IN THE ITAT AGRA BENCH
Shri Girraj Educational and Welfare Society
versus
Income-tax Officer 3(4), Mathura
IT APPEAL NO. 365 (AGR.) OF 2011
[ASSESSMENT YEAR 2007-08]
SEPTEMBER 28, 2012
ORDER
A.L. Gehlot, Accountant Member
This is an appeal filed by the assessee against the order dated 31.03.2011 passed by the ld. CIT(A)-I, Agra for the A.Y. 2007-08.
2. The effective ground raised in the appeal is in respect of addition of Rs. 27,96,200/- sustained by the CIT(A) out of the addition of Rs. 68,99,943/- made by the Assessing Officer (A.O.) on account of anonymous donation/undisclosed income.
3. The brief facts of the case are that the assessee is a society registered with the Registrar of Societies U.P. on 01.06.2006. The society was granted registration under section 12AA of the Income Tax Act, 1961 (‘the Act’ hereinafter). The objects of the society is charitable purpose by running school/institution for imparting of education, help the poor and orphans, protection of environment etc. During the assessment proceedings the A.O. noticed that the assessee has shown voluntary contribution received from 2700 donors amounting to Rs. 68,99,943/-. In order to verify the genuineness of the donors, the A.O. issued summons under section 131 of the Act and letters calling information under section 133(6) of the Act. The reply of donors and relevant observation has been noted by the A.O. in paragraph no. 9 f his order. Some of the donors have refused to give the donation. During the assessment proceedings, statement of Smt. Laxmi Sharma, W/o. Shri Nand Kishore Sharma, Secretary of the society was recorded under section 131 of the Act. It was said in the statement that the donation was collected by arranging camps in nearby village. On the basis of examination, the A.O. noticed that the society is mainly controlled by Shri Nand Kishore Sharma and his family members i.e. father and wife, and relatives and the donation alleged to have received from 2700 donors within a period of 9 months were not genuine. Some of the donors admitted to have given donation. Some of the donors are not traceable on the address given by the assessee. The A.O. observed that in a small span of ten months practically it is not possible to collect huge amount of donation of Rs. 68,99,943/- in cash from a large number of donors. The A.O. noted that not a single amount of donation was received by cheque. It has also been noted by the A.O. after examination of the books of account that all receipts of donation were prepared in a single sitting as it was evident that no signature of Authorized Representative/Cashier was available on these receipts. The signatures put were illegible. The donors filed affidavits before the A.O. but the assessee could not produce any of them for examination. The A.O. observed that the affidavit filed were of cyclostyled in nature and appeared to be made on the insistence of the society or its representatives. It was claimed before the A.O. that the said donation was received as corpus fund for the purpose of construction of the society building but during the course of assessment proceedings, no confirmation of such corpus donation have been filed. The A.O. treated this amount of Rs. 68,99,943/- as income of the assessee from undisclosed sources and the same has been taxed in the status of A.O.P.
4. The CIT(A) noticed that the A.O. has made the addition on the basis of small sample verification which is not sufficient for making a decision of treating the whole amount of donation as unexplained. The CIT(A) directed the A.O. to verify all the donors who were shown to have given donations more than Rs. 4,000/- and in case of other donors shown to have given donations less than Rs. 4,000/-, the CIT(A) further suggested to the A.O. that a sample survey may be made by sending letters to them on the address given in the list provided by the assessee. In compliance to the direction of CIT(A), the A.O. submitted his report vide letter dated 23.02.2011 which has been reproduced by the CIT(A) at page nos. 11 & 12 of CIT(A)’s order. The report submitted by the A.O. was in Hindi. On the basis of the A.O.’s repot, the CIT(A) noted that the sample survey done in cases of 667 persons, the A.O. concluded that about 53% donors were found to have either refused to give the donation or they could not be traced out to verify whether they have given donation or not. The CIT(A) sent the A.O.’s report to the assessee for its comments. The assessee disputed number of donors in the category of donation more than Rs.4,000/- stating that they are 502 in number and not 530 as noted by the A.O. in the remand report. Before the CIT(A), the assessee filed confirmation from 102 more donors who have given donation more than Rs. 4,000/-stating that the A.O. refused to accept these confirmation letters. It was also stated that remaining donors could have also been produced if the A.O. had given time. Regarding those letters which were returned back unserved due to incomplete address, it was stated by the assessee that if this information would have been given to the assessee earlier, complete address of those donors could have been furnished. However, it was admitted before the CIT(A) that at the worst donation pertaining to 120 donors below Rs. 4,000/- could have been disallowed in case explanation furnished by the assessee is not accepted. The assessee also raised objection before the CIT(A) that the assessee was not given opportunity to give the full address of the donors. He also opposed estimation of 53% as unexplained donation as rough method having no proper basis and authentic details and hence this method of computation was not accepted by the assessee. The CIT(A), considering the principle of natural justice, time was allowed to the assessee to file the reply on 22.03.2011. The assessee filed reply dated 28.03.2011 which has been reproduced by the CIT(A) at page nos. 13 & 14 of his order. The assessee reiterated the submissions which are discussed as above. However, the assessee again raised objection before the CIT(A) that the assessee was not provided reasonable opportunity of hearing. In order to give opportunity to the assessee as well as to the A.O. to explain their stand before the CIT(A), a joint hearing was fixed on 29.03.2011 which was attended by the Authorized Representative as well as by the A.O. The rejoinder filed by the Authorized Representative was examined by the A.O. and agreed before the CIT(A) that wherever proof of identity is given, those confirmations can be accepted. The CIT(A) has gone through the confirmations produced by the assessee and found that in all these confirmations the assessee has attached the proof of identity in the form of identity card issued by Election Commission. The CIT(A) accepted the confirmations of 102 donors who have given donation more than Rs. 4.000/-. The CIT(A) did not accept the assessee’s contention for further opportunity observing that this matter of receipt of donation is under examination since July 2007, when proceeding for providing registration to the assessee society under section 12AA was initiated and thereafter ample opportunities were given to the assessee to give full details of the donors along with their complete address. However, despite giving various opportunities, even after completion of the assessment order, the list which the assessee filed before the CIT(A) along with the written submission dated 16.03.2010, the CIT(A) found that in most of the cases, full addresses are not given. Before the CIT(A), it was also submitted by the assessee that the people of this country belie in secret donation (Gupt Dan), therefore, it not possible to give correct name and address of all the donors. The CIT(A) observed that such Gupt Dan are prevalent at least in case of religious trusts where people give donation as per their faith but the concept of Gupt Dan cannot be accepted in case of educational trust specially when it is being claimed by the assessee that these donations are received as corpus donation with specific purpose for making the building of educational institution. The CIT(A) further observed that generally in the name of Gupt Dan unaccounted money are being channelized to such institutes and, therefore, with a view to prevent channelization of unaccounted money to these institutes by way of anonymous donations, a new section 115BBC has been inserted in the Income Tax Act, 1961 by the Finance Act w.e.f. 01.04.2007.
5. The CIT(A) on the basis of verification carried out by the A.O. and after considering the assessee’s submissions bifurcated donations in two parts, donations given more than Rs. 4,000/- and donations given less than Rs. 4,000/-. In respect of donors who have given donation more than Rs. 4,000/- (amounting to Rs. 21,58,700/-), the total number of donors were 502. A sample verification carried out for 359 persons (257 verified by the A.O. + 102 confirmations filed by the assessee before the CIT(A)). The CIT(A) found that the necessary verification made in case of 71.5% such donation (359/502×100) and hence about 28.5% such donors were remained unverified. The CIT(A) accordingly calculated 28.5% of Rs. 21,58,700/- of which calculation comes to Rs. 6,15,229/-. The CIT(A) found that to that extent Rs. 6,15,229/- remained unverified.
6. As regards the donation less than Rs. 4,000/- the CIT(A) noted that total amount involved was Rs. 47,41,243/- having 2197 donations. The CIT(A) was of the view that on the basis of examination it will be quite reasonable to estimate 46% of the donation shown by the assessee as being unaccounted or unexplained money because the assessee has failed to get all its donations shown to have taken from 2700 persons verified because the list of donors being with incomplete or wrong addresses and hence not fully verifiable. The CIT(A) accordingly calculated amount of disallowance out of donation less than Rs. 4,000/- of which calculation comes to Rs. 21,80,971/-. The CIT(A) accordingly held that the total amount of Rs. 27,96,200/- is liable to be taxed under section 115BBC of the Act. In this regard the relevant detailed finding of CIT(A) is reproduced as below :-
(Paragraph nos.7.1 to 7.4, page nos.17, 18 & 19)
“7.1 After considering the submission of the Ld. AR, remand report of the AO and rejoinder of the appellant filed against the remand report of the AO and all the materials available on the assessment record, it is quite clear that entire amount of donation amounting to Rs. 68,99,943/- are not verifiable. It has also been found that the list of 2700 donors so far produced by the appellant does not have complete and correct addresses of all the donors and therefore, it is not possible to make verification of the entire amount shown by the appellant as donation. It has also been found that receipt books for donation produced by the appellant during the assessment proceeding did not appear to have been made on day to day basis looking to the writing on the slip book which prima-facie was found by the AO to have been written in a single sitting. Though it was claimed that these donations were collected by arranging camps in nearby villages but details of dates and places where these camps were organized could not be furnished by the appellant. While organizing such camps, certain expenditure are required to be incurred on the persons who are sent to manage such camps and for creation of necessary logistic for organizing such camps but no such expenses are shown to have been Incurred by the appellant. On the basic of verification so far carried out by the AO in case of the persons who are claimed to have given donation more than Rs. 4000/, numbering 502, it has been found that out of 502 donors listed out by the appellant, verification could be made only from 359 persons (257 verified by the AO + 102 confirmations filed before me) and thus the appellant was able to get the necessary verification made in case of 71.5% such donation (359/502X100) and hence about 28.5% such donors remained unverified. As per the categorized list of all the donation furnished by the Ld. AR in rejoinder, which is reproduced in para 6.2, it may be seen that such donors are shown to have contributed Rs. 21,58,700/-. Therefore, I find that in case of those donations which are shown more than 4,000/- an amount of Rs. 6,15,229/- remained unverified being 28.5% of Rs. 21,58,700/-
7.2 For other donations shown less than Rs.4000/- as per the list submitted by the Ld. AR and reproduced in para 6.2, the total amount involved is Rs. 47,41,243/- having 2,197 donors. Out of these 2,197 donors, necessary verification were made from time to time, first by the Ld. CIT-I Agra, then by the AO during the assessment proceeding and also during remand proceeding and the result of such enquiries are given are as under:-
