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Facts
The assessee, a society, received corpus donations for constructing a dining hall, which they treated as capital receipts. The case was reopened due to cash deposits, and the assessment treated these donations as income. The CIT(A) dismissed the appeal ex parte.
Held
The Tribunal found that the assessee had submitted documents, but they may not have been properly considered. It granted another opportunity to the assessee to present their case to the CIT(A) with necessary documents.
Key Issues
Whether corpus donations received for construction of a capital asset can be treated as income, and whether the assessee was denied a reasonable opportunity of being heard.
Sections Cited
148, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 03/10/2024 in respect of the A.Y. 2016-17 and raised the following grounds:
Tax effect relating to each Ground of Grounds of Appeal appeal (see note below)
1. Order of CIT (Appeals) is Rs. 73,88,533/- liable to be set aside as it wrongly treated the corpus donation of Rs. 73,88,503/- as non-corpus donations and added the same to the total income of the Appellant on the following grounds: (a) that the Appellant has not discharged the burden of proving the exemption to the corpus donation received by the Appellant in the form of deposits made in the bank even though the Appellant submitted all documents in this regard; (b) that the Appellant has not submitted the documents related to list of donors and others to justify the donation even though the Appellant furnished the list of donors (agriculturists); (c) that the Appellant had made some general grounds of appeal even though the Appellant furnished several documents and explanations during the course of assessment proceedings and appeal proceedings; (d) that the Appellant failed to file proper explanation and documentary evidence in support of its claim even though the documents furnished by the Appellant were on record during the proceedings; Total tax effect (see note below) Rs. 60,10,598/-
The assessee is a firm and their case was reopened for the reason that there were cash deposits of more than Rs. 10 Lakhs. Thereafter the assessee filed their return of income on 29/10/2023 in response to the notice issued u/s. 148 of the Act. On 16/12/2023, the assessee furnished some details and explained that the cash deposited into the bank accounts are the corpus donations received for the construction of Dasoha Bhavana. In respect of the purchase of an immovable property for Rs. 79,20,500/-, the assessee submitted that they have not made any such purchases during the year. Not satisfied with the replies filed by the assessee, the assessment was made u/s. 147 of the Act. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) dismissed the appeal ex parte for the reason that the assessee had not submitted any documents, evidences and explanations in support of the grounds of appeal.
As against the said order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR submitted that the assessee is a society registered under the Karnataka Societies Registration Act but unfortunately in the income tax proceedings, it was shown as a partnership firm. The Ld.AR submitted that the objects of the trust are only charitable in nature. The Ld.AR further submitted that the dining hall was constructed for which donations has been received from the local people which was treated as corpus donations by the assessee. The assessee had treated the said corpus donations as capital receipts and therefore the other incomes are below the limit prescribed under the Act and therefore no return was filed by the assessee. The Ld.AR submitted that various documents were furnished at the time of assessment proceedings, but unfortunately the AO had not considered the said documents properly and therefore the assessee had approached the appellate authority. The Ld.AR submitted that the assessee was not able to appear before the Ld.CIT(A) because of some miscommunication and therefore prayed to grant an opportunity to appear before the Ld.CIT(A).
The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the assessment order and in the assessment proceedings, the assessee had participated and also produced the various documents in support of their claim that the corpus donations received from the local donors could not be treated as an income. We have also considered the fact that some list of donors were also furnished before the AO and the AO had, without properly considering the said documents, had treated the said donations as incomes and subjected the same to tax under the provisions of the Income Tax Act. We have also seen that the assessee is doing various charitable activities which is not in dispute before any of the authorities. The only reason for not granting the deduction was that the assessee had not furnished the full list of donors from whom the donations were received by the assessee for the purpose of construction of dining hall. We have also considered that the society is also doing various welfare activities and therefore without considering the activities carried out by the assessee, the donations received by the assessee could not be treated as an income.
We, therefore, deem it fit to grant one more opportunity to the assessee to appear before the Ld.CIT(A) with the necessary documents to substantiate their case that the assessee had received donations from various people towards the corpus and therefore the same is in the nature of capital receipts and not an income as concluded by the authorities below.
We, therefore, set aside the order of the Ld.CIT(A) and remit the issue to its file to decide the issue afresh and in accordance with law after granting a reasonable opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 30th June, 2025.