IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No.2560/Mum/2025 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 (Assessment Year :2016-17 Assessee by Ms.Ridhisha Jain (virtually appeared)

Revenue by Shri Surendra Mohan, Sr.DR Date of Hearing 19/01/2026 Date of Pronouncement 22/01/2026 / O R D E R आदेश PER AMIT SHUKLA (J.M):

The aforesaid appeal has been filed by the assessee against the order dated 15 February 2025 passed by the learned Commissioner of Income-tax (Appeals)-47, Mumbai, arising out of reassessment framed under section 147 of the Income-tax Act, 1961 for the assessment year 2016–17.

2. In the grounds of appeal, the assessee has challenged both the validity of notice issued under section 148 and, on merits, the disallowance of deduction amounting to ₹1,79,37,500/- claimed under section 35(1)(ii) of the Act in respect of donation of ₹1,02,50,000/- made to Vivekananda Yoga Anusandhana Samsthana (VYASA).

3. The brief facts, as culled out from the impugned assessment order, are that the assessee, a private limited company engaged in the business of builders and property developers and following the percentage completion method, filed its original return of income on 17 October 2016 declaring total income of ₹33,45,59,140/-. The assessee’s case was reopened after recording reasons to believe that income chargeable to tax had escaped assessment.

4. The recorded reasons stated that during the assessment proceedings for assessment year 2016–17 in the case of VYASA, it was claimed that one of its employees had opened and operated a bank account in Axis Bank, Hyderabad, by misusing his position as an employee and authorized signatory, and had received donations in the name of the trust while issuing receipts certifying eligibility under section 35(1)(ii). It was further stated that the funds so received were diverted and allegedly repaid to donors through other means without the knowledge of the trust, and that the trust itself had denied any connection with the said bank account. It was also stated that complaints had been lodged by the trust against the said employee before the Superintendent of Police, Bengaluru and the Directorate of Income-tax (Investigation), Bengaluru. In this backdrop, it was alleged that the assessee, being one of the donors who had paid ₹1,00,00,000/- through the said account, had wrongly claimed deduction under section 35(1)(ii).

5. Notice under section 148 dated 30 March 2021 was issued and served. The assessee filed return in response declaring the same income. Notices under sections 143(2) and 142(1) were issued. The Assessing Officer recorded that the reopening was premised on specific information from ACIT (Exemptions), Coimbatore, and that during assessment proceedings in the case of VYASA, the receipts through the disputed Axis Bank account had been treated as income and brought to tax, as the trust’s explanation had not been accepted owing to want of finality of investigation into the FIR.

6. The Assessing Officer further recorded that the assessee had claimed total deduction of ₹1,79,37,500/- under section 35(1)(ii), which included donation of ₹1,00,00,000/- dated 31 March 2016 and ₹2,50,000/- dated 18 November 2015 to VYASA. The assessee submitted that VYASA is a reputed institution in the field of yoga and scientific research, operating offices in Bengaluru, Hyderabad and Mumbai, functioning under the leadership of Padma Shri Dr. H.R. Nagendra, and visited by several dignitaries including the Prime Minister and the President of India. It was stated that the trust is registered under section 12A and duly approved under section 35(1)(ii), and that the assessee had made donations