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Income Tax Appellate Tribunal, ABENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 7.3.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1074201689(1) for the assessment year 2012-13 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
The assessee has raised the following grounds of appeal:
At the outset, there is a delay of 24 days in filing the appeal before this Tribunal. Before us, the ld. A.R. of the assessee drew our attention to an affidavit dated 15.9.2025 filed by the assessee stating the reasons for delay which are reproduced below for ease of reference and convenience:
3.1 On going through the above affidavit, we take a note of the fact that the main contention of the assessee in filing the appeal belatedly is that the assessee was completely unaware of the online/faceless proceedings as they were not well-versed in the computer knowledge and they do not possess any idea how the faceless system works. Further, Mr. Kempalayya who was looking after the accounts affairs also could not attend the work due to his ill health. The assessee Trust was searching for a good tax practitioner who could handle all their accounts and at this point of time, the assessee approached CA Shri Shyama Sagar to handle their accounts and to file an appeal before this Tribunal. Thereafter, the CA Shri Shyama Sagar approached the counsel Shri Balram R. Rao, Advocate to file the appeal before ITAT, who filed this appeal with a delay of 24 days. The ld. A.R. of the assessee Janaseva Trust, Bangalore Page 8 of 16 vehemently submitted that the delay in filing the appeal was unintentional and due to the fact,which is beyond the control of the assessee and accordingly prayed to condone the short delay of 24 days.
Perused the record and having heard the ld. Counsel for the assessee as well as the ld. D.R., it is perceived that the explanation offered in the affidavit is plausible and the sufficient cause being shown by the assessee, which prevented them from filing the appeal within the specified period and accordingly we inclined to condone the short delay of 24 days and admit the appeal for adjudication on merits.
Now the brief facts of the case are that the assessee trust filed its return of income for the assessment year 2012-13 on 29.9.2012 declaring nil income after claiming exemption u/s 11 of the Act. The said return was processed on 20.2.2014 resulting in a refund of Rs.1,13,030/-, which was issued to the assessee. Thereafter, the case of the assessee was selected for scrutiny by CASS and accordingly notices u/s 143(2) as well as 142(1) of the Act were issued from time to time. In response to notices, the ld. A.R. appeared from time to time and produced the details as called for.
5.1 During the course of scrutiny proceedings, it was seen by the AO that the assessee had claimed Rs.1,05,92,266/- (Rs.24,92,266/- + Rs.81,00,000/-) as capital expenditure in the receipt and payment account as building fund corpus and Veda Vignana Shodha Samstha respectively. The assessee was asked to substantiate by producing specific letter from the donors in this regard. The assessee vide letter dated 19.3.2015 produced the copy of receipts and the list of donors. On verification of the same, the AO noticed that there is no specific direction or letter from any of Janaseva Trust, Bangalore Page 9 of 16 the donors. Therefore, in the absence of specific direction from the donors, the amount of Rs.1,05,92,266/- was treated as general receipt and not as corpus fund and accordingly added to the surplus of the assessee trust.
5.2 Further, the AO noticed that the assessee had claimed Rs.31,97,283- as depreciation and accordingly the AO was of the opinion that the assessee is claiming double deduction of the same expenditure in view of the fact that the value of asset on which the depreciation has been claimed had already been claimed towards the application of income in earlier years and therefore, depreciation in respect of such assets would amount to double deduction and accordingly added the same to surplus of the assessee.
5.3 Further, on perusal of the computation of income by the AO, it was evident that the assessee had claimed accumulation u/s 11(1)(a) of the Act @ 15% of the gross receipts of educational institution instead of net income as envisaged in the Act. However, the AO was of the opinion that the accumulation u/s 11(1)(a) of the Act will be to the extent of 15% of income after revenue expenditure and accordingly income to be set apart/exempted u/s 11(1)(a) of the Act was computed @ 15% of net income i.e. gross receipt (-) revenue expenditure.
5.4. The assessee had also claimed an amount of Rs.52,413/- as loss on sale of asset. The AO was of the opinion that this loss is not allowed as an application of income as there is no actual expenditure incurred for the same and accordingly added the same to the income of the assessee trust.
Janaseva Trust, Bangalore Page 10 of 16 5.5 Further, it was noticed that the assessee trust had received a sum of Rs.58, 000/- as refund of caution fund. The assessee stated that the amount of caution fund was collected by the students at the time of admission and refunded when they leave the institution. However, the AO in absence of proper proof of expenditure, held not to be allowed as application of fund and accordingly added the same to the surplus of the trust.
5.6 Finally, as the assessee had filed a delayed Form 10 for an amount of Rs.25,88,520/- before the DIT (Exemptions) and the ld. DIT (Exemptions) vide letter dated 26.3.2025 had condoned the delay in filing Form 10, accordingly, the AO considered the same while passing assessment order u/s 143(3) of the Act.
5.7 Thus, after verification of return and details furnished by the assessee on a random test check basis & discussion with AR, the assessment for the assessment year 2012-13 was concluded as under:
Aggrieved by the Order of the AO dated 27/03/2015, the assessee preferred an appeal before the ld. CIT(A)/NFAC. The ld. CIT(A)/NFAC dismissed the appeal of the assessee based on the materials available before him as the assessee did not appear and filed any submissions.
Again aggrieved by the Order of the ld. CIT(A)/NFAC, the assessee filed the appeal before the ITAT. The ITAT vide order dated 26.7.2023 allowed the issue of disallowance of depreciation, however, with respect to the remaining 3 issues on which addition was made by the AO were remitted to the file of ld. CIT(A) for fresh consideration.
In the second round of litigation before the ld. CIT(A)/NFAC, the assessee again failed to respond to any of the notices or provide any evidence in support of its claim inspite of several notices issued to them. Since sufficient opportunities have been allowed to the assessee but no submission had been made, the ld. CIT(A)/NFAC was of the view that no useful purpose would be served by keeping the appeal pending and therefore proceeded to decide the appeal based on the documents available on record. The ld. CIT(A)/NFAC observed that the addition of Rs.1,05,92,266/- was made on account of donations, Rs.52,413/- on account of disallowance of loss on sale of assets and Rs.58,000/- on account of refunded money during the year under consideration, which the assessee failed to provide in the cogent evidences during the assessment, appellate proceedings as well as set aside appellate proceedings and accordingly upheld the addition made by the AO by again dismissing the appeal.
Again, aggrieved by the order of ld. CIT(A)/NFAC dated 7.3.2025, the assessee has filed the present appeal before this Tribunal. The assessee has also filed copy of audit report for the assessment year 2012-13 along with details of donation collected for the financial year 2011-12 as well as details of building fund corpus as well as Veda Vijnana Shodha Samstha building fund in support of his case.
Before us, the ld. A.R. of the assessee vehemently submitted that the assessee could not represent its case before the ld. CIT(A)/NFAC as the trustees are not very tax savvy persons and they have no knowledge about the computer and they also do not possess any idea how the faceless systems works and for this reason they could not represent the case before the ld. CIT(A)/NFAC. Further, ld. A.R of the assessee vehemently submitted that Hon’ble Karnataka High Court in the case of Director of Income Tax (Exemption) and Another Vs. Shri Ramakrishna Seva Ashram reported in (2013) 357 ITR 731 (Karn.) has held that when income falls u/s 11(1)(d) of the Act, it is not liable to tax. Further the AR submitted that If the intention of the donor is to give that money to a trust to keep in trust the account in deposit and utilize the income there from for carrying on a particular activity, it satisfies the definition part of the corpus, the assessee would be entitled to benefit of exemption from payment of tax. The, ld. A.R. also submitted that in view of the language employed in section 11(1)(d) of the Act, the requirement is that the voluntary contribution have to be made with a specific contribution. However, the law does not require that direction should be in writing. Further, with regard to the addition of Rs.52,413/- as well as Rs.58,000/-, the ld. A.R. of the assessee vehemently submitted that same may be treated as application of income as incurred for the object of the trust. Lastly, the ld. A.R of the assessee submitted that the accumulation u/s 11(1)(a) of the Act will be to the extent of 15% of the gross receipt and not to be set apart u/s 11(1)(a) of the Act @ 15% of the net income.
The ld. D.R. on the other hand vehemently supported the order of the authorities below and submitted that the assessee is
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that assessee has been granted registration u/s 12A of the Act. The assessee trust filed its return of income for the assessment year 2012-13 on 29.9.2012 declaring nil income after claiming exemption u/s 11 of the Act. Further, it is also an undisputed fact that the delay in filing the form 10 for an amount of Rs.25,88,520/- was condoned by ld. DIT (Exemptions) vide letter F.No.18(83)/119(2)(b)/CIT(E)/2014-15 dated 26.3.2015 and accordingly, the same is considered by the AO while passing assessment order. Before us, the assessee has raised mainly 3 issues such as with regard to (i) disallowing the corpus received as building fund to the extent of Rs.1,05,92,266/- and treated the same as general receipt. (ii) Disallowance of application of income to the extent of Rs.52,413/- due to loss on sale of fixed assets and (iii) Receipt of a sum of Rs.58,000/- as refund of caution fund in the absence of proof of expenditure.
12.1 First, we take the issue with regard to claim of amount of Rs.1,05,92,266/- (Rs.24,92,266 + Rs.81,00,000/-) in the receipt and payment account as building corpus and Veda Vignana Shodha Samstha respectively. During the course of assessment proceedings, the assessee was asked to substantiate by producing the specific letters from the donors in this regard. The assessee however, vide its letter dated 19.3.2015 produced a copy of the receipt and list of donors. The AO on verification of the same noticed that there is no specific direction or letter from any of the donors. Therefore, in absence of specific direction from the donors, the AO added the entire amount of Rs.1,05,92,266/- as general Janaseva Trust, Bangalore Page 14 of 16 receipt and not as corpus fund. The ld. CIT(A)/NFAC in the absence of any cogent evidences dismissed this ground since inspite of sufficient opportunities allowed by the ld. CIT(A)/NFAC in appellate as well as in set aside proceedings, the assessee did not respond to the notices at all. We take note of the fact that even in the 1st round of proceedings before us, none appeared on behalf of the assessee. Before us, ld. A.R. of the assessee vehemently argued that the written specific directions are not required and if the intention of the donor is to give that money to a trust to keep in trust the account in deposit and utilize the income there from for carrying on a particular activity, it satisfies the definition part of the corpus. We are of the considered opinion that the assessee could not demonstrate before the Authorities below that these are the corpus funds with a specific direction either oral or written to treat it as corpus. It is the duty of the assessee to substantiate its claim before the authorities below. We agree with the contention of the ld. A.R. of the assessee that law does not require that the direction should be in writing but in order to fall u/s 11(1)(d) of the Act, the assessee has to demonstrate that the amount has been received towards the corpus fund with a specific direction. The direction may be verbal but the onus is on the assessee to establish the same before the lower authorities which the assessee had failed to do so. The assessee has to substantiate that the money so received had actually been invested or deposited in one or more of the forms or modes specified in sub-section (5) of section 11 of the Act maintained specifically for such corpus. Before us, ld. A.R. of the assessee filed copy of audit report and tried to demonstrate that there exists building fund corpus as well as Veda Vijnana Shodha Samstha in the liability side in the balance sheet as corpus fund. But we are of the considered opinion that all these facts need examination and verification. We agree with the contention of the 12.2 With regard to Rs.52,413/- being loss on sale of asset claimed as application of income, we agree with the contention of the AO that these are not actual expenditure incurred towards the object of the trust and this cannot be treated as application of income. We are of the considered opinion that if the purchase or acquisition of the asset had been considered by the assessee as application of Income then the entire gross sale proceeds of the said asset will be treated as surplus of the assessee trust and this fact also requires verification & examination.
12.3 Lastly, with regard to a sum of receipt of Rs.58,000/- as refund of caution fund, as the assessee could not produce the details of students from whom the same were collected and the details of refund when they left the institution. The AO in the absence of proof of such expenditure disallowed this claim as application of fund.
We are of the considered opinion that the issues involved in this appeal requires further examination of facts supported by evidences/confirmations/record. This being so, in the interest of justice and fair play and as requested by the Ld. AR of the assessee, the issues in dispute are remitted to the file of ld. AO (Exemptions) to decide afresh in accordance with the above observations. Needless to say a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce all the books/ documents/record/confirmations /Proof of deposit/ bills & vouchers in support of its claim. We make it clear that in case of further default the assessee shall not be entitled for any leniency.
Janaseva Trust, Bangalore Page 16 of 16 14. Further, while remitting the matter back to the file of the AO(Exemptions), we also consider it necessary to impose a token cost of Rs. 25,000/- to the assessee owing to the steady negligence shown towards the statutory notices not only during the first appellate stages but in the 1st round before us also. The assessee shall deposit the total cost of Rs. 25,000/- in favour of the Prime Minister Relief Fund and the receipt thereof shall be furnished before the ld. AO(Exemptions) within 30 days from the date of the receipt of this Order. With these terms, the appeals of the assessee are restored to the file of ld. AO(Exemptions) for de-novo consideration with the above observations. It is ordered accordingly.