Case Law Details
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:-
|
Letter issued for verification |
Refused for giving donation or address is found wrong |
Accepted giving donation |
Not replied |
|
| 548 enquired by CIT-I |
7 |
239 |
302 |
|
| 63 enquired by the AO during assessment | 23 (refused) + 8 (wrong address) |
30 |
– |
|
| 137 enquired by the AO during remand | 11 (refused) + 69 (wrong address) |
17 |
40 |
|
| Total = 748 |
118 |
286 |
342 |
7.3 On the basis of above chart, it can be seen that out of total verification in the case of 748 persons, in case of 118 persons, either they have refused for giving donation or address given are not correct. In case of 342 persons, no reply was received and only 286 persons confirmed giving the donation. On the basis of these statistics, I find that over all sample survey done in 748 cases is about 34% of the total donors. Out of sample survey of 34%, it has been found that 118 persons out of 748 persons refused to have given donation or address was found to be wrong which comes to about 16%. Therefore, out of sample survey of 34% sample about 16% refused for giving donation. If this %age of sample survey is extrapolated to total number of donors, %age of the persons who can possibly refuse for giving the donation or whose address are not complete or wrong would come to about 47% (16/34X100). Therefore, considering the fact that the list of donors furnished by the appellant does not have complete and correct address of all donors, and donation receipt slips are found not to have been prepared in proper manner and also about 41 persons clearly refused to have given donation during sample survey, it would be quite reasonable to estimate 46% of the donation shown by the appellant as being unaccounted/unexplained money because the appellant has failed to get all its donations shown to have been taken from 2700 persons verified because the list of donors being with incomplete or wrong addresses and hence not fully verifiable. 46% of total amount of donation below Rs. 4000 of Rs. 47,41,243/- comes to Rs. 21,80,971/-.
Therefore, out of the donations of Rs. 47,41,243/-, shown to have been taken from donors who are claimed to have’ given donation below Rs. 4000/-, amount of Rs. 21,80,971/- is found to be unaccounted money on estimate basis on the basis of sample survey done by the AO and considering the circumstances that the appellant failed to get all the donations shown by it verified.
7.4 In view of my findings about the donations above Rs. 4,000/- and below Rs. 4,000/- in para 7.1 & 7.3, total amount of donations found to be in form of unaccounted/unexplained money which could not be verified due to persons refusing to have given donation or their address were not complete or wrong or they could not be produced for verification by the appellant comes as under:-
| Donation above Rs. 4,000 |
6,15,229 |
|
| Donation below Rs. 4,000 |
21,80,971 |
|
| Total amount of donation in form of unaccounted/unexplained money |
Rs. 27,96,200 |
In view of the above findings, the total amount of Rs. 27,96,200/- is found to be unexplained donation out of total amount of Rs. 68,99,943/- claimed by the appellant to have been received as ‘corpus donation’. Such unexplained donation can be treated as anonymous donation being in form of unaccounted money and is liable to be taxed u/s 115BBC.”
7. The CIT(A) has decided the issue raised by the assessee that donations are received from named persons and not from anonymous persons. Therefore, section 115BBC of the Act is not applicable to the case of the assessee. The CIT(A) distinguished the judgement in the case of Hon’ble Supreme Court in the case of Smt. P.K. Norjahan relied upon by the assessee. The CIT(A) has also rejected the assessee’s contention that the assessee society is registered under section 12AA of the Act, therefore, exemption will apply both to the disclosed and undisclosed income. The assessee in support of its contention relied upon a decision of Cochin Bench in the case of Asstt. CIT v. Muslim Educational Society [2010] 1 ITR (Trib) 527 (Cochin). The CIT(A) distinguished the decision of I.T.A.T. in the case of Muslim Educational Society on the ground the in that case the issue was pertaining to section 10(23C) of the Act whereas in the case under consideration , it relates to section 11 and 12AA of the Act. As per section 11, entire income of members of societies which are registered under section 12AA are not exempted from tax and exemption are provided only for those income which are mentioned in section 11(1) after fulfilling certain conditions. The CIT(A) has also examined the provisions of section 115BBC and held that donations can be said to be from known persons only when the identity of the donors shown in the donor list is established. The CIT(A) noted that in the case under consideration, after a detailed examination including sample survey, it was found that the identity of the donors with respect to donation of Rs. 27,96,200/- could not be established by the assessee. Therefore, such amount of donation can be very well treated as anonymous donation and such donation would be liable for taxation as per the provisions of section 115BBC of the Act. The CIT(A) directed the A.O. to treat donation amount of Rs. 27,96,200/- as anonymous donation out of total amount of Rs. 68,99,643/- shown by the assessee and tax this amount of anonymous donation as per the provisions of section 115BBC of the Act.
8. The ld. Authorised Representative reiterated the submissions made before the CIT(A) and submitted that section 115BBC is applicable to anonymous donation only. Ld. Authorised Representative submitted that the assessee received donations from named persons and not from anonymous persons. Ld. Authorised Representative referred a list of donors of which copy has been placed at page nos. 6 to 53 of assessee’s Paper Book. Ld. Authorised Representative referred the order of I.T.A.T., Agra Bench in assessee’s case in ITA Nos. 399 & 400/Agr/2007, order dated 06.02.2009 and submitted that the I.T.A.T while giving direction to CIT to grant registration under section 12AA and 80G(5) observed that though majority of the donors confirmed having given the donations, merely because seven persons have denied having given the donations of 2700 donor, the genuineness of trust is not lost. Ld. Authorised Representative submitted that the assessee has furnished complete details of donors, therefore, it cannot be held that donation received by the assessee was anonymous. Ld. Authorised Representative in support of his contrition relied upon order of I.T.A.T. Delhi Bench in the case of Hans Raj Samarak Society v. Asstt. DIT Exemptions [2011] 133 ITD 530.
9. The ld. Departmental Representative, on the other hand, relied upon the orders of the Revenue Authorities and submitted that the assessee has failed to maintain complete details regarding donors. Therefore, the case of the assessee is squarely covered by section 115BBC of the Act.
10. We have heard the ld. Representatives of the parties and records perused. The admitted facts of the case are that the assessee society has been granted registration under section 12AA of the Act. Before coming to the issue under consideration, we would like to refer and discuss the scheme of the Act. Income of wholly charitable or religious trusts or institutions as well as partly charitable or religious trusts or institutions is exempt from income tax under sections 11 & 12, subject to the fulfillment, inter alia, of certain conditions, of application of income and investment in specified modes. Similarly, income of any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (via) or any hospital or other medical institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10, is exempt from income tax subject to the fulfillment of conditions specified in the said clause.
10.1 With a view to prevent channelisation, of unaccounted money to these institutions by way of anonymous donations, a new section 115BBC has been inserted to provide that any income of a wholly charitable trust or institution by way of any anonymous donation shall be included in its total income and taxed at the rate of 30%. Anonymous donation made to wholly charitable and religious trusts or institutions, i.e. mixed purpose trusts or institutions shall be taxed only if it is for any university or other educational institution or any hospital or other medical institution run by them. Anonymous donation to wholly religious trusts or institutions will not be taxed.
10.2 Anonymous donation has been defined in the new section to mean any voluntary contribution referred to in section 2(24) (iia) of the Act, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. Consequential amendments have been made in section 10(23C) and section 13 to provide that any income by way of any anonymous donation which is taxable under section 115 BBC shall be included in the total income of the assessee. Section 115BBC is applicable from assessment year 2007-08 onwards.
11. To appreciate the issue we would like to reproduce section 115BBC as under:-
“115BBC. (1) Where the total income of an assessee, being a person in receipt of income on behalf of any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10 or any trust or institution referred to in section 11, includes any income by way of any anonymous donation, the income-tax payable shall be the aggregate of—
[(i) the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of the higher of the following, namely:—
(A) five per cent of the total donations received by the assessee; or
(B) one lakh rupees, and
(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received.]
(2) The provisions of sub-section (1) shall not apply to any anonymous donation received by—
(a) any trust or institution created or established wholly for religious purposes;
(b) any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.
(3) For the purposes of this section, “anonymous donation” means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed.]”
12. On a plain reading of section 115BBC, the salient features of section noticed are as under :-
(1) Total income of an assessee, being a person in receipt of income on behalf of:-
(i) any university or other educational institution existing solely for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed; or
(ii) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purpose and not for purposes of profit, if the aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed; or
(iii) any other fund or institution established for charitable purposes [which may be approved by the prescribed authority], having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or
(iv) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes [which may be approved by the prescribed authority], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;
(v) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approve by the prescribed authority; or
(vi) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiac) or sub-clause (iiiae) and which may be approved by the prescribed authority]
(vii) Trust or institutions referred to in section 11.
(2) Includes any income by way of any anonymous donation.
(3) Income tax payable shall be the aggregate of the amount of income tax calculation on the income by way of any anonymous donation @ 30%.
(4) Amount of income tax with which the assessee would have been chargeable had his total income been reduced by the amount of income charged to tax @ 30%.
(5) Anonymous Donation – for the purpose of anonymous donation, following conditions must be satisfied:-
(i) Anonymous donation means voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) [or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10 [or by an electoral trust]].
(ii) Where a person receiving such contribution does not maintain record of the identity indicating the name and address of person making such contribution and such other particulars as may be prescribed.
(6) This provision of anonymous donation shall not apply to following :-
(i) any trust or institution created or established wholly for religious purpose;
(ii) any trust or institution created or established wholly for religious purpose and charitable purpose other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.
13. In the light of the above background of discussions of relevant scheme of the Act and provisions of section 115BBC, if we consider the facts of the case under consideration, we notice that the assessee did not maintain records of the identity indicating the names and addresses of the donors. Merely filing list of donors containing names and addresses/incomplete addresses does not satisfy the conditions laid down in section 115BBC(3) of the Act. The sub-section (3) of section 115BBC has explained the meaning of anonymous donation clearly that such institution is required to maintain records of identity indicting the names and addresses of the persons making the donations or contributions. On a perusal of records, we do not find that the assessee has maintained such records of identity indicting names and addresses of the donors. After sample examination carried out by the Revenue Authorities, it was found that in some cases the assessee has proved identity indicating the names and addresses of the donors. Therefore, to that extent, it can be said that the there was no anonymous donation. The burden is on the assessee to explain that the assessee has maintained records of identity indicting names and addresses of the persons of such contribution or donation. Since the assessee has failed to maintain such records, under the circumstances, it is clearly a case covered by anonymous donation. On account of failure of the assessee and in the absence of other alternative calculation or determination of amount of anonymous donation, we agree with the CIT(A) estimating such anonymous donation on the basis of sample examination. Such exercise is not unjust because inspite of the fact that the assessee did not maintain the records as required under clause (3) of section 115BBC, the benefit has been allowed by the CIT(A) on the basis of sample examination of the total donation. As regards the contention of the assessee that the donation was with a specific direction, therefore, section 115BBC is not applicable, in this regard, in view of sub-clause (2) of that section 115BBC of the Act, it is relevant to note that the assessee has failed to produce any evidence based on which it can be said that the donation was for a specific direction particularly when the donation was found as anonymous donation.
14. In the light of the above discussion, we do not find any infirmity in the order of CIT(A). Order of the CIT(A) is confirmed.
15. In the result, appeal filed by the assessee is dismissed.
