ITAT Pune held that onus of proving the genuineness of transaction of receipt of donation not discharged. Accordingly, held that all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations.
Facts- The appellant assessee is public trust registered under the Bombay Public Trust Act 1950 and is also registered u/s 12A and u/s 80G of the Act.
The assessee society is a non-filer, however the return of income filed pursuant to notice u/s 142(1) of the Act was subjected to scrutiny and consequent to assessee’s failure to prove the identification of 7145 individual donors and genuineness of cash donations of ₹2,89,20,955/- received by it, AO framed the assessment by bringing to tax entire amount of cash donations as ‘Anonymous’ u/s 115BBC of the Act.
Being aggrieved by the aforestated addition, the assessee preferred an appeal before Ld. FAA, who by the impugned order has granted a substantial relief to the assessee trust by restricting the ‘Anonymous’ donation to ₹82,600/-. Being aggrieved, both the Revenue and the Assessee has preferred the present appeal.
Conclusion- It is settled position of law that the burden of proving the genuineness of transaction of receipt of donation is always on the assessee. This burden can be discharged by it adducing cogent and persuasive evidence. In the absence of any such positive evidences from the appellant assessee, the Ld. AO was justified applying the test of human probabilities.
We are of the considered view that all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations. Holding so, we do not see any infirmity in the order of assessment framed u/s 143(3) of the Act, but the order of Ld. CIT(A) in restricting the taxation of anonymous donation to ₹82,600/-. For the reason, we set-aside the impugned order of Ld. FAA and restore the order of assessment intact.
FULL TEXT OF THE ORDER OF ITAT PUNE
These cross appeals are filed by the Revenue and the assessee against the common order of the Commissioner of Income Tax (Appeals)-2, Aurangabad [‘CIT(A) or FAA’ hereinafter] vide Appeal No. ABD/CIT(A)-2/109/2014-15 dt. 12/05/2017 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ hereinafter].
2. Since the issue raised in these cross appeals are related to common facts, we proceed to dispose-off these together by this common order.
3. The Revenue raised following meritare grounds in the memorandum of appeal filed by it;
“1. The Ld. CIT(A) has erred in deleting the addition of Rs. 2,87,38,355/-(Rs. 2,88,20,955- Rs. 82,600) made u/s.115BBC of the I.T.Act, as anonymous donations, even though the AO brought on record defects in maintaining records as per the provision of said section.
2. The Ld. CIT(A) has erred in restricting the addition at Rs. 82,600/- on account of anonymous donation by specific donors only verified on sample basis, without extrapolating the ratio to the entire donation amount in view of the details available on record.
3. The appellant craves to leave, to add, alter, amend or delete any of the above Grounds of Appeal.”
4. Whereas the assessee as raised the following grounds in the cross appeal filed;
“1. Appellant Assessee trust contends that, the notice u/s 143(2) of the ITA, 1961; dated 03/03/2014; issued by the learned AO is bad in law, as the notice is issued in violation to the Instruction No. 10 & 13 of 2013 issued by the CBDT.
2. Appellant Assessee trust contends that, the enquiries conducted by the learned AO before 03/03/2014 (i.e. date on which notice u/s 143(2) of the ITA, 1961 is issued), are bad in law as the same were conducted without any jurisdiction / authority under the ITA, 1961.
3. Appellant Assessee trust contends that, the notice u/s 143(2) & 142(1) of the ITA, 1961 dated 03/03/2014 are ante-dated, considering the specific observation in Line-1 of Para-10 of the assessment order.
4. Appellant Assessee trust contends that, the learned I-T Authorities erred in law and on facts, in sustaining addition of Rs. 82,600/- as ‘Anonymous Donations’ u/s 115BBC of the ITA, 1961; on the analogy that the donors could not be reached on the given address. The earned I-T Authorities ought to have appreciated that Appellant Assessee Trust has maintain all the record of identity of donors indicating name and address as prescribed u/s 115BBC of the ITA, 1961; as such taxation u/s 115BBC of the ITA, 1961 is uncalled for.
5. The appellant craves leave to add / alter / modify / delete / amend all / any of the grounds of appeal.”
5. We shall first deal with the cross appeal of the assessee i.e. ITA No. 525/PUN/2022.
5.1 We note that, the impugned order was passed on 12/05/2017 and was served on the assessee on 13/062017. The extant cross appeal is filed on 12/07/2022 with a delay of 1796 days. The assessee submits that the first part of delay of 930 days i.e. from 11/08/2017 to 27/02/2020 was attributable to its unawareness of the fact of filing of the appeal by the Revenue. And 2nd part of the delay of 866 days falling within the exclusion ordered by the Hon’ble Supreme Court in MA No. 665/2021 in SMW(C) No. 3/2020.
5.2 Before we advert to the merits of the controversy of the present Cross Appeal, from rival submissions, a short point that primarily arises for our determination as to ‘Whether appellant have explained sufficient cause for condonation of 1st part of delay of 930 days in filing the present cross appeal or not?’
5.3 Let us first consider well settled propositions of law relating to condonation of delay. In so far as the liberal approach to be adopted in condonation of delay is concerned, in “Collector, Land Acquisition, Anantnag and Anr. Vs Ms Katiji and Others” reported at 167 ITR 5 (SC), the Hon’ble Supreme Court vide paragraph 3 reiterated certain principles to be followed while dealing with condonation of delay which are summarily stated as;
a. Ordinarily a litigant does not stand to benefit by lodging an appeal.
b. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
c. Every day’s delay must be explained does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner.
d. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
e. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
f. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
5.4 With this de lege lata, we now have to examine whether the reason put forth by appellant & affiant or deponent expanses cause of sufficienso within the purview of sub section (5) of section 253 of the Act;
a. It is not in dispute that impugned order of Ld. FAA was served on 13/06/2017 and the present cross appeal is instituted on 12/07/2022.
b. It is also undisputed that, due to Covid-19 a nation-wide lockdown was declared and pursuant to suo-motto decision from Hon’ble Apex Court in MA/21/2022 the period of limitation stands extended from 15/03/2020 upto 28/02/2022, therefore this fraction of the period including 90 days from the expiry thereof is saved of limitation.
c. Thus actual delay in instituting the present cross appeal consist of 1st part of 930 days delay from 13/06/2017 to 27/02/2020 i.e. falling much before the start of COVID-19 pandemic and such other fraction of delay commencing from the expiry of 90 days from 28/02/2022 till the institution of present cross appeal i.e. 12/07/2022.
d. Needless to state that, in terms of provisions of section 253(3) of the Act, every appeal u/s 253(1) & 253(2)of the Act shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the Principal Commissioner or Commissioner.
e. As is evident from the averments made in the application for condonation of delay and affidavit filed by appellant that, ‘Being the period in which, fact of filing of appeal by I-T department was not known by Appellant Assessee Trust’. Apparently, the averments in the application and affidavit of the assessee are vague and are devoid of any basis.
f. Further the Ld. AR appearing before us did not establish as to how the averments in the application or affidavit establishes sufficient cause towards 1st part of delay of 930 days in filing the appeal.
g. In view of the foregoing, when the averments in the application or affidavit executed on 12/07/2020 are vague and not corroborated by any independent evidence while no sufficient reasons for delay in filing the appeal attributable to appellant have been submitted, the delay in instituting present cross appeal stands bottomless of adequate and enough reasons.
5.5 We note that, there is no whisper in the entire application regarding a single step taken by appellant to showcase the required seriousness in knowing about filing of appeal by the Revenue. In the event plea of the appellant smoke fancy and unreasonable. Nota bene, the core principles that has been culled down by the Hon’ble Supreme court in ‘Esha Bhattacharjee Vs Managing committee of Raghunathpur Academy and Ors’ reported in 12 SCC 649, are compelling to be referred herein before with regards to conduct of the appellant;
a. Lack of bonafied imputable to a party seeking condonation of delay is a significant and relevant fact;
b. The concept of liberal approach has to encapsulate the conception of reasonableness and totally unfettered free play is not allowed;
c. The conduct, behaviour and attitude of a party relating to its negligence cannot be given a total go-bye in the name of liberal approach.
d. If the explanation offered is concocted or the grounds urged in the applications are fanciful, the Courts should be vigilant not to expose the other side unnecessarily to face such litigation;
e. It is to be borne in mind that no one gets away with fraud, misrepresentation or interpolation by taking recourse to the technicalities of the law of limitation.
f. An Application for condonation of delay should be drafted with careful concern and not in a haphazard manner harbouring the notion that the Courts are required to condone the delay on the bedrock of the principle that adjudication of lis on merits is seminal to justice dispensation system;
g. The increasing tendency to perceive the delay as a non-serious matter and hence lackadaisical propensity can be exhibited in a nonchalant manner requires to be curbed, of course, with legal parameters.
5.6 The true length of delay is no matter and acceptability of explanation is the only criteria as primary function of the Tribunal is to adjudicate dispute between the parties and to advance substantial justice. In this context it is worthy to note the law summarized at para 15 by the Hon’ble Supreme Court in “Basawaraj and Anr vs- Special Land Acquisition Officer” reported in L4 SSC 8U(SC) as;
“15. The law on the issue can be summarized to the effect that where a case has been presented in the court beyond limitation, the applicant has to explain the court as to what was the “sufficient cause” which means an adequate and enough reason which prevented him to approach the court within limitation. In case a party is found to be negligent, or for want of bona fide on his part in the facts and circumstances of the case, or found to have not acted diligently or remained inactive, there cannot be a justified ground to condone the delay. No court could be justified in condoning such an inordinate delay by imposing any condition whatsoever. The application is to be decided only within the parameters laid down by this Court in regard to the condonation of delay. In case there was no sufficient cause to prevent a litigant to approach the court on time condoning the delay without any justification, putting any condition whatsoever, amounts to passing an order in violation of the statutory provisions and it tantamounts to showing utter disregard to the legislature”.
5.7 In the light of aforesaid decisions, the burden is on the party claiming condonation of delay to place before the Tribunal, in clear and explicit terms, all facts on which the party relies, so that the Tribunal can come to the conclusion that it is not a case of want of diligence or inaction on the part of the applicant. Inaction or want of diligence on the part of the applicant would not entitle the applicant to the benefit of the provisions of section 253(5) of the Act.
5.8 In the case under consideration, admittedly, the assessee trust has not shown any action or vigilance for a period of more than 930 days after the impugned order was served by the Revenue. Further, the assessee has not proved any inaction or negligence on the part of a third party, much less have they pleaded any action or vigilance on their own part. The assessee did not care to file present cross appeal for a long period of 930 days of service in the first part and for such further delay commencing from the expiry of 90 days from 28/02/2022. The averments made either in the application or in the affidavit are not corroborated by any evidence and since the assessee has failed to make out a case that there was sufficient cause for delay in filing this cross appeal, therefore keeping in view the propositions of law laid in judicial precedents relating to condonation of delay and having regard to the totality of the facts & circumstances as discussed above, in our considered view the appellant is found to be casual, non-serious and non-vigilant in preferring appeal against impugned order, therefore, to avoid injustice to the Revenue, the application for condonation of delay being devoid of reasonable and sufficient cause merits dismissal, ergo ordered accordingly.
6. We now deal with ITA No. 1919/PUN/2017; wherein we note that;
6.1 The appellant assessee is public trust registered under the Bombay Public Trust Act 1950 and is also registered u/s 12A and u/s 80G of the Act.
6.2 The assessee society is a non-filer, however the return of income [‘ITR’ hereinafter] filed pursuant to notice u/s 142(1) of the Act was subjected to scrutiny and consequent to assessee’s failure to prove the identification of 7145 individual donors and genuineness of cash donations of ₹2,89,20,955/- received by it, the Ld. Income Tax Officer, Ward-1(1), Aurangabad [‘AO’ hereinafter] by an order dt. 27/03/2014 framed the assessment by bringing to tax entire amount of cash donations as ‘Anonymous’ u/s 115BBC of the Act.
6.3 Being aggrieved by the aforestated addition, the assessee preferred an appeal before Ld. FAA, who by the impugned order has granted a substantial relief to the assessee trust by restricting the ‘Anonymous’ donation to ₹82,600/-.
6.4 Being aggrieved, both the Revenue and the Assessee are before us in present cross appeals.
7. During the course of physical hearing, the Ld. AR submitted that the assessee society had discharged the onus casted upon it by filing necessary details of various donors such as name, address and amount of cash donations etc. to the extent available. The Ld. AR withdrawing the ground number 4 of its cross appeal as ‘not pressed’ contended that, upon the satisfaction that the appellant had maintained records as required under law, the Ld. CIT(A) has rightly restricted the ‘Anonymous’ donation only to the extent attributable to unidentified donors i.e. ₹82,600/-. Au contraire, Ld. DR pressing into service written submission has vehemently argued that, in the absence of complete details as to the ‘full names’ and ‘full address’ the identification of the donors and the veracity of cash donations received remained unexplained and unproved. The Ld. DR also submitted that the notices issued u/s 133(6) of the Act to various donors have been returned un-served by the postal authorities with the remarks like ‘address not found’, ‘insufficient address’, ‘addressee left’, this ispo-fact proves that these donation are indeed anonymous in nature.
8. The Ld. DR further submitted that, on direction of Ld. FAA during remand proceedings the assessee filed new set of donors list contending that the first list was erroneously submitted by the clerk in mistaken belief and without the knowledge of chairman/president of the trust. This make belief story should not have been accepted in the first appellate proceedings. And to drive home the contention, Ld. DR has placed strong reliance on CBDT Circular No. 14/2006 issued with reference to section 115BC of the Act.
9. We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [‘ITAT-Rules’ hereinafter], perused the material placed on records, case laws relied upon and duly considered the facts in the light of settled legal position.
10. In the extant appeal of the Revenue, we observed that;
10.1 In the absence of return of income for the assessment year [‘AY’ hereinafter] 2011-12, the notice u/s 142(1) of the Act was served calling upon the assessee to file return of income [‘ITR’ hereinafter], pursuant to such notice only, the assessee filed its ITR alongwith audited financial statement on 19/11/2013 declaring total income ₹51,410/-. The verification of audited financial statement revealed that the assessee has accounted receipt of cash donations totalling to ₹2,89,20,955/- from 7145 person each ranging from ₹3500/- to 5000/- and in order to verify veracity thereof a list of donors was called out from the appellant assessee.
10.2 Upon receipt of a list, in the first instance Ld. AO issued letters to 25 random donors on 17/02/2014 of which 15 were returned unserved by postal authorities with a remark ‘insufficient address’ or ‘incomplete address’, and whereas 2 donors did not confirm the fact of making donation in-spite receipt of letters/notices from the IT-Department. To concretise the basis, before culminating the assessment proceedings, the Ld. AO in 2nd set has issued letters to another 25 donors from list provided by the assessee. However in this round also 19 of such letters were returned unserved by postal authorities with similar remark ‘insufficient address’ and reminder did not bother to reply, thus remained unconfirmed.
10.3 When self-serving confirmations and receipts failed inspire any confidence, therefore the Ld. AO as matter of last resort deputed his inspector to verify the identity of 10 random donors; however such exercise also remained futile. Consequently the appellant was put to show-case-notice, and in the event of effective failure on the part of appellant to discharge the onus casted upon it, the Ld. AO brought to tax the cash donations treating it as anonymous in nature u/s 115BBC r.w.s. 2(24)(iia) of the Act.
10.4 In the first appellate proceedings, the Ld. CIT(A) without first dealing with the objection of the Ld. AO raised against the admission of additional evidence submitted by the appellant in the form of ‘new set of donor list’, has restricted the anonymous donation addition to the extent attributable random donors whose identity remained unproved.
11. In the present case, beside making a note of failure to file ITR by the appellant suo-motu within the time allowed u/s 139(1) of the Act, we find certain highly improbable events in the matter of receipt of donations such as; (a) all donations from 7145 persons are received in cash, (b) all donations remained sliced in the range of ₹3500/- to ₹5000/- (c) identified donation receipts bears signature of different person instead of designated secretary (d) None of the cash donation were found deposited into the bank account (d) The letters issued u/s 133(6) were mostly returned unserved with a remark ‘address not found’, ‘insufficient address’, ‘addressee left’, (e) From the inspectors report dt. 11/03/2014 it remained uncontroverted fact that none of the donor found at the given address (f) Most of the persons listed in the donor list do not represent complete name (g) Further most of the person listed as donors with incomplete and vague address etc., therefore, in our considered opinion nothing more was required to apply the test of human probabilities so has to held such donation as ‘anonymous’ u/s 115BBC of the Act.
12. Having vouched the fact and circumstance, we are heedful to state that, the appellant has dejectedly failed to discharge the onus of rebuttal of the material with which it was confronted by the AO. These uncontroverted facts beyond any iota of smoke would shows that the transaction of the receipt of the donations is abnormal, fictitious and militates against the claim of appellant that the cash donations are genuine. It is settled position of law that the burden of proving the genuineness of transaction of receipt of donation is always on the assessee. This burden can be discharged by it adducing cogent and persuasive evidence. In the absence of any such positive evidences from the appellant assessee, the Ld. AO was justified applying the test of human probabilities and drawing adverse inference in the light of judgements of the Hon’ble Supreme Court in the case of ‘CIT Vs Durga Prasad More’, reported in 72 ITR 807, ‘CIT Vs Daulat Ram Rawatmull’, reported in 87 ITR 349, and ‘CIT Vs P Mohanakala’, reported at 291 ITR 278(SC).
13. The plea of the appellant that the clerk in the first instance submitted the incorrect list as the original list was maintained in a language other than english hence certain errors were crept-in which has been rectified before the first appellate proceedings by bringing on record new list of correct donors failed to inspire any confidence to us, thus deserves to be rejected. The very conduct of the appellant made us to believe that the information filed during the original assessment proceedings is not correct or incomplete, thus failure to maintain the identity of the person indicating full name and full address. As a result, on consideration of totality of facts & circumstances, we are of the considered view that all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations. Holding so, we do not see any infirmity in the order of assessment framed u/s 143(3) of the Act, but the order of Ld. CIT(A) in restricting the taxation of anonymous donation to ₹82,600/-. For the reason, we set-aside the impugned order of Ld. FAA and restore the order of assessment intact.
14. Resultantly, cross appeal of the assessee is DISMISSED and the appeal of the Revenue is ALLOWED.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 14th day of June, 2023.