Gian Sagar Educational and Charitable Trust Vs DCIT (ITAT Delhi)
ITAT Delhi held that donations received cannot be considered to be anonymous donations under section 115BBC as details i.e., name, address, PAN, amount of donations of donors provided and not proved to be wrong.
Facts- Vide the present appeal, the appellant has contested that CIT(A) has erred in affirming the action of AO in treating the voluntary donations to the extent of RS. 11,60,77,000/- as anonymous donation u/s 115BBC of the Income Tax Act, 1961. The appellant contested that it had maintained complete records of the identity of the donor’s in compliance with provision of section 115BBC of the Act and disregarding the confirmation furnished by the appellant during the course of assessment as well as appellate proceedings.
Conclusion- Held that details of the names, addresses, their PAN card nos., cheque nos., dates and amounts of donation of the donors has not been proved to be wrong. Thus, the donation received by the assessee-trust cannot be considered to be anonymous donation by virtue of sub-section (3) of Section 115BBC of the I.T. Act, 1961.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal has been filed by the assessee against the order of the ld CIT(A)-30, New Delhi dated 28.03.2016 for AY 2012-13.
2. The assessee has raised the following grounds of appeal:-
“1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in treating voluntary donations to the extent of Rs. 11,60, 77,000as ‘anonymous donation’ under section 115-BBC of the Income Tax Act, 1961 (“the Act”).
2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that the appellant had maintained complete records of the identity of the donor’s in compliance with provisions of section 11 5-BBC of the Act.
3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in disregarding the confirmation(s) furnished by the appellant during the course of assessment/appellate proceedings.
4. That the Commissioner of Income-tax (Appeals) failed to appreciate that there was no requirement under the provisions of section 115-BBC of the Act to prove the ‘genuineness’ of voluntary contributions received by the appellant-trust.
5. That the Commissioner of Income-tax (Appeals) failed to appreciate that mere non-receipt of response to notice issued under section 133(6) of the Act would not ipso-facto mean that the voluntary contributions received were non-genuine.
6. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not following the binding decision of the CIT(A) in the appellant’s own case for the earlier assessment year 2011-12, in gross violation of principles of judicial discipline.
7. That the Commissioner of Income Tax (Appeals) erred in confirming levy of interest under sections 234B of the Act.”
3. The ld counsel of the assessee submitted that the ld CIT(A) has erred in affirming the action of the Assessing Officer in treating the voluntary donations to the extent of RS. 11,60,77,000/- asanonymous donation u/s 115BBC of the Income Tax Act, 1961 (for short the Act). He further submitted that the ld first appellate authority has grossly erred on facts and in law in not appreciating that the appellant had maintained complete records of the identity of the donor’s in compliance with provision of section 115BBC of the Act and disregarding the confirmation furnished by the appellant during the course of assessment as well as appellate proceedings. The ld counsel vehemently pointed out that the ld CIT(A) failed to appreciate that there was no requirement under provision of section 115BBC of the Act to prove the genuineness of voluntary contributions received by the appellant trust and merely non receipt of response to notice issued u/s 133(6) of the Act would not ipso‑ facto mean that the voluntary contributions received were non-genuine. The ld counsel again drew our attention towards orders of authorities below and submitted that the ld CIT(A) is not following the binding decision of the ld CIT(A) in assessee’s own case for the earlier assessment year 2008-09, which was upheld by the Tribunal order 21.10.2022, which is gross violation of the principles of judicial discipline therefore, impugned orders of authorities below may kindly be set aside in deleting the addition made by the AO u/s 115BBC of the Act. He vehemently, pointed out that since the identical issue under similar circumstances has been decided by the Tribunal in favour of the assessee dismissing the appeal of Revenue, therefore, the issue is squarely covered in favour of assessee by the order of the Tribunal (supra) is assessee’s own case.
3.1 The ld counsel further placing vehement reliance on the order of ITAT Delhi Bench dated 21.10.2022 in the cross appeal in assessee’s own case of AY 2008-09 rendered in ITA No. 4775/Del/2015 (departmental appeal) and submitted that identical issue was decided in favour of the assessee by ld CIT(A) and the appeal of the revenue has been dismissed by the Tribunal by passing the said order and upholding the conclusion drawn by the ld CIT(A) in favour of the assessee, on the identical issue under similar facts and circumstances. The ld counsel of the assessee thus submitted that the issue is covered in favour of the assessee by the order of the coordinate bench of Tribunal for AY 2008-09 dated 21.10.2022 (supra).
4. The ld counsel also briefly reiterated the assessee’s written submissions and submitted that it is settled law that wherein, assessee who was entitled to exemption u/s 115BBC of the Act and can claim benefit thereof for the purpose of income deem to chargeable to tax u/s 68 of the Act as per judgment of Hon’ble jurisdictional High Court in the case of DIT Vs. Hans Raj Samarak Society (2013) 35 taxmann.com 642 (Delhi). Further, placing reliance on the judgment of DCIT(E) Vs. Raunaq Educational Foundation 294 ITR 76 HC (Delhi), the ld counsel submitted that it is now well settled principle of law that although the exemption provisions are to be construed strictly as regards to applicability to the case of the assessee once it is found that the same is taxable, the same are required to be interpreted liberally. Ld counsel of assessee also placed reliance on the judgment of Hon’ble Supreme Court in the case of DCIT vs. Maharaja Agrasen Technical Education Society in ITA No. 5245/D/2015 for Assessment Year 2011-12 S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income-tax [1998], 230 ITR 636 (SC) Commissioner of Income Tax v. M/s Muslim Educational Society ITA. No. 1711 of 2009 HC (Kerala).
5. Lastly, the ld counsel submitted that donations received by the appellant are not anonymous donations u/s 115BBC of the Act as the appellant has maintained complete particulars of the donors. Further, since the assessee has applied all its receipts towards its objects, as such, addition upheld by the learned CIT(A) is unsustainable under the facts and in law.
6. Replying to the above contentions of assessee the ld. CIT(DR) drawing our attention towards relevant paras of assessment order submitted that postal remarks mentioned in the undelivered notices were also communicated to the assessee and the assessee again asked to submit requisite documents to prove the identity of persons, genuineness of the transaction and credibility of the donors. But in response to the same, the assessee submitted confirmation from some of the donors regarding donations made by them to the The ld CIT DR submitted merely because donations have been received though banking channels all the donor are having PAN, the donations shown by the assessee cannot be held as inconfirmity with the provisions of section 115BBC and other provisions of the Act and therefore, the AO rightly made adverse inference against the assessee.
7. The ld CIT(DR) further drawing our attention towards relevant operative para 5.7 of first appellate order submitted that the ld first appellate authority has granted part relief to the assessee by allowing donation from five donors amounting to Rs. 4 crores as genuine and rightly held that the donations in the name of remaining 32 alleged donors amounting to Rs. 11,60,77,000/- are anonymous as per amended of section 115BBC of the Act and therefore, no interference in favour of assessee was called for in the first appellate order on this issue.
8. The ld CIT DR also placed vehement reliance on the judgment of ITAT Agra Bench order, in the case of Shri Girraj Educational and Welfare Society Vs. ITO and submitted that the failure of the assessee society to maintain proper records including names and other details of voluntary contribution received by it then the same were rightly brought to tax as anonymous donation within the meaning of section 115BBC of the Act. Further, placing reliance on the order of ITAT Jaipur Bench order dated 07.02.2020 in the case of Rama Devi Memorial Charitable Trust, the ld DR submitted that when the assessee trust has failed to substantiate that the voluntary donation was received by obtaining credible and verifiable evidence in terms of complete names and addresses of the donors and purpose of donations then the AO is right in invoking provision of section 13(7) read with section 115BBC of the Act and the ld CIT(A) is also quite correct and justified in upholding the part addition made by the AO by taking balanced appropriate judicial approach. Finally, the ld DR submitted that the appeal of the assessee may kindly be dismissed being devoid of merits.
9. On careful consideration of the above rival submissions from the assessment order we note that the AO invoked provision of section 115BBC of the Act with following observations are and findings:-
“8. Before proceedings further, some provisions of the Income Tax Act, 1961 regarding receipts of donations and credits in the books are discussed as under:-
(a) As per the provisions of section 11 (1)(d)) of the Income Tax Act, which reads as under;-
“Subejet to the provisions of section 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-
(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution,”
(b) The provision of section 12(1) of the Income Tax Act states as under-
“Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 he deemed to be income derived from property held under trust wholly for charitbale or religious purposes and the provisions of that section and section 13 shall apply accordingly.”
(c) According to section 68 of the Act, if there is any credit entry in the books of the asssessee then there are the follo wign three ingredients to be proved by the assessee:-
(i) Identity of the creditor
(ii) Genuineness of the transactions.
(iii)Source and the creditworthiness of the creditor.
(d) The provisions of section 11 5BBC of Income Tax provides that anon emus donation received by trust, educational institutional or hospital shall be charged @ 30% on the agreegate of anonemus donation received in excess of 5% of donation received by the assessee or Rs. 1,00,000/-
9. Therefore the assessee was given the list of persons/ concerns where notices u/s 133(6) were returned unserved or no reply have been received. The postal remarks mentioned in the undelivered notices were also communicated to him. He was asked to submit the the requisite documents to prove the identity of persons, genuineness of transactions and credit worthiness of persons.
10. In response to same the assessee submitted the confirmations from some of the persons regarding the donations made by them to assesseee trust. It is submitted by the assesece that the donations have been received through banking channels. All the donors are are having PAN. Therefore the donation shown by it are proper in con firmity of law and no adverse inference should be draw.
11. The submission of assesse is carefully considered. As per the provision of section 11(1)(d) and 12(1) of the Income Tax Act, the donation received by trust/institution shall be exempt or cover u/s 11 only if the donation are voluntarlly. If the donation is voluntarily then only it can consider income derived from the trust property. In absence of the confirmations as well as other evidence of identity and genuineness of transaction, it cannot be established that the donation are voluntary. Therefore, the receipts of donation by the assessee are to be examined as per the criteria of section 68 of the Income Tax Act.
12. The assessee provided only confirmation letters of donors in some cases. The confirmation letter inspire no confidence on the claim of assessee that the donation are genuine and voluntarily but casts serious doubts about the genuineness there of.. Most of the confirmation letter submitted by assessee are made on computer with change of font or colours. Majority of letter head do not contain any phone number of the donors mentioned therein. Merely providing a name, address and PAN numbers of the donor, the assessee could not escape from its obligation which has been caste by law on it. The assessee has failed to furnish by way of evidence the ITR returns, financial statements including balance sheet, copies of bank statements, memorandum and articles of association of the donor companies. Further, in many cases letters u/s 133(6) of the Act so called donors / contributors has been received back undelivered or no reply has been received. The assessee failed to give the reason of non delivery of the letters which were issued to the addresses provided by him. He also did not submit the current address in case of any change, so that notices may be issued at the new address for getting information.
13. Under these circumstances, the genuineness and creditworthiness of the said donations and corpus fund contributions remaining unsubstantiated and the assessee having been unable to discharge his onus in this regard, despite sufficient opportunity having been given for the same, the said donations and corpus fund contribution are held to be non-genuine and actually the assessee used it as a device to introduce his undisclosed income.
14. As the above referred donations are not found genuine, therefore, it cannot be deemed to be income derived from the property held under the trust. Hence, no exemption u/s 11 of the Act is allowable out of the said amount. 15. Therefore, in view of the above fact, it is held that the assessee trust introduced amount of Rs. 15,60,77,000/- on account of donations by taking entries only. The assessee failed to give satisfactorily evidences regarding genuineness and creditworthiness of such persons. Therefore, amount of Rs. 15,60,77,000/- is treated as income of assessee as per the provisions of section 68 read with section 115BBC of the Income Tax Act. The deductions u/s 11 are therefore not allowable on the same. Therefore, the said amount of Rs. 15,60,77,000/- is treated as income of assessee from undisclosed source and added u/s 68/111BBC of the Income Tax Act.
(Addition Rs. 15,60,77,000/-)”
10. Further, from the relevant part of first appellate order we note that the ld CIT(A) granted part relief to the assessee and confirmation remaining part of addition amounting to Rs. 11,60,77,000/- with following observations and findings in para 5.7 of first appellate order which as follows:-
“5.7 I have carefully considered assessment order, written submissions, case laws relied upon and oral arguments of Ld. AR. The objections/arguments of the appellant are discussed as under:-
(i) During the appellate proceedings, it has been submitted by the appellant that all the details of the donors were filed before the A. O.. giving name. address, date of payment, amount and PAN. During the assessment proceedings, the A. O. issued notices u/s 133(6) of the Act, where notices were not complied in 37 cases, as against the total notices issued in 49 and the A.O. has stated as under:
> No reply received in 22 cases,
> In 11 cases, postal authority gave remark as “Not Known”, and
> In 4 cases, postal authority gave remark as “Left”.
However, the appellant has submitted that the A.O. has wrongly considered the donations in 37 cases as non-genuine and further, the A. O. has not given the benefit of set off of application of income against the receipt of the assessee trust.
(ii) The appellant has submitted that in A. Y. 2008-09, the A. O. has made the addition of Rs. 22,53,53.785/-, in the assessment order u/s 143(3) dated 30.12.2010. by holding anonymous donations and as such there is no applicability of section 115BBC/13(7) of the Act and the total income was determined at Rs. 16,30,38,330/- This assessment order u/s 143(3) was rectified vide order u/s 154 dated 27.5.2011, allowing the set off assets purchased during previous year minus depreciation claimed, which is amounting to Rs. 61.91,04,926/- and determined the taxable income at NIL (net loss of Rs. 45,60,66,470/-).
Against the above addition of Rs. 22,53.53.785/-, the appellant filed an appeal before the CIT(A)-30 on 30.12.2013. Ld. CIT(A), disposed off the ground vide order dated 24.3.2015 in appeal no. 400/13-1 4/1 551 for A. Y. 2008-09, by observing as under:-
A perusal of the above definition reveals that if the person receiving such donation maintains the record of identity and address of donors then such donation cannot be called anonymous have been notified as per the requirement of this section,
In view of the above facts. I agree with the arguments of Ld. AR that the requirement of section 115 BBC is not at par with onus on the assessee casted us 68 of 1. T. Act. i.e. to prove creditworthiness of the donors. Emphasis in section 115 BBC is to maintain & declare correct identity of the donors. The Ld. AR argued that the appellant have maintained & disclosed such name & address of donors during the assessment proceeding as accepted by the assessing officer in the original assessment order therefore section 115 BBC is not applicable to the facts of the case
I have examined these arguments on the facts of the case & perused original assessment order. As per para (5) of the original assessment order. the appellant has maintained the name & address of all the donors, which has been reproduced in the assessment order Unless these details are proved to be wrong that these persons have not donated to the appellant, in my view the donation received cannot he said as anonymous donation by virtue of sub section (3) of section 115 BBC.
I have perused the status of enquiry contained in para 6.1 & 6.2 of the original assessment order. In one donor namely M/s. Adivasi Mahila Vikas Samiti, it has been categorically stated that it has not made any donation to the appellant. The relevant portion of finding is contained in para 6.1 of the original assessment order & reproduced as under:-
6.1 Here, it is pertinent to stress upon the reply received in this office in the case of Adivasi Mahila Vikas Semiti. Fuldungri, P.O. Ghatsila, Distt. Singhbhum. Jharkhand 832303 from whom, donation @ Rs. 1.46 Cr is stated to have been received. The counsel of Adivasi Mahila Samiti has in response to letter ws 133(6) stated that during the relevant period Adivasi Mahila Vikas Samiti did not make any transaction with the said M/s Gian Sagar Educational and Charitable Trust and made no payment to them on uny account.
As the alleged donor M’s Adivasi Mahila Vikas Samiti, has not confirmed the donation to the appellant, to this extent the name or address of the donor is incorrectly maintained by the appellant & therefore, onus on the appellant to the extent of this donation to maintain identity of donor is not fulfilled. As the meaning of maintaining identity of donors means name & address should be correct. If the name of the person with address maintained by assessee denies to have paid donation, it means such details are not correctly maintained & therefore, not maintained. Neither during the present impugned assessment proceeding nor during the present appellate proceedings, the appellant hus produced or contradicted this findings. Considering these above Rs. 1.46 Crores allegedly received from M’s Adivasi Mahila Vikas Samiti is treated as anonymous donation and is taxable us 115 BBC of LT. Act & no deduction is allowable on account of application of income under subsection (7) of section 13 of IT Act, 1961.
As far as the balance donations are concerned, the enquiry conducted during the original assessment proceedings revealed that the enquiry letters mere either not replied or not served. This does not prove that the appellant has not maintained the requisite details to establish the identity of donors specially under the circumstances where all the alleged donation are through banking channels and letters of donors were produced during the assessment proceedings.
M/s. Gian Sagar Educational and Charitable Trust The appellant has filed complete details of donation during the present impugned assessment proceedings, containing name, address & PAN
Therefore, these are the cases at the most of not discharging onus u/s 65 of 11 Act. In any case all the donation except corpus donation is credited as income of the assessee. In my view these donation cannot be called anonymous donation therefore section 115 BBC read with section 13(7) are not applicable.
In view of the above facts I agree with the arguments of Ld. AR that even in case of unexplained cash credit us 68 the income have to computed in accordance with the provision of section 11 to 13 of 1.7. Act.
I have perused the judicial pronouncements relied by the Ld. AR on this issue. Since registration u/s 12AA is continuing in the case of the applicants, therefore. the appellant’s income has to be computed in accordance with the provision of section 11 & deduction on account of application has to be allowed. I rely on the following judicial pronouncements on this issues cited by Ld. AR.
i) Commissioner of Income Tax vs. Uttaranchal Welfare Society (2013) 86 CCH 333 All HC. (2014) 364 ITR 398 (All)
ii) Director of Income Tax (Exemptions) & Anr. vs. Sri Belimatha Mahasamsthana Socio Cultural & Educational Trust 336 ITR 694 High Court of Karnataka
iii) Director of Income Tax (Exemption) vs. Bharat Kalyan Pratishthan (2002) 257 ITR 609 (Del) High Court of Delhi
iv) Assistant Commissioner of Income Tax vs. Geetanjali Education Society (2008) 114 TTJ (Jd) 697 ITAT, Jodhpur
v) Director of Income Tax vs. Raunaq Education Foundation 294 ITR 76 (Del) High Court of Delhi
vi) Director of Income Tax (Exemption) vs. Keshav Social & Charitable Foundation (2005) 278 ITR 152 (Del) High Court of Delhi
In view of the above judicial pronouncements, application of income is to he allowed as the registration u/s 12AA is continuing & therefore, the activities of the trust are in accordance with its Memorandum of Association
Considering the entire facts & circumstances of the case, I hereby confirm anonymous donation to the extent of Rs. 1.46 Crores u/s 115 BBC and balance donation is not treated as anonymous donation within the provision of section 115 BBC and application of income of income is allowed for balance addition, Accordingly these grounds of appeal are partly allowed. “
(iii) During the appellate proceedings, the donation in the name of 5 persons were also verified by the A. O. and in the remand report, same has been found in order, as reply has been received. The details of these 5 donors, are as under-
