrutiny proceedings, the Assessing Officer (AO) noticed that the assessee had claimed a weighted deduction of Rs. 43,75,000/- under section 35(1)(ii) on account of a donation of Rs. 25,00,000/- made to Matrivani Institute of Experimental Research & Education (MIER&E), Kolkata. To verify the genuineness of the claim, the AO issued a notice under section 133(6) of the Act to the said institute, calling for confirmation of the donation and relevant documents such as receipts, approval certificates, and bank statements. However, no response was received from the institute. Consequently, the AO issued a show-cause notice to the assessee proposing to disallow the deduction claimed under section 35(1)(ii) of the Act, on the ground that the Central Government, vide Notification No. 78/2016 dated 06.09.2016, had rescinded the approval earlier granted to Matrivani Institute with retrospective effect from 01.04.2004, thereby deeming that the said notification of approval was never issued for any tax benefit under the Income-tax Act. In response, the assessee submitted that the donations were made in July 2015, well before the withdrawal notification dated 06.09.2016, and therefore, the deduction could not be denied
