Sri Adichunchanagiri Shikshana Trust Vs Deputy Commissioner of Income (ITAT Bangalore)
Dumb Diaries Can’t Kill Charity- ITAT Says No Tax Without Proof, No Denial of Section 11
A search was conducted on the assessee–a large charitable trust running medical/educational institutions–as well as on one H.B. Shivaram, who was involved in admission processes. During the search, handwritten diaries & loose papers (not maintained by the trust & not signed by any trustee) were seized. These diaries contained student names, amounts, some entries marked “PP”, alleged fee receipts, refund figures, & payments to brokers.
AO treated these diaries as books of account & made four major additions:
1. ₹7.74 Cr – “PP Receipts” treated as unaccounted income u/s 69A, alleging cash was handed over to Swamiji.
2. ₹7.65 Cr – “Fee not received / Fee refunded” treated as unrecorded receipts.
3. ₹1.21 Cr – “Expenditure to agents/brokers” treated as unexplained expenditure u/s 69C.
4. ₹94.75 lakh – “Voluntary donations” treated as unexplained receipts.
He also denied Section 11 exemption, claiming violation of Section 13 (benefit to trustee).
In the first appellate round, the matter was remanded by ITAT because the earlier CIT(A) ignored binding directions. In the second round, the CIT(A):
- Confirmed ₹7.74 Cr (PP receipts)
- Sustained only ₹5.24 Cr out of ₹7.65 Cr fee refund (₹2.41 Cr deleted as double counting)
- Sustained only ₹76.56 lakh out of ₹1.21 Cr expenditure (₹45.19 lakh actually income)
- Deleted ₹94.75 lakh voluntary donations (supported by earlier ITAT/HC ruling)
- Allowed Section 11 exemption, as no concrete violation of Section 13 was proven
Both assessee & Revenue appealed.
