CBDT busts Bogus donation racket under section 35(1)(ii) of Income-tax Act, 1961Rural Development Society , Hyderabad.  It raised substantial donations on the basis of forged certificates and claimed weighted deduction u/s.35(1)(ii) of the The amount of donations raised during the Assessment Years  i.e. 2016-17 & 2017-18. president of the Society had admitted that they had raised donations on the basis of a bogus certificate and the amount was passed on after retaining commission of 5 %. In View of the above CBDT has recommended to initiate appropriate remedial action in respect of 243 donors from whom Society has raised Bogus Donation.

F. No. 225/26/2019-ITA (II)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
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Room No. 245A, North Block
New Delhi, the 25th February, 2019

To
All Principal Chief Commissioners of Income Tax
All Director Generals of Income Tax (Investigation)

Sir/Madam

Subject: Information regarding bogus donation racket under section 35(1)(ii) of Income-tax Act, 1961Rural Development Society, Hyderabad (PAN:AAAAR4658N) reg.

Kindly refer to the subject mentioned above.

2. In this connection, I am directed to state that Section 35(1)(ii) of the Income-tax Act, 1961 (‘Act’) prescribe s a weighted deduction @ 150% (175% before (01.04.2018) to a donor for any sum paid to an approved ‘research association’ having as its sole object the undertaking of scientific research or to a ‘university, college or other institution’ for carrying out scientific research.

3. Recently, it has been brought to the notice of the Board that one entity namely M/s Rural Development Society, Hyderabad (‘Society’) had raised substantial donations on the basis of forged certificates and it has been further verified from the Directorate of Systems that donors had claimed weighted deduction u/s.35(1)(ii) of the The amount of donations raised during the two Assessment Years is as below:

S. No. AY Amount of donation (Rs.) Amount of likely bogus benefit claimed by the donars (Rs.)
1 2016-17 37,13,45000 64,98,53,750
2 2017-18 4,70,32,000 8,23,06,000

4. This entity, being not recognized for purpose of section 35(1)(ii) of the Act by the Central Government, is not eligible to raise any donation for undertaking scientific research and consequentially, the donors are also not eligible to claim any benefit of weighted deduction under section 35(1)(ii) of the Act. During a recent survey action conducted on 07.02.2019 by the jurisdictional income tax authorities, the president of the Society had admitted that they had raised donations on the basis of a bogus certificate and the amount was passed on after retaining commission of 5 %.

5. In view of such a blatant misuse of a beneficial provision of the Act , I am directed to share the list of donors of A.Y 2016-17 & A.Y 2017-18 as provided by the said Society and to request you to initiate appropriate remedial action in respect of donors to safeguard the interest of the revenue. Further, I am also directed to state that if any incriminating information is found regarding tax evasion in respect of other A.Ys during the assessment/re-assessment proceedings , the same may be shared with concerned A.Os by the Jurisdictional Income Tax Authorities.

6. I am further directed to state that while handling investigations/enquiries in these cases, the concerned Assessing Officer should examine the specific transactions related to the sum donated and cash trail should be clearly identified as far as Also, various provisions pertaining to enquiry and investigation under the Act should be effectively used and assessment orders should be passed under the monitoring of supervisory authorities.

7. This issues with approval of Member (IT&C),

Enclosure: Donors List  of A.Y 2016-1 7 & A.Y 2017-18

Yours faithfully,

(Rajrajeswari R.)
Under Secretary, (ITA.II)

 

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