Case Law Details
Batuk Vithalabhai Donga Vs ITO (ITAT Rajkot)
If addition under section 80U is not made under section 68 or 69, then tax cannot be imposed under section 115BBE
Assessee has not challenged the additions made by the AO under section 80U and 80G of the Act, but has only challenged the computation of tax liability by the AO under section 115BBE of the Act. With respect to the first contention of the assessee that unless there is a specific finding that addition under section 80U is made under section 68 or 69 of the Act, then tax cannot be imposed under section 115BBE of the Act, we are in agreement with the contention of the assessee that once the AO has not invoked the provisions of section 68 to 69 of the Act, tax cannot be imposed under a deeming provisions of section 115BBE of the Act. In the instant case, the Assessing Officer made disallowance of deduction claimed u/s. 80U ( permanent disability) of the Act but did not do any discussion as to how the case of the assessee is covered by the provisions of section 68 or 69 of the Act so as as to compute tax liability u/s. 155BBE of the Act.
Disallowance with respect of incorrect claim of donation under section 80G cannot be made under section 69A
Disallowance with respect of incorrect claim of donation under section 80G cannot be made under section 69A of the Act, we observe that section 69A of the Act can be invoked only in case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account and the assessee offers no explanation about the nature and source of acquisition of such money, bullion, jewellery or other valuable articles. Therefore, in our considered view, the AO has erred in facts and in law in invoking the provisions of section 69A in respect of incorrect claim of deduction under section 80G of the Act. Accordingly, since provisions of section 69A cannot be invoked in respect of disallowance made under section 80G of the Act, and without a specific finding that the assessee is in possession of any unexplained money, bullion, jewellery or other valuable article in his possession, accordingly, AO cannot compute tax liability under section 115BBE of the Act with respect to disallowance for incorrect claim under section 80G of the Act.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
This assessee’s appeal for A.Y. 2017-18, arises from National Faceless Appeal Centre (NFAC), Delhi dated 27-02-2021, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
2. The assessee has raised the following grounds of appeal:-
“1. The order of Ld. A.O. was bad in law as the same was made without issuing Show cause notice. The Ld. CIT (Appeals) have also erred in not taking the said ground into the consideration.
2. The Ld. CIT (Appeals) has erred in upholding the order of Ld. A.O. treating the excess deduction claimed u/s 80U for Rs.50000/- as unexplained money u/s 69A. In fact the order of Ld. A.O. was silent about the section under which the addition was made. However the Ld. A.O. has calculated tax u/s 115BBE.
3. The Ld CIT (Appeals) has erred in upholding the order of Ld. A.O treating the donation disallowed for non production of receipt as Unexplained money u/s 69A.
4. The appellant craves leave to add, amend, alter, withdraw any grounds of appeal anytime upto the hearing of appeal.”
3. The brief facts of the case are that during the course of assessment, the AO observed that assessee claimed deduction of Rs. 125,000/- under section 80U of the Act for permanent physical disability under Chapter-VI-A. However, the disability of the assessee as per certificate issued by the medical authority dated 08-11-2019 was 55% only. Accordingly, the AO held that the assessee has incorrectly claimed disability deduction at Rs. 1.25 lakhs under section 80U whereas, the allowable deduction was Rs. 75,000/-only and therefore, the AO denied excess claim of deduction amounting to Rs. 50,000/- under section 80U of the Act. Further, the AO observed that the assessee claimed deduction under section 80G of the Act amounting to Rs. 97,995/- but the assessee was unable to furnish any proof or details in this regard. Accordingly, the AO added this amount back to the income of the assessee under section 69A of the Act. Further, the AO computed tax in respect of the aforesaid additions at a higher rate as prescribed under section 115BBE of the Act.
4. In appeal, the assessee argued that while calculating tax, the AO has incorrectly invoked section 115BBE of the Act, while computing the tax demand with respect to the aforesaid additions. The assessee submitted that tax can be imposed/computed under section 115BBE only if disallowance is made under section 68 to section 69C of the Act, which deals with unexplained cash credit, unexplained investments etc. However,in instant facts, no such observations were made by the AO during the course of assessment proceedings so as to impose tax under section 115BBE of the Act. The Ld. CIT(Appeals) however dismissed assessee’s appeal on this ground with the following observations:
“2. The main ground of appeal raised by the appellant relates to addition of deductions u/s 80U & 80G as unexplained money u/s 69A. The first issue relates to disallowance of deduction of u/s 80U of Rs.50,000/-, The assessee claimed Rs, 1,25,000/- u/s 80U for permanent physical disability under chapter VI-A. However, the AO noticed from the medical certificate issued by the medical authority that the assessee has only 55% permanent disability. The AO observed that for claiming full deduction u/s 80U, the person should have 85% or more physical permanent disability. Hence the AO has restricted the deduction u/s 80U to Rs. 75,000/- and disallowed Rs.50,000/-. The appellant in his written submissions stated that it was a clerical mistake to claim higher deduction. Since the appellant has himself admitted that is clerical mistake, the disallowance of Rs. 50,000/- is sustained.
3. The next issue raised in the grounds of appeal relates to disallowance of deduction of u/s 80G of Rs.97,995/-. The AO noticed on verification of the computation of income that the appellant has claimed Rs.97,995/- u/s 80G deduction of IT Act 1961. Since the appellant did not furnish any proof or details in this regard, the AO has disallowed the same and added the same as unexplained money u/s 69A. The appellant in his return submission has stated that since the donation has been entered in the books of account, the same cannot be made as an addition u/s 69A.The appellant relied on the following case laws in respect of his contentions:
(i) Smt. Teena bethala v/s ITO (ITA NO 1383/Bang/2019)dated 28/08/2019 – ITAT Bangalore
(ii) DCIT Vs. Karthik Constructions Co. in ITA No.2292/Mum/2016 dated 23.06.2018 -ITAT Mumbai
4. I have carefully considered the submission of the appellant. In this case, facts as stated above show that appellant did not produce the evidence to substantiate his claim made u/s 80G. In this absence of the evidence, AO has rightly made disallowance. In the view of the above the disallowance made by the AO stands confirmed and grounds taken are dismissed.
5. In this result Appeal is dismissed.”
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). We observe that the assessee is not aggrieved with the additions made by the AO and also confirmed by Ld. CIT(Appeals) in the appellate order under section 80U and section 80G of the Act. The only grievance of the assessee is that so far as addition in relation to disallowance under section 80U (permanent disability) is concerned, the AO did not mention specifically under which section the disallowance has been made. Secondly, in respect of disallowance under section 80G, the AO erred in facts and in law in invoking the provisions of section 69A of the Act while confirming the additions, since section 69A refers to unexplained money which the assessee has not recorded in the books of accounts. Accordingly, the CIT erred in facts and in law in holding that the computation of tax with respect to aforesaid disallowances has correctly been done under section 115BBE of the Act. In response, the DR has placed reliance on the observations made by the AO and CIT in their respective orders.
6. We have heard the rival contentions and perused the material on record. We observe that the assessee has not challenged the additions made by the AO under section 80U and 80G of the Act, but has only challenged the computation of tax liability by the AO under section 115BBE of the Act. With respect to the first contention of the assessee that unless there is a specific finding that addition under section 80U is made under section 68 or 69 of the Act, then tax cannot be imposed under section 115BBE of the Act, we are in agreement with the contention of the assessee that once the AO has not invoked the provisions of section 68 to 69 of the Act, tax cannot be imposed under a deeming provisions of section 115BBE of the Act. In the instant case, the Assessing Officer made disallowance of deduction claimed u/s. 80U ( permanent disability) of the Act but did not do any discussion as to how the case of the assessee is covered by the provisions of section 68 or 69 of the Act so as as to compute tax liability u/s. 155BBE of the Act.
7. In the result, ground number 1 of the assessee’s appeal is allowed.
8. With regard to second contention of the assessee that disallowance with respect of incorrect claim of donation under section 80G cannot be made under section 69A of the Act, we observe that section 69A of the Act can be invoked only in case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account and the assessee offers no explanation about the nature and source of acquisition of such money, bullion, jewellery or other valuable articles. Therefore, in our considered view, the AO has erred in facts and in law in invoking the provisions of section 69A in respect of incorrect claim of deduction under section 80G of the Act. Accordingly, since provisions of section 69A cannot be invoked in respect of disallowance made under section 80G of the Act, and without a specific finding that the assessee is in possession of any unexplained money, bullion, jewellery or other valuable article in his possession, accordingly, AO cannot compute tax liability under section 115BBE of the Act with respect to disallowance for incorrect claim under section 80G of the Act.
9. In the result, ground number 2 of the assessee’s appeal is allowed.
10. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 20-12-2022
