🔬 The Evidence Chain: How They Prove Bogus Claims

1. Digital Footprint: No online presence of donee entity
2. Bank Trail Gap: Amount transferred doesn’t match receipt
3. Agent Connection: Same phone number appears in multiple cases
4. Pattern Recognition: Identical receipt format across different donees
5. Cash Flow Analysis: Money circles back to taxpayer through shell companies

📄 Mandatory Documentation Checklist

1. Form 10BD: Mandatory donor certificate from donee (digital from AY 2023-24). Must contain:
   • Donee PAN and name
   • Donor PAN and name
   • Amount and date of donation
   • Mode of payment
   • Registration number under Section 12A/12AA/12AB
   • Unique Acknowledgement Number (UAN)
2. Form 10BE: Annual reporting by donee (non-filing = invalid claims). Must be filed by 31st May following financial year.
3. Form 10B/10BB: Donee audit reports (missing = scrutiny trigger). Required for trusts with receipts >₹50 lakh.
4. Bank Statement: NEFT/RTGS/UPI proof matching receipt exactly. Should show:
   • Transaction ID
   • Date matching receipt
   • Amount exactly as claimed
   • Beneficiary name matching donee
5. 12AB Certificate: Current registration validity check. Verify on IT Department website.
6. Donee’s Annual Report: Showing activities and fund utilization.
7. Receipt with QR Code: Mandatory from AY 2024-25 for amounts >₹50,000.

📅 Day 1: Immediate Assessment & Platform Login (2-3 hours)

1. Login to Income Tax Portal:
   • Visit incometax.gov.in
   • Navigate to: e-Proceedings → Compliance → Pending Actions
   • Check “e-Campaign” tab for specific alerts
2. Download Exact Nudge Details:
   • Assessment Year involved
   • Exact amount under scrutiny
   • Donee PAN and name
   • Section under which claim made
   • Date range for response
3. Check Registered Channels:
   • SMS inbox for full communication
   • Email (check spam folder too)
   • Registered email on IT portal
4. Document Everything:
   • Screenshot with timestamps
   • Download PDF of notice
   • Note down acknowledgement number

Pro Tip: Use the “View 26AS” feature to see what the department sees about your donations.

📅 Day 2-3: Document Hunt & Verification (4-5 hours)

1. Bank Statements (last 3 years):
   • Get certified statements from bank
   • Highlight donation transactions
   • Ensure dates match receipts exactly
   • Get UTR/NEFT/RTGS numbers
2. Physical/Digital Receipts:
   • Original signed receipts
   • Stamp of the institution
   • PAN and 12AB number clearly visible
   • QR code for verification
3. Form 10BD Download:
   • Request from donee if not available
   • Verify on IT portal using donee PAN
   • Check for UAN (Unique Acknowledgement Number)
4. Donee Validity Checks:
   • NGO Darpan registration status
   • 12AB certificate validity period
   • FCRA status (if foreign donations)
   • Last 3 years’ Form 10B filings
5. Payment Mode Proofs:
   • UPI screenshot with transaction ID
   • Bank scroll/acknowledgement
   • Cheque copy (front and back)
   • Credit card statement
6. Supporting Correspondence:
   • Emails with donee
   • Visit photos if any
   • Event participation proof
   • Thank you letters from institution

📅 Day 4: Critical Decision Point (1-2 hours)

Path A (Genuine Claim with Proofs):

• Prepare submission package with index
• Create covering letter explaining each document
• Cross-reference with notice points
• Prepare for possible hearing

Path B (Bogus/Insufficient Proofs):

• Calculate revised tax liability
• Compute interest under Section 234A/B/C
• Estimate penalty exposure
• Decide on ITR-U vs response

Decision Matrix:

📅 Day 5: File ITR-U if Needed (2-3 hours)

ITR-U Filing Deadlines:
AY 2025-26 deadline: Mar 31, 2028 (Additional Tax: 25%)
AY 2024-25 deadline: Mar 31, 2027 (Additional Tax: 25%)
AY 2023-24 deadline: Mar 31, 2026 (Additional Tax: 25%) ← CURRENT FOCUS
AY 2022-23 deadline: Mar 31, 2025 (Additional Tax: 25%) ← URGENT!

Calculation Formula:
Tax Payable = Revised tax - Original tax paid
Additional Tax = 25% of Tax Payable
Interest u/s 234A = 1% per month on tax due from July to payment
Interest u/s 234B = 1% per month on advance tax shortfall
Interest u/s 234C = 1% per month for deferment of advance tax

Steps:
1. Login to e-filing portal
2. Select 'File Income Tax Return'
3. Choose 'Updated Return (ITR-U)'
4. Select correct Assessment Year
5. Fill revised figures (remove donation claim)
6. Compute additional tax automatically
7. Pay tax + additional tax + interest
8. File return with new acknowledgement
            

Note: ITR-U can be filed only once per assessment year. Choose figures carefully.

📅 Day 6: Submit Response (1-2 hours)

1. Access e-Proceedings:
   • Login → e-Proceedings → Compliance
   • Select your case from list
   • Click “Submit Response”
2. Prepare Submission Package:
   • Create single PDF with all documents
   • Maximum size: 10MB
   • Name format: PAN_AY_Response.pdf
   • Include index with page numbers
3. Write Covering Letter:
   • Address to Assessing Officer
   • Reference notice number and date
   • Point-wise response to each query
   • Cross-reference to document pages
   • Request for hearing if needed
   • Signature with date
4. Upload and Submit:
   • Upload zipped file if >10MB
   • Get acknowledgement number
   • Save submission confirmation
5. Request Adjournment if Needed:
   • Maximum 15-day extension available
   • Valid reasons: awaiting documents, professional advice
   • Submit through same portal

📅 Day 7: Professional Help & Follow-up

When to Hire Professional:

• Tax impact >₹5 lakh
• Business implications
• Multiple assessment years involved
• Complex donation structures
• Potential prosecution risk
• Lack of documentation skills

Choosing the Right Professional:

• CA/CMA with tax litigation experience
• Check their case history
• Clear fee structure upfront
• Availability for hearings
• Good standing with IT department

Follow-up Schedule:

Don’t go solo on complex cases. A ₹10,000 professional fee can save ₹1 lakh in penalties.

Under-reporting (50% penalty): When taxpayer fails to report income correctly but without misrepresentation.

Misreporting (200% penalty): When claim involves:

• Misrepresentation or suppression of facts
• Failure to record investments in books
• Claim of expenditure not substantiated
• False entry or fake documents
• Failure to report international transactions

Appeal Process: CIT(A) within 30 days, full waiver possible with reasonable cause if:

• Acted in good faith
• Voluntarily disclosed before detection
• Co-operated fully during proceedings
• Has genuine financial hardship

🔍 Pre-Donation Due Diligence Checklist (5-Minute Verification)

1. Entity Verification:
   • NGO Darpan registration valid and active?
   • 12AB/80G certificate current (<5 years old)?
   • FCRA registration if receiving foreign funds?
   • Income Tax site: Search donee PAN status
2. Financial Health Check:
   • Form 10B filed for last 3 years?
   • Annual reports available online?
   • Audited accounts show genuine activity?
   • Utilization certificates available?
3. Operational Genuineness:
   • Active website with regular updates?
   • Social media presence with engagement?
   • Physical office verifiable?
   • Contact numbers operational?
4. Reputation Check:
   • Google search for controversies
   • Media coverage analysis
   • Donor testimonials verifiable
   • No pending litigation/notices

📚 CMA Inter Paper 7: Direct Taxation

Expected Questions (16-20 marks):

• Section 80GGC vs 80GGB differences
• Form 10BD requirements and validity
• Penalty provisions for misreporting
• ITR-U provisions and calculations
• Documentation requirements for donations
• Case study on bogus donation detection

Study Focus Areas:

1. Recent amendments (Finance Act 2023, 2024)
2. Judicial pronouncements on donation claims
3. Practical documentation requirements
4. Calculation of penalties and interest
5. Compliance procedures

📚 CMA Final Paper 17: Strategic Financial Management

Tax Planning Case Studies:

• Optimizing donations within legal limits
• CSR vs donation planning for companies
• Risk assessment of aggressive tax planning
• Cost-benefit analysis of ITR-U filing
• Ethical considerations in tax advice

Professional Application:

1. Client advisory on donation planning
2. Compliance verification services
3. Litigation support for tax cases
4. Internal controls for businesses
5. Training for finance teams

1. Can I claim cash donations for tax deduction?

Answer: Limited allowance exists but with strict conditions:

• 80G: Maximum ₹2,000 cash donation allowed per financial year
• 80GGC: ₹0 (completely prohibited for political donations)
• Best Practice: Avoid cash entirely. Use bank transfers for full audit trail.

2. What if the donee says “receipt lost” or “records destroyed”?

Answer: Take immediate action:

1. Get written communication from donee acknowledging original receipt
2. Request reissue with same date, amount, and details
3. Get affidavit if needed, explaining circumstances
4. Bank proof is mandatory – without it, claim will likely be rejected
5. Consider ITR-U if documentation cannot be reconstructed

3. My ITR was processed and refund received. Am I safe now?

Answer: NO. Processing doesn’t mean acceptance. Department can reopen:

• Within 4 years: Normal scrutiny cases
• Within 6 years: If income escape ₹10-50 lakh
• Within 10 years: If income escape >₹50 lakh or complex investigation
• Real case: Taxpayer got notice in 2025 for AY 2018-19 (7 years later)

4. Are family donations to same institution safe?

Answer: Potentially risky if not structured properly:

• Safe: Each family member has independent proofs, different payment modes, varied amounts based on individual income
• Risky: Same amount, same date, same payment mode from different family members
• Pattern matching algorithms flag family clusters donating identical amounts
• Recommendation: Stagger donations, use different payment methods, maintain individual documentation

5. Can donations to RUPPs ever be safe?

Answer: Possible but requires extra diligence:

• Party must have contested at least one election in last 5 years
• Active website with regular updates
• Office verifiable with staff
• Form 10BD issued properly
• Bank account in party name (not individual)
• Electoral bond record if applicable
• High risk: Dormant parties suddenly active only for donations

6. What if I can’t pay the full liability immediately?

Answer: Options available:

1. Installment Scheme: Apply under Section 220(3) with valid reasons
2. Stay Petition: File before CIT(A) with partial payment
3. Settlement Commission: If case qualifies (income disclosure needed)
4. Vivad se Vishwas: If scheme reopened for your case type
5. Important: File ITR-U first, then apply for relief. Don’t delay filing.

7. Will this affect my credit score or loan applications?

Answer: Potentially yes, if not handled properly:

• Income Tax Clearance Certificate: Required for large loans
• Banks check: Tax compliance as part of KYC
• High penalty: May affect debt-to-income ratio calculations
• Recommendation: Clear dues before major loan applications. Maintain tax compliance certificate.

8. Can I claim deduction for donations made to foreign charities?

Answer: Very restricted:

• Only if charity has FCRA registration in India
• Donation must be to Indian branch/account
• Subject to Foreign Contribution Regulation Act
• Documentation requirements stricter
• High scrutiny: Such claims get additional verification
• Recommendation: Prefer Indian-registered charities for tax benefits