M/S SANT BABA BHAG SINGH MEMORIAL CHARITABLE SOCIETY,JALANDHAR vs. D.C.I.T, CIRCLE - 1 (EXEMPTION), CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 432/(Asr)/2017 Assessment Year: 2014-15

Sant Baba Bhag Singh vs. Deputy C. I. T., Memorial Charitable Society, Circle-1 (Exemption) Santpur, VPO Manko, Chandigarh Distt. Jalandhar [PAN: AAETS 1800N] (Appellant) (Respondent)

Appellant by : Sh. J. S. Bhasin (Adv.) Respondent by: Sh. Sandeep Chauhan, CIT-DR Date of Hearing: 12.12.2018 Date of Pronouncement: 27.02.2019 ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-2, Jalandhar ‘(CITA)’ for short) dated 10.04.2017, dismissing the assessee’s appeal contesting its’ assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 25.11.2016 for Assessment Year (A.Y.) 2014-15.

2 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT including Rs.2.96 lacs as ‘Gupt Daan’ and Rs.435.575 lacs from Dera Sant Baba Bhag Singh (DSBBS, also referred to as the ‘Dera’), which had also given another sum of Rs.15 to the assessee by way of unsecured loan. DSBBS was explained to be a seat of spiritual teaching, established in the year 1924. Besides religious activity, it is also claimed to have undertaken several charitable projects, listed at PB pgs. 138-141. The source/s of income DSBBS is stated to be donation and prayer offerings by its’ disciples (followers), who have great faith in it in view of the services being rendered to the society. Besides, it is claimed to have agricultural income from 88 acres of agricultural land. The donations to DSBBS were, however, unexplained, i.e., with reference to identifiable sources. Statement of Sant Dilawar Singh, Mukh Sewadar of DSBBS, was recorded u/s. 133(6) of the Act, as well as also its’ bank statement examined, in verification, finding no valid or verifiable source of the deposits. The same (at a total of Rs.453.535 lacs) were accordingly treated as anonymous, covered u/s. 115BBC of the Act. The same were also found as covered equally u/s. 68 of the Act, and thus, liable to be taxed u/s. 115BBE of the Act. That is, the same is liable to be taxed at 30% u/s. 115BBC or, in any case, u/s. 115BBE of the Act. The same stood confirmed in appeal in the absence of any improvement in its’ case, by the first appellate authority. The ld. CIT(A) held that the donations having been received in cash, with DSBBS having no record of the donations by it, the impugned sum had been rightly brought to tax by the Revenue. Aggrieved, the assessee is second appeal, raising the following grounds:

‘1. That the ld. CIT(A) grossly misdirected himself in facts and on law, to uphold the findings of the ld. AO, that the corpus donations amounting to Rs.4,35,57,500/-, received by assessee society, from identified persons, were anonymous donations, liable to tax under section 115BBC. 2. That having held so, the ld. CIT(A), grossly misconstrued the relevant provisions of law, to hold that the impugned corpus donation, once held to be taxable U/S.115BBC, was still to

3 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT suffer further special rate of tax under section 115BBE read with section 68 of the Income Tax Act, 1961. 3. That the ld. CIT(A) further erred in law and on facts, to endorse the findings of the ld. AO, that Rs.15,00,000/- received as unsecured loan, from an identified person through banking channel, was unexplained credit liable to tax under the special provisions of section 115BBE read with sec. 68 of the Income Tax Act. 4. That while confirming the above additions, the ld. CIT(A) failed to appreciate that the special provisions of section 115BEE read with section 68/69 were not applicable to the case of trust, inasmuch as, once the donations are held to be anonymous, the same are hit only by the provisions of section 115BBC. 5. That the order of the ld. CIT(A), confirming the above additions, is unsustainable being perverse on facts and de hors the evidence placed on record, inasmuch as it is founded on a wholly incorrect premise that the above amounts were received in cash by the assessee trust. 6. That even the calculation of amount of anonymous donations, in terms of section 115BBC(1) is incorrect, and wrongly confirmed by ld. CIT(A). 7. That, without prejudice to above, the impugned additions were neither called for nor sustainable, when the application of funds, inclusive of the above amounts, made during the year, towards attaining the objects of the society, was beyond 85% of the total income of the trust.’

4 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT (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 assesse; 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— (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.’ The explanatory notes to the amendments by Finance Act, 2006, w.e.f. 01/4/2007, per which section 115 BBC was inserted in the statute book, listed in Board Circular No. 14 of 2006, dated 28/12/2006, explains its rationale. The relevant part thereof reads as under (source: 288 ITR (St.) 9)

‘25.2 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 anonymous donation shall be included in its total income and taxed at the rate of 30 per cent. Anonymous donations made to wholly charitable and religious trusts or institutions, i.e., mixed purpose trusts of 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 donations to wholly religious trusts or institutions will not be taxed.’ [Section 115BBE (inserted by Finance Act, 2012, w.e.f. 01.04.2013)]

5 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT ‘Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 115 BBE (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, at the rate of thirty per cent; and (b) 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 (a).".

The respective cases 3.2 The assessee’s case is that the impugned donations cannot be regarded as anonymous in-as-much as both the name and address of the donor, DSBBS, is maintained and provided. How could, then, the same be treated any differently from the regular, balance donations for Rs.209.585 lacs, i.e., other than Gupt Daan and from DSBBS, and which have been accepted as regular donations? It is incorrect to say, as does the ld. CIT(A), that the donations are received in cash, a substantial part thereof being through bank transfers, which thus establish the identity of the donor. DSBBS is, in fact, a religious trust, to which the provision of section 115BBC is not applicable. It is this trust which is the donor as far as the assessee-donee is concerned. How could, then, the donations being confirmed by the donor through its’ trustee, could be regarded as anonymous? The tribunal, in some cases, as in Gugan Solanki Memorial Ed. Society v. Asst.DIT(E) (in ITA No. 1495/Del/2011, dated 30/3/2012), has held the provision of section 115BBC as not applicable even in the absence of confirmation/s. Further, the donations are toward corpus so that there is no obligation to apply it for charitable purposes, even as the assessee has indeed applied over 100% of its’ income, for which it places on record a computation in its respect (PB pg. 145). For earlier years, contributions made similarly by DSBBS have been regarded as regular donations, and toward which assessment orders u/s. 143(3) for those years, accepting the returned income at nil are relied upon (at PB pg. 95-111).

6 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT The Revenue’s case is that the entire donation to DSBBS, stated to be received by it from its’ followers (disciples), is in cash. The Dera does not maintain any books of account or other record; it itself claiming the provision of section 115BBC being not applicable thereto in-as-much as it is a religious trust. It neither has a PAN nor has filed any return of income. The source of donations (to DSBBS – the stated donor) is therefore undisclosed. Once this is so, how could, even granting that it is the Dera that has ‘donated’ the impugned sum to the assessee, can be said to be from an identified or identifiable sources? The law is to be read meaningfully. The same, in fact, are also liable to be regarded as undisclosed credits u/s. 68, as both the capacity of the stated creditor, DSBBS, is not proved, as indeed the genuineness of the transaction/s and, therefore, liable to be subject to tax at the average rate of 30%, i.e., even if, as stated, applied for charitable purposes in terms of section 11(1)(a) of the Act.

3.3 Our first observation is that Rs.2.96 lacs, admittedly received as Gupt Daan, i.e., donations from undisclosed source/s, is clearly covered u/s. 115BBC. The Assessing Officers’ (AO’s) treating it as such has not been disputed by the assessee before the ld. CIT(A). The AO, however, as it appears, has not allowed the assessee the benefit of the floor level, i.e., of Rs.1 lac or 5% of the total donations received by the assessee during the relevant year (Rs.648.12 lacs), whichever is higher. This appears to be on account of the said sum having been also regarded by him as covered u/s. 115BBE. Once an amount is admitted as a donation, and anonymous one at that, it is in our view not necessary to travel to section 68 of the Act. Section 115 BBE shall, consequently, becomes superfluous. The assessee, therefore, who has challenged this aspect per Gd. 6 before us (Gd. 5 before the ld. CIT(A)), ought to have the benefit of the floor level qua this sum, or any other for

7 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT that matter, which may be finally held as part of the anonymous donation, i.e., as included in the total donation of Rs.648.12 lacs. We decide accordingly.

3.4 The next issue arising before us is if the sum of Rs.435.575 lacs, stated as received as donation from DSBBS, can be said to be an anonymous donation? Each of these donations is, as claimed, given with specific direction, of even date, that the same shall form part of the corpus of the donee-society (PB pgs. 125-136). Of the same, Rs.371 lacs is, as per the list of donations (at PB pg. 94), stated to be through RTGS (bank transfer, i.e., from the bank account of DSBBS, held in the name of its’ Mukh Sewadar, Sant Baba Malkit Singh (up to 07.12.2015) and Sant Baba Dilawar Singh, thereafter) (refer letter dated 26.10.2016 by DSBBS to the AO/PB pgs. 113-114). The balance (Rs.64.575 lacs) is received in cash (PB pg. 94). The question therefore is if DSBBS, admittedly not having a Permanent Account Number (PAN), nor filing its return of income, either for the relevant year (or even earlier years)-facts emphasized by the AO as well as the ld. CIT(A) (refer para 6 and paras 5.4, 5.8 of the assessment and the appellate order respectively), could be relevant, i.e., considering the confirmation by Sant Dilawar Singh ji by way of an affidavit dated 04.10.2016 (PB pg. 90). The property of the Dera (DSBBS), including its’ bank accounts, is held in the name of its’ Mukh Sewadar, under trust, as indeed were the bank accounts in the name of Sant Malkit Singh ji (up to 07.12.2015), where-after the same were transferred in the name of his successor, Sant Dilawar Singh ji (PB pg. 91). How could it therefore matter as to whether DSBBS is having a PAN or had not filed any return of income. It, clearly, is a trust, religious in nature, even as admitted (refer replies dated 09.09.2016, 26.10.2016 and 21.11.2016 by the assessee, reproduced in the assessment order), income of which from property held under trust would, on application, stand to be exempt u/s. 11 and 12 of the Act. That the said section would not apply in view of

8 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT non-registration u/s. 12AA of the Act (U.P. Forest Corporation v. Dy. CIT [2008] 297 ITR 1 (SC)) is a different matter. That, however, would not make the donation/s by it to the assessee- society any less as donations. That is, that DSBBS, a religious trust, was not registered and, thus, its’ income (from property held under trust) liable to be assessed in its’ hands, could not, for that reason, be a ground to disregard its’ donations to the assessee as valid donations. The PAN, since obtained, though would not be of much assistance in this regard as the same shows the date of the donor’s (DSBBS’s) formation/incorporation as 18.10.2018 (copy on record). An oral trust is equally valid in law, even as the admitted position is that DSBBS had neither PAN nor had filed any return of income at least up to the current year. In fact, the document executed toward evidencing the formation of the trust, and on the basis of which the date of its’ incorporation/formation is stated as 18.10.2018, is also not on record, even as the ld. counsel for the assessee, Sh. Bhasin, was during hearing specifically asked about the same. Going by the material on record and the admitted position between the parties, DSBBS is a religious trust during the relevant year, formed orally and, unregistered, with Sant Baba Malkit Singh ji as its’ Mukh Sewadar, holding the property (including bank balance/s) under trust (also refer PB pgs. 78/137, being a certificate from Naib Tehsildar to this effect, english translation of which stands also furnished during hearing).

3.5 We next consider the assessee’s plea that its’ returns of income for the earlier years (AY 2006-07 onwards), in which there were similarly donations from DSBBS, have been accepted and, as such, the donations from it for the current year should also be accepted by the Revenue on the principal of consistency. The principle of res judicata is not applicable to the proceedings under the Act as each assessment is a separate and independent unit of assessment. Acceptance of the

9 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT return for the earlier years would not therefore bar the AO, whose powers in the matter of assessment are plenary, to make an assessment in accordance with law, consistent with the facts as found. Reference in this regard may be made to the decisions, inter alia, in New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC) and M.M. Ipoh v. CIT [1967] 67 ITR 106 (SC) (also see para 3.6).

3.6 On the merits of the issue, the question to be answered therefore is whether any of the two sections, s. 115BBC and s. 115BBE, can be said to be applicable in the given facts and circumstances of the case. Where so, the assessment as framed shall hold; else not, i.e., irrespective of the assessments for the preceding years. In fact, a perusal of the assessment orders for those years shows no reference to the donations from DSBBS. How, therefore, one wonders, could the same operate to estopp the assessing authority to examine this issue, being thus considered for the first time. Further, section 115 BBE, even as pointed out by the ld. CIT(A), came on the statute book only by Finance Act, 2012, w.e.f. 01/4/2013, so that it could not possibly have an application for the earlier years. Rather, as we shall presently see, it is the genuineness of the claim of the transaction of transfer of funds which is, in substance, the issue. The assessee’s plea of estoppel is without merit.

3.7 Equally, the assessee’s case of the donations being with a specific direction of forming part of the corpus of the assessee-donee, or of having been expended at, in fact, over 100%, for charitable purposes, so that, in either case, it would stand to be exempt u/s. 11, is without merit. The reason is simple. Where an assessee’s, being a trust or institution, referred to in section 11, as the assessee, income includes anonymous donation, the tax payable by such assessee shall, subject to the floor level (of 5% of the total donations or Rs.1 lac, whichever is higher), be at 30% of such donation, i.e., besides the tax, if any, payable by it on its’ other

10 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT income. As such, the application of any donation for charitable purposes or of it being toward corpus, covered u/s. 11(1)(d), is irrelevant to the tax liability on such income. That is, the application of section 115BBC, prescribing tax liability with reference to anonymous donation, does not exclude the applicability of sections 11 and 12 of the Act qua such receipt (section 13(7)). In fact, the assessee’s claim of it being for corpus, and then including it in the income statement, is mutually contradictory. The donations toward corpus fund are not income derived from property held under trust so as to be subject to exemption only on its’ application in terms of section 11. A better representation would be to depict the income actually deployed for the repayment of the loans separately against corpus donation, exhibiting the maintenance of corpus funds. Further, it is the income and not the gross receipt that is to be applied u/s. 11(1)(a) to the extent of 85%, accumulating the balance 15% for application for charitable purposes in future.

3.8 We, next, discuss the aspect as to whether, given the definition of ‘anonymous donation’ u/s. 115BBC(3), the donations ascribed to DSBBS, i.e., for Rs.435.575 lacs, could not be said to be anonymous donations. Apparently, not. This is as irrespective of the manner and mode of receipt of donation by DSBBS, as far as the assessee is concerned, it is the DSBBS which is the donor, which has in fact confirmed the relevant donation, a good part of which (Rs.371 lacs) is through bank transfer, establishing the identity of the donor as DSBBS. The question, however, as we see it, and what the Revenue essentially challenges, is the genuineness of the relevant transaction, be it through bank transfer or in cash. The source of donations to DSBBS being undisclosed, how could it possibly become a disclosed source of donation to another? That is, its’ name (and address) notwithstanding. In fact, its’ name is being propped up – the two organizations being under the same management (Sant Malkit Singh ji and Sant Dilawer Singh ji

11 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT being the president and vice-president of the assessee-society respectively), so as to reflect the ‘source’ of donations and, thus, pre-empt the same being classified as ‘anonymous donations’. In other words, DSBBS, the stated donor, is a name lender. Genuineness (or otherwise) is essentially a matter of fact, to be determined in the conspectus of the facts and circumstances of the case. Apparent is real, and the burden to prove that it is not so is on the person who so alleges – the Revenue in the present case, even as the assessee claims it to be genuine (refer Gd. 8 before the ld. CIT(A)). The question therefore boils down to whether the fund transfer from DSBBS to, or stated as sourced there-from by, the assessee-society, represents a genuine transaction of donations (voluntary contribution) by one trust to another. In this regard, we observe the assessee-society is running as many as eight educational and medical institutions (refer balance-sheet as on 31/3/2014/PB pgs. 13-58), involving huge capital outlay. During the current year itself, it purchased fixed assets at Rs.471.77 lacs and repaid borrowings, meeting thus its’ contractual obligation/s in this regard, to the extent of Rs.180.97 lacs, i.e., at a total of Rs.652.74 lacs, which far exceeds the revenue (net income) generated at Rs.228.94 lacs during the year, i.e., even assuming the entire of it to be realized (PB pg. 145). The shortfall (Rs.423.80 lacs) is to the same tune as the donation ascribed to DSBBS (Rs.435.57 lacs/PB pg. 144). This is, further, a quantum increase from Rs.61.25 lacs and Rs.28.30 lacs for the two immediately preceding years), and more than 9 times the average donation received from DSBBS for the preceding five years (Rs.47.67 lacs). How is it that the fund requirement of the assessee-society matches, or almost, the fund availability with the donor? This is as there should in the normal course be no correlation between the two. In fact, while the assessee’s fund requirement could be elastic, depending upon the projects being executed for the time being, the funds of the Dera would only be stable, being from regular sources; its’ followers in the main. Nothing has been

12 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT brought on record qua its’ agricultural income which, assuming so, would also vary in the same range from year to year. It could be understandable where it has, to financially assist a sister organization, liquidated its’ investments, of which there is no reference or even whisper. What, then, explains the sharp increase in the fund availability with DSBBS, which in fact is completely undocumented and, being wholly in cash, from undisclosed sources. It is, thus, extremely surprising, given the stable income profile of the ‘donor’, that the availability of funds with it increases manifold during the year and, two, meets the shortfall in the assessee’s fund requirement, even as the same is nearly 10 times that donated in the past! Could it, then, be that it is these undisclosed sources, the stated ‘source’ of funds with DSBBS – the stated source of funds for the assessee, that represents the source of funds for the assessee? It is this, as afore-noted, that we discern to be the Revenue’s case in the instant case, i.e., when it says that the donations from DSBBS have not been explained with reference to any valid or identifiable source. Add to this the fact that the donations are not evenly, or nearly so, during the year, but concentrated (at Rs.421.15 lacs), or over 97%, in one month (i.e., from 28.02.2014 to 27.03.2014)(PB pg. 94). Assuming a regular cash balance with the Dera, i.e., as would meet its’ regular needs, what explains the abrupt and sharp increase in its finances in that short a period? That is to say, the increase in the fund availability, being concentrated in one month of the year, is phenomenal, with no explanation therefor, as, for example, with reference to a build-up of cash or bank balance during the year, etc. This, even as the Revenue questions the same for lack of identifiable or valid source. It is in this context that the non-maintenance of any books of account or record by the Dera assumes significance. Couple this with the fact that DSBBS is admittedly a religious trust, to which therefore the provision of section 115BBC does not apply. All this leads to an unmistakable inference that, in the given set of facts and circumstances and law, DSBBS has lend its’ name as a

13 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT donor to defeat the law. This is irrespective of whether the donation is stated to be paid in cash or routed through the bank, i.e., by depositing cash in its’ bank account/s. It is not surprising, then, that none of the donation advices, 12 in number (at PB pgs. 125-136), from June, 2012 to March, 2013, are not signed by Sant Malkit Singh ji, the Mukh Sewadar, i.e., the trustee of the Dera’s property, including the bank account/s. It is Sant Dilawar Singh ji, the Mukh Sewadar after 07.02.2015, i.e., the day Sant Malkit Singh ji left his mortal body, whose signatures appear on the donation advices. Why? As it appears, the advices are ‘procured’ only later. As, however, Sant Malkit Singh ji was not alive at the time of the assessment proceedings, whereat these advices were given, it is his successor, Sant Dilawar Singh ji, whose signature appears on the said advices, who signed them. It is the Mukh Sewadar, the trustee holding the legal obligation in respect of the properties of the Dera, who could, and would, part with the said property. It may have also be relevant to state that the assessee, though maintaining regular accounts, duly audited, has not issued any receipt to the Dera on receipt of the donations from it. Why? These are all tell-tale signs as to the amount under reference having been routed through the Dera (DSBBS); the latter being excluded u/s. 115BBC. It would be so even if not regarded as a wholly religious trust in view of charitable activities being also stated as undertaken by it, of which there is though no record, as it is admittedly not running any educational or medical institution. There cannot, it may be appreciated, in the normal course of events, a conclusive proof with regard to a cash transaction/s. The deposit of cash in bank account and transfer there-from is, again, in effect and substance, a cash transaction, routed thus. At best, a species of cash transactions. That is, the transaction does not admit of strict proof. Assessments under the Act, as indeed in proceedings resulting in a civil liability, are based on preponderance of probabilities. A part of the settled law, reference in this context may be drawn,

14 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT inter alia, to Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), a decision by the larger bench of the Apex Court, rendered in the context of section 68 of the Act. It, with reference to judicial precedents, explained that the receipt of money was itself an evidence against the assessee, i.e., of it being in the nature of income, and if the assessee fails to rebut the said evidence by offering a satisfactory explanation as to the ‘nature’ and ‘source’ thereof to the AO, the sum found credited in his books of account may be charged to income-tax as the income of the assessee for the relevant year u/s. 68.

3.9 At this juncture it may be relevant to discuss the interface of section 2(24)(iia) – defining income to include voluntary contribution received by a charitable trust or institution, and section 68. Where a receipt is admitted as income, where, pray, and even as afore-stated, is the need to travel to section 68 which, as afore-noted, requires proving the nature and source of the receipt lest it may be assessed as income. Section 115BBC r/w s. 13(7), however, provides for tax liability in case of an anonymous donation, i.e., from an undisclosed source, by definition. The purpose thereof, as explained in the Board Circular 14/2006 supra, is to prevent channelization of unaccounted money to charitable institutions operating in the educational and medical sector, as the assessee. As such, even if the donation is toward corpus fund, or otherwise applied, or held for being applied, for charitable purposes, it shall be taxed at the threshold at the defined (thirty per cent.) rate, subject of course to the floor level for such donations. The premise, thus, is to check the flow of unaccounted money into these sectors, subjecting it to tax. This, that is, the amount representing a ‘voluntary contribution’, thus, has to be from an identifiable source if it is not to suffer tax in the hands of the recipient, being a charitable trust or institution engaged in the field of education or medicine. ‘Voluntary contribution’ defines the nature of the sum credited (in the

15 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT assessee’s books), while the identity of the donor, it’s ‘source’; the two requirements mandated for being satisfactorily explained by section 68, non- discharge of which leads to the same being liable to be assessed as income. There is, thus, essentially, no difference between the scope of the two provisions, i.e., qua the assessees to which both apply. Continuing further, the identity (source), however, is a prerequisite for establishing the ‘voluntary contribution’ (nature) of the sum credited, for there could be no voluntary contribution without a contributor, its’ source. Anonymous donation, in that sense, is a contradiction in terms, for there could be no donation without a donee. This assumes particular significance in the context of educational and medical institutions where large unaccounted sums of money are generated through dubious means, as also invested in. As, for instance, to secure admission to medical schools, etc. This also provides the backdrop for the enactment of the provision of s. 115-BBC, which though excludes religious trusts as well as charitable trusts not operating in the field of education or medicine. Clearly, therefore, the focus is to target unaccounted money flowing into these sectors. Religious trusts, perhaps on account of faith, remain largely unregulated, as indeed we find DSBBS to be. The two sections, or more appropriately, the terms thereof, are in pari materia; section 115BBE also prescribing a tax rate of 30% for sums assessed u/s. 68, it does not lead to any quandary or imbalance as, either way, the tax liability, on the provision becoming applicable, is the same. Further, voluntary contribution itself implies a source outside the assessee, who confirms, or shall, where called upon to, confirm having contributed of own volition in the stated sum (as well as the manner thereof). Where, however, he does not do so, could the ‘voluntary contribution’ be ascribed to him? Surely, not, in-as-much as it negates the assessee’s claim qua the identity or the record maintained by the assessee in its respect. Reference in this regard be made to the decision in Asst. CIT v. Gurudatta

16 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT Shikshan Sanstha [2017] 87 taxmann.com 214 (Pune – Trib). This though could only be in case of cash transactions, as a bank transaction itself confirms the identity. Where, again, he confirms, though is unable to state the source/basis thereof, how could he be regarded as the donor, which implies parting with own property, and on own volition. When it is said that the capacity of the donor cannot be inquired into as the term ‘anonymous donation’ is defined to mean a donation from an identifiable source, all it implies is that, given the scope of the provision, s. 115BBC cannot be applied where the identity of the donor is confirmed. The source, however, is not the creditor per se, but includes his capacity as well, as, without it (capacity), the source remains ambiguous and undefined, i.e., an unproved source. The identity and capacity of the creditor, thus, together go to establish the source, and the identity de hors the capacity is of no value. In fact, it is a composite of the two, coupled with the genuineness of the transaction, that establishes it (transaction). Looked at from this perspective, identity and capacity, itself go to prove the genuineness of the transaction, which in fact is required to be. For example, when it is said that ‘A’ has given a loan or gift or donation, etc. to ‘B’, it is the truth of this credit as recorded in the books of ‘B’ that is required to be proved, with identity, capacity, and genuineness being its’ elements or parameters on which it is to be tested. A donation, to be a valid, is to be from an identifiable source, lest it attract tax, and which is what we understand the purport of the law to be. Further, not so interpreting would defeat the very purpose of enacting the provision (of section 115BBC), i.e., check the flow of unaccounted money into targeted institutions, legislative intent being the foundation of any interpretative exercise [CIT v. Baby Marine Exports [2007] 290 ITR 323 (SC)]. It is, however, not necessary for us to dwell further in the matter. This is as in the present case we have, on an analysis of facts and circumstances, including the given position of law, issued a finding of fact as to the impugned transactions of donations from the

17 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT Dera to the assessee as not genuine. Further, even otherwise, this does not in any manner preclude the Revenue to tax the donor for donations out of undisclosed sources, i.e., unproved capacity, u/s. 69A, or even the donee for unexplained credit u/s. 68. As held in L. Hazari Mal Kuthiala v. ITO (1961) 41 ITR 12 (SC), the exercise of power is with reference to a jurisdiction which confers validity (to the exercise) and not to that which would render it nugatory. The reason for taxing a sum in the hands of the ostensible source (i.e., investor/depositor) for, say, want of capacity u/s. 69/69A and, on the other, its’ application (i.e., investee/depositee), again for want of nature and source u/s. 68, as explained by the Apex Court time and again, is to provide flexibility for the levy and collection of tax. Two, the money, though ascribed to one, is held by another, so that it is the latter, being in possession thereof, who is better placed to pay tax thereon. These sections, as explained in Chuharmal v. CIT [1989] 172 ITR 250 (SC), embody the principles of common law jurisprudence enshrined in the Evidence Act, i.e., if a person is found in possession of something, the onus to prove that he is not the owner thereof is on him. The relevant sections falling under Chapter VI of the Act under subhead ‘Aggregation’ of income’, provide for deeming the same, in the face of unsatisfactory explanation as to nature and source, as the income for the year in which the assessee is found therewith (by the Revenue). The notion of income under the Act, it was further explained in Chuharmal (supra), is wide enough to include anything which comes in or results in gain. A credit in the assessee’s accounts, it may be noted, is an admission of a receipt, i.e., of something having come in, which therefore is to be satisfactorily explained as to its nature and source. In law, there is no bar for bringing the sum to tax in the hands of both, the creditor and the debtor, even as explained in Jagmohan Ram Ram Chandra v. CIT [2005] 274 ITR 405 (All). On facts, it should though be possible to argue of ‘income’ in the hands of the creditor as being the source of the credit in the

18 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT debtor’s books. This is as once it is regarded as income in the hands of the creditor, it cannot possibly be regarded as unexplained in the hands of the debtor, i.e., as to its’ source. The position would be different if the creditor challenges the assessment of income in his hands, or where the Revenue itself does not consider the creditor, as in the present case, a valid source of the receipt under reference.

3.10 We may now contextualize our discussion. The proposition that identity, as maintained by the recipient-donee, cannot be called into question only implies that the onus to prove or show that the stated donor, who in the present case has confirmed the donation, is not the actual donor, is on the Revenue. The apparent is even otherwise real unless shown to be otherwise, the onus of which is on the person who claims so (CIT v. Durga Prasad More [1977] 82 ITR 540 (SC); CIT v. Daulat Ram Rawatmal [1973] 87 ITR 349 (SC)). Identity, in the context of a receipt, given that the concept of income under the Act is wide enough to include anything that comes in, with the receipt itself being an evidence of the recipient being in receipt of income, is inextricably linked to capacity in-as-much the two together constitute the ‘source’, implying an identifiable source. Examination thereof, even if prima facie, could not be excluded if the purport of the section, as the Board Circular explaining the legislative intent, which is to be construed as contemporanea exposito, is to be given effect to. Purposive interpretation is a recognized cannon/rule of interpretation, particularly valid in the context of a provision as the present one, enacted in the backdrop of the surge of unaccounted money in the relevant sectors, though covered under the definition of a charitable purpose. What value an identity without capacity? The law is to be read holistically, and not in a fragmented or compartmentalized manner. At the same time, we are conscious that it could be argued that the law is to be strictly construed, so that want of capacity would result only in the payer being charged to

19 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT tax. A harmonious understanding, reconciling the opposing claims, would therefore cast a burden on the Revenue to establish that the stated donor is not, or could not be, in the given facts and circumstances, the actual donor. What the Revenue in such a case essentially does is to challenge the truth of the assessee’s claim as to the identity of the stated donor, or of the records maintained by the assessee-recipient in its respect. In other words, the only course available to the Revenue when it seeks to question the donors’ identity is to impugn successfully the genuineness of the transaction of donation as recorded. Examining from this stand-point, we have observed valid grounds to infer that the transaction of donation/s from Dera is not a genuine transaction, and that the Dera (DSBBS), in view of it being not covered u/s. 115BBC, has lend it’s name, and allowed itself to be used as a conduit for routing the funds of, or otherwise made available to, the assessee-recipient. The same could be a voluntary contribution from an unidentifiable source, covered u/s. 2(24)(iia), and for that reason liable to be taxed at the threshold u/s. 115BBC, while not saving the requirement of applying the balance for its’ purposes by the recipient (charitable) entity. At the same time, it may well be that it is not a voluntary contribution, which is deemed by law to be the income of the recipient entity from property held under trust. It is in view of the absence of an identifiable source that its nature, whatever it may be, cannot be said to be determined. Section 68 would therefore become applicable, deeming the nature of receipt as income; again, rendering it liable to be taxed at the same rate as section 115BBC prescribes, i.e., at 30%, u/s. 115BBE. The law does not bar its application in-as-much as there is no exclusion therein, with, rather, the law, as explained, is that it is a jurisdiction that confers validity to the exercise of power that is to be preferred, which stands clarified by us with reference to the decision in L. Hazari Mal Kuthiala (supra), a decision by the larger bench of the Apex Court. Again, it may be argued that the amount sought to be taxed u/s. 68 has already

20 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT been admitted as income, which is the purport of section 68, so that it would be of no consequence. The argument is misleading in-as-much as we have already clarified the two provisions to be in pari materia, entailing, in fact, the same tax liability. The purport of an assessment under the Act is the determination of the assessee’s correct tax liability. In the instant case, the nature of the transaction as a voluntary contribution is itself suspect. The question of it being income u/s. 2(24)(iia) would arise only where it’s genuineness as a voluntary contribution, doubted in the instant case, and which we have found as validly so, is confirmed. In fact, the identity of the said donor as being the actual donor is being doubted, and which is forms the basis the invocation of section 115BBC in the present case. When it is said that the sum under reference stands already admitted as income, it does not necessarily imply without concomitant tax liability. It is, thus, largely irrelevant whether the same is u/s. 115BBC or 115BBE. As afore-explained, section 115BBC, where applicable, would be so notwithstanding that the assessee is entitled to, on application, exemption of income by way of voluntary contribution u/s. 11. Application of either section could be resorted to for the same, even as in the instant case, the Revenue relies on both. Here, though, it may be clarified that where the nature of the transaction as a voluntary contribution is not in doubt or proved by the assessee, section 115BBC cannot apply.

3.11 In view of the fore-going (including the preceding paragraphs), in our opinion, the Revenue has successfully impugned the transaction/s, stated as a donation/s, as a genuine transaction/s (also see para 4), so that it is liable to be taxed u/s. 115BBC and, in any case, u/s. 115BBE. We decide accordingly.

21 ITA No. 432/Asr/2017 (AY 2014-15) Sant Baba Bhag Singh M. C. Society v. Dy. CIT as stated, as a loan, through bank transfer (PB pg. 82). The identity of the lender is confirmed. As regards the capacity, in our view, the said sum, given as the loan, is, considering that the Dera is in existence for decades, with a large following, is not out of bounds or means of the Dera. Also pertinent is the fact that the amout has given as a loan, i.e., is repayable, for use for the time being. Interest stipulation, even if in future, is not excluded. The capacity as well as the genuineness of the transaction is therefore shown. In fact, the very fact that an entity which has ostensibly given crores of rupees by way of donation, should, in the same year, i.e., at the same time, give, by comparison, a paltry sum of Rs.15 lacs as loan, is itself a strong indicator of and pointer to the donations ascribed to it as being not genuine. Addition of this sum (Rs.15 lacs) u/s. 68 r/w s. 115BBE, is accordingly deleted. We decide accordingly.