The bench of Waseem Ahmed (Accountant Member) and Sidhhartha Nautiyal (Judicial Member) of Rajkot Income Tax Appellate Tribunal (ITAT) ruled that no addition shall be made under section 69A of Income Tax Act, 1961 on the ground of denial of deduction under section 80G.
The facts is that during the course of assessment, the Assessing Officer (AO) observed that the assessee claimed deduction of ₹125,000 under section 80U of Income Tax Act for permanent physical disability under Chapter VIA.
However, the disability of the assessee as per certificate issued by the medical authority was 55% only.
Furthermore, the AO determined that the assessee had submitted an excess claim for a deduction totaling ₹ 50,000 under Section 80U of the Income Tax Act while the permitted deduction was only ₹ 75,000 instead of ₹ 1.25 lakhs as claimed by the assessee.
The AO also noted that the assessee claimed a deduction of ₹97,995 under section 80G of Income Tax Act but was unable to provide any supporting documentation or information. In accordance with section 69A of Income Tax Act, the AO added this sum back to the assessee’s income.
The AO further applied a higher rate of tax computation for the aforementioned additions in accordance with section 115BBE of Income Tax Act.
The assessee asserted that only if disallowance is issued under sections 68 to 69C of the Income Tax Act, which deal with unexplained cash credits, unexplained investments, etc., can tax be levied or computed under section 115BBE of the Income Tax Act.
However,in instant facts, no such observations were made by the AO during the course of assessment proceedings so as to impose tax under the same.
The CIT(A), in the instant case ruled that the appellant did not produce the evidence to substantiate his claim made under section 80G of Income Tax Act. In this absence of the evidence, AO has rightly made disallowance.
The bench observed 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 Income Tax Act.
The tribunal emphasised that the section 69A of Income Tax Act can only be used in the event that the assessee is discovered to be the owner of any money, bullion, jewellery, or other valuable item that is not recorded in the books of account and the assessee makes no attempt to explain the nature and source of acquisition of such money, bullion, jewellery, or other valuable articles.
Further it was observed that the AO has erred in facts and in law in invoking the provisions of section 69A of Income Tax Act in respect of incorrect claim of deduction under section 80G of Income Tax Act.
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