No section 69A addition is made when a section 80G deduction is denied
Fact and Issue of the case
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.
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. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals).
Observation of the Court
The tribunal has 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.
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.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
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