Facts of the Case

The assessee, Rashmikant Bhaichandbhai Shah, filed his return of income for Assessment Year 2021-22 and claimed deduction of ₹2,15,000 in respect of donation made to The Gujarat Cancer Society under Section 80GGA of the Income-tax Act. The return was processed under Section 143(1), wherein the Assessing Officer disallowed the claim on the ground that the assessee had business income and therefore did not satisfy the conditions prescribed under Section 80GGA.

The assessee thereafter made an application under Section 154 and raised an alternate claim seeking deduction of the same amount under Section 35(1)(ii), contending that The Gujarat Cancer Society was engaged in scientific research and was duly notified for the purposes of that section. The alternate claim was rejected by the lower authorities, and the Commissioner of Income Tax (Appeals), NFAC confirmed the rejection. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

Whether the assessee’s alternate claim for deduction under Section 35(1)(ii) could be rejected merely because the original claim was made under Section 80GGA, whether the lower authorities erred in misconstruing the scope of Section 154, and whether the Assessing Officer was required to examine eligibility for deduction under Section 35(1)(ii) on merits.

Petitioner’s Arguments

The assessee submitted that although the original claim was made under Section 80GGA, the donation was in fact eligible for deduction under Section 35(1)(ii) as it was paid to a duly notified scientific research institution. It was argued that income-tax authorities are obliged to grant legitimate deductions and should not deny relief merely because of an incorrect section being quoted. The assessee relied upon settled principles and CBDT instructions requiring officers to assist taxpayers in claiming lawful deductions.

Respondent’s Arguments

The Revenue supported the orders of the lower authorities and contended that the alternate claim raised by the assessee was not allowable in rectification proceedings and was rightly rejected.

Court Order / Findings

The ITAT Ahmedabad observed that it is a settled principle that income-tax authorities should levy only legitimate taxes and should assist assessees in claiming eligible deductions. The Tribunal noted that the assessee had made a specific alternate claim under Section 35(1)(ii) and that such a claim could not be rejected without examination on merits merely because the original claim was made under Section 80GGA.

Relying on the consistent view that bona fide mistakes of assessees should not result in denial of lawful benefits, the Tribunal held that the Assessing Officer was duty-bound to examine the eligibility of the assessee’s claim under Section 35(1)(ii) and grant the deduction if the statutory conditions were satisfied.

Important Clarification

The Tribunal clarified that quoting an incorrect provision does not disentitle an assessee from claiming a deduction otherwise allowable in law. Income-tax authorities are required to examine alternate claims on merits and assist taxpayers in availing legitimate deductions in accordance with the Act.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The matter was restored to the file of the Assessing Officer with a direction to examine the assessee’s claim for deduction under Section 35(1)(ii) in respect of donation made to The Gujarat Cancer Society and to grant the deduction if the assessee is found eligible in accordance with law.

 Link to download order https://www.mytaxexpert.co.in/uploads/1769062097_RASHMIKANTBHAICHANDBHAISHAHAHMEDABADVS.THEITOWARD532AHMEDABAD.pdf

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