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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M:
This appeal by assessee is directed against the order of Ld. Commissioner of Income Tax Appeals-53, Mumbai (for short ‘Ld. CIT (A)’) dated 22.11.2022 u/s. 143(3) r.w.s. 263 of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2017-18. The assessee has raised the following grounds of appeal:
2 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY “1 That on the facts and in the circumstances of the case and in law, learned Assessing Officer has erred in determining total income of the appellant at Rs. 7,75,34,410/-as against NIL declared by the appellant 2. Without prejudice to the generality of the ground of appeal no.1 above, on the facts and in the circumstances of the case and in law, learned Assessing Officer has erred in not considering and disallowing the deductions claimed by the appellant and allowed by the Assessing Officer in the assessment order u/s 143(3) made on 26 12 2019. 3. Without prejudice to the generality of the ground of appeal no 1 above, on the facts and in the circumstances of the case and in law, learned Assessing Officer has erred in holding that Rs. 3.07.77.671/- was chargeable to tax u/s 115BBE of the Act as the same is considered by him as unexplained money u/s 69A of the Act. 4. That the impugned order being contrary to law, evidence and facts of the case may kindly be set aside, amended or modified in the light of the grounds of appeal enumerated above. 5. That each of the grounds of appeal enumerated above is without prejudice to and independent of one another. 6. That the appellant craves leave to reserve to himself the right to add to, alter or amend any of the aforesaid grounds of appeal before or at the time of hearing and to produce such further evidence, documents and papers as may be necessary.” 1. Brief facts of the case are that assessee charitable trust is duly registered u/s. 12A of the Act. Filed its return of income on 24-02-2018 declaring total income of Rs Nil. The mandatory audit report in form no. 10B is filed on 24- 02-2019. Case of the assessee was selected for scrutiny assessee and assessed at Rs 2, 88, 96,000/-. Assessee runs a temple and community hall at Bangur Nagar, Goregaon Mumbai.
AO was in possession of information through the actionable intelligence monitoring system of ITD that assessee had made a cash deposit of Rs 6, 21, 86,235/- during the F.Y.2016-17 (including Rs 3, 18, 09,117/- during the demonetization period). Consequent to this a survey proceeding under the
3 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY provisions of Sec. 133A of the Act was conducted on 21-03-2017. During survey proceedings, a sworn statement of Shri Raghavan Paniker, permanent life trusty of the assessee trust was recorded on oath. Relevant extracts of the statement are available on page no. 2 to 6 of the assessment order and we have gone through the same. It was observed that assessee trust has received old currency during the demonetization period amounting to Rs 2,88,96,000/-. This amount of Rs 2, 88, 96,000/- AO treated as unexplained money u/s. 69A and treated the same as chargeable to tax u/s. 115BBE. Thereafter Ld.CIT(E) issued a notice u/s. 263 dated 17- 03-2021 on the ground that total deposit during the demonetization period was amounting to Rs 3,18,09,117/-, whereas the addition to income was made to the extent of Rs 2,88,96,000/- only. Also, the assessee has made a declaration under the PMGKY scheme of Rs 10, 31,500/-. Therefore, prima facie the balance amount of Rs 18, 11,617/- has remained to be verified for tax purposes.
In contemplation of order passed u/s. 263 another assessment order was passed u/s 143(3) r.w.s 263, dated 23.02.2022. In this assessment order the amount of assessed income was enhanced from Rs 2,88,96,000/- to Rs 7,75,34,410/- (out of which Rs 3,07,77,617/- is chargeable u/s 115BBE of the Act as the same is considered as unexplained money u/s. 69A). Aggrieved with this order of AO assessee filed an appeal before the Ld.CIT (A). On few issues Ld.CIT (A) allowed the appeal of the assessee whereas on addition u/s. 69A was confirmed by the Ld. CIT (A) also. Assessee being further aggrieved preferred this appeal before us.
We have gone through the order of AO u/s. 143(3), order of Ld. CIT (E) u/s. 263, order of AO passed in compliance to order u/s. 263 and order of Ld. CIT (A). As Ld.CIT (A) already given directions vide para 6.4 of his order to verify the date of actual filing of form no. 10B so that exemption u/s 11 can be allowed to the assessee subject to verification. So, the only substantive
4 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY ground remains with the assessee is to challenge the taxability of Rs 3, 07, 77,617/- u/s. 115BBE r.w.s. 69A. We have gone through the submissions of the assessee along with case laws relied upon. For sake of clarity on the issue we are reproducing herein below the relevant sections as under:
Section - 69A, Income-tax Act, 1961
[Unexplained money, etc.
69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the[Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Section - 115BBC, Income-tax Act, 1961 [Anonymous donations to be taxed in certain cases.
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 in excess of the amount referred to in sub-clause (A) or sub-clause (B) of clause (i), as the case may be.]] (2) The provisions of sub-section (1) shall not apply to any anonymous donation received by—
5 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY (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
(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.]
Section - 115BBE, Income-tax Act, 1961
[Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.
115BBE. [(1) Where the total income of an assessee,— (a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),
the income-tax payable shall be the aggregate of— (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).]
(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance [or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) [and clause (b)] of sub-section (1).]
Section 69A can be applied only in those cases where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article
6 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY and such money, bullion, jewellery, or valuable article is not recorded in the books of account, if any, maintained by him for any source of income. In this case whatever may be the amount received by the assessee as donation in various forms, were duly entered in the books of accounts and tallied with bank statement also. Assessee’s books were subject to audit and duly audited accounts were produced before the authorities for verification. Rather, amount tried to be covered u/s. 69A was pointed out by the department from assessee’s own books of accounts and bank statements. Since otherwise also assessee was not found with any money, bullion, jewellery, or other valuable article conditions prescribed in section 69A can’t be applied. We further relied on following judicial pronouncements of coordinate benches and various Hon’ble High Courts and Apex Court as under:
1). [2022] 142 taxmann.com 122 (Chennai - Trib.) DCIT v. M.C. Hospital “It is also noted that the opening cash balance of Rs. 57.11 lakhs are an accepted amount which has been subject to assessment under section 143(3) for assessment year 2016-17 and thus, there is no occasion to doubt on this opening balance of cash in hand. There is force in the submission of the assessee so also the finding given by the Commissioner (Appeals) in respect of addition made under section 69A whereon it is a settled principle of law that entries recorded in the books of account cannot be brought to tax under section 69A. It is also important to note that SBNs were allowed to be accepted at pharmacy by the government during the demonetization period. Assessee has deposited cash out of its balance cash in hand, duly recorded in its books of account which were the results of pharmacy sales and hospital receipts. [Para 9.4]” 2). [2022] 142 taxmann.com 508 (Nagpur - Trib.)DCIT v. Smt. Anju Saraf During search proceedings at office premises of RBSS, certain loose papers were seized which had some details related to payments made to ED Architects in respect to interior work done at two houses of assessee - Assessee was unable to explain this entry and it was presumed by Assessing Officer that contents of document seized were true and therefore an amount of Rs. 15 lakhs were added to total income of assessee as undisclosed income - On appeal, Commissioner (Appeals) deleted addition - It was observed that, this issue was not explained by assessee during assessment proceedings before Assessing Officer, however, before Commissioner (Appeals) assessee had pointed out from ledger account that Rs. 15 lakhs had been paid by cheque to W and impugned entry of Rs. 15 lakhs were same and duly accounted in books of account - Whether therefore, addition made by Assessing Officer had rightly been deleted - Held, yes [Para 33]
7 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY 3). [2014] 42 taxmann.com 361 (All.) CIT v. Uttaranchal Welfare Society “Shri Nikhil Agarwal, appearing for the respondent-assessee has relied on DIT (Exemption) v. Keshav Social & Charitable Foundation [2005] 278 ITR 152/146 Taxman 569 (Delhi) in which following S. RM. M. CT. M. Tiruppani Trust v. CIT [1998] 230 ITR 636/96 Taxman 635 (SC) it was held that under Section 11 (1) every charitable or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, of course, subject to accumulation up to a specified maximum which was 25 per cent. In that case it was found, as in the present case that the assessee had applied more than 75% of the donations for charitable purposes as per its objects. The Delhi High Court further held that Section 68 of the Act has no application in such case where the assessee had disclosed donations as its income. It was also not disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. If there is full disclosure of the donation for whatever purpose and that the registration under Section 12-A is continuing and valid, exemptions cannot be denied.”
4). [2005] 146 TAXMAN 569 (DEL.) DIT (Exem.)v. Keshav Social & Charitable Foundation
“To obtain the benefit of the exemption under section 11, an assessee is required to show that the donations were voluntary. In the instant case, the assessee had not only disclosed its donations, but had also submitted a list of donors. The fact that the complete list of donors was not filed or that the donors were not produced, did not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. That was more particularly so in the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes. [Para 10] Further section 68 had no application to the facts of the instant case because the assessee had in fact disclosed the donations as its income and it could not be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and application of the donations for charitable purposes. It was not in dispute that the objects and activities of the assessee were charitable in nature since it was duly registered under the provisions of section 12A. [Para 11] For the aforesaid reasons, there was no merit in the appeal and no substantial question of law arose from order of the Tribunal. Therefore, the appeal was to be dismissed. [Para 12]”
5). [2022] 143 taxmann.com 281 (Mum.- Trib.) DCIT v. Jayananad Religious Trust “Ground no. 3 of the appeal is with respect to the same addition of Rs. 22,925,500/- under section 68 of the Act. The learned Assessing Officer in grounds of appeal has referred to the decisions of the Hon'ble Supreme Court, however, on careful consideration of both these decisions of the Hon'ble Supreme Court, we find that those are not applicable to the facts of this case because, the decisions of the Hon'ble Supreme Court are respect to the assessee individuals
8 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY whereas it is a case of a trust before asked which has already offered the above sum as income as voluntary contribution and respective receipts were also impounded by the learned Assessing Officer during the course of survey. Assessee has explained the nature of the receipt as voluntary contribution and the source of such voluntary contributions are already mentioned in the receipts impounded. Accordingly, ground number 3 is dismissed. [Para 9]”
In the light of above discussion on judicial pronouncements and factual matrix of the case, we are of the considered view that section 69A has no applicability in the present case, hence section 115BBE of the Act. Accordingly, Ground Nos. 1 & 2 raised by the assessee is allowed.
As far as Ground No. 3 is concerned, we set aside the matter back to AO for verification with a direction that if interest so claimed by the assessee pertains to corpus fund, then the same has to be allowed as accretion to corpus fund, otherwise it will be deemed to be the income of the assessee subject to the benefits available in section 12A. In the result, this ground of assessee is allowed for statistical purposes.
The assessee is running a temple of Lord Ayyappa and a community hall and there was no change in the aims and objects of the assessee in comparison to the earlier year. The Assessing Officer while framing the original assessment categorically stated that the activities of the assessee are charitable within the meaning of section 2(15) and there was no change in the aims and objects of the assessee as compared to the earlier years. The provisions of section115BBC (1) are applicable for the anonymous donations received by any university or other educational institution or any hospital or any trust or institution referred to in sub-clauses (iiiad) or (vi) or (iiiae) or (via) or (iv) or (v) of clause (23C) of section 10. However, sub-section (2) of section 115BBC provides that the said provisions are not applicable to any anonymous donation received by any trust or institution created or established wholly for religious purposes.
9 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY 9. In the instant case, the assessee is established for religious and charitable purposes and the anonymous donation was not received with specific direction that such donation is for any university or other educational institution, or any hospital or other medical institution run by the assessee-trust. Therefore, the Assessing Officer will not be justified in making the addition even by invoking the provisions of section115BBC (1). To Strengthen our view, we relied on Hon’ble Delhi High Court in the matter of [2015] 62 taxmann.com 358 (Del.) CIT (E) v.Bhagwan Shree Laxmi Naraindham Trust,[2022] 143 taxmann.com 281 (Mum. - Trib.) DCIT v. Jayananad Religious Trust.
A careful reading of the entire section of section 115BBC reveals that the provisions have been meant to check the inflow of black money/unaccounted money into the system/institutions such as universities, educational institutions, medical institutions, etc. and it has been provided that the record of the donor along with name and address etc. should be maintained. Sub-section (2) specifically excludes anonymous donations received by an institution which are other than any anonymous donations made with a direction that such donation is for university, medical institution etc. When we read clause (a) and clause (b) of sub-section (2) in harmony and in conscience with each other then it becomes clear that the provisions of sub-section (1) will not apply to the donations like that has been received by the assessee in donation boxes from numerous devotees who have offered the offerings on account of respect, esteem, regard, reference and their prayer for the deity/siddha peeth. Such type of offerings are made/put into the donation box by numerous visitors and its generally not possible for any such type of institutions to make and keep record of each of the donor with his name address etc. Even sometimes the donors out of their esteem, respect and regard and selflessness they do not want that their name be registered as a donor before the deity for whom them make the prayer in the belief that the deity is the ultimate giver of all the worth and virtues of their life. Now reverting to the definition of anonymous donations under sub-section (3) of section 115BBC, it is found that it has been mentioned that anonymous donations means voluntary contributions where the person receiving such contributions does not maintain a
10 ITA No.135/MUM/2023 AYYAPPA SEVA SAMGHAM BOMBAY record of the identity indicating the name and address of the person making such contribution and charitable trust as in the case of the assessee, it is generally not only difficult but also not possible to maintain such type of record. A perusal of the entire section 115BBC shows that the provisions of said section are not applicable to the institutions like that of assessee-trust as the same are meant to check the inflow of unaccounted/black money into the system with a modus operandi to make out as a part of the accounts of the institutions like university, medical institutions where the problem relating to the receipt of capitation fees, etc. is generally highlighted. Under such circumstances, there is no justification on the part of the Commissioner (Appeals) in taxing the offerings received in the hundis/donation boxes as income of the assessee under section 115BBC.
In the result appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 15th day of May, 2023. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 15/05/2023 Mahesh R. Sonavane Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकर आयुक्त CIT 3. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 4. ग र्ड फ इल/Guard file. 5.
BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai