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Facts
The assessee, a charitable trust, declared Nil income claiming exemption under Section 11. During assessment, the AO noticed voluntary contributions of Rs. 1,43,61,000/-, which were added as income for lack of proof of source and creditworthiness of donors. The CIT(A) confirmed the AO's order.
Held
The Tribunal held that Section 115BBC(3) only requires the maintenance of records indicating the identity (name and address) of the donors, not necessarily the source or creditworthiness, especially when such donations are applied for charitable purposes. The AO and CIT(A) erred in applying Section 68 of the Act.
Key Issues
Whether the cash donations received by the trust are to be treated as anonymous under Section 115BBC(3) and added to income, or if the provided records of donor identities are sufficient.
Sections Cited
11, 143(2), 143(3), 144B, 46A, 68, 115BBC(3), 13(7)
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal at the instance of the assessee is directed against CIT(A) - NFAC order dated 20.11.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
The solitary issue raised is whether CIT(A) was justified in confirming order of the AO holding that Rs.1,43,61,000/- was enormous donations.
3. Brief facts of the case are as follows:- The assessee is a trust engaged in providing training for preparation of police services free of cost to poor and rural students, who aspire to be recruited in police services. For the assessment year 2018-19, return of income was filed on 02.11.2018 declaring Nil income after claiming exemption u/s.11 of the Act. The assessment was selected for scrutiny and notice u/s.143(2) was issued. During the course of assessment proceedings, the AO noticed that assessee had disclosed voluntary contribution other than corpus amounting to Rs.1,43,61,000/-. The AO held that for the aforesaid voluntary contribution, the assessee has no proof for source and creditworthiness of donors and added the same as income while completing assessment u/s.143(3) r.w.s. 144B of the Act (order dated 21.04.2024).
Aggrieved by the order of assessment by adding back the sum of Rs.1,43,61,000/-, the assessee preferred an appeal before the First Appellate Authority. Before the First Appellate Authority, the assessee has filed additional evidences under Rule 46A of the Income Tax Rules, 1962. The additional evidences that sought to be admitted are as follows:- i)280 Individual files maintained by the trust out of 317 donors ii)Mess bill payment register containing identities of 13 donors iii)Office copies of bill books containing names & addresses. iv) Mobile numbers of all the 316 donors. v) Photographs taken identifying 148 donors; and vi) Video taken on 29.10.2017.
The CIT(A), however concurred with the view of the AO that assessee trust has not explained i) source of cash deposits & ii) genuineness and capacity of donors. The relevant findings of the CIT(A) reads as follows:- “It is pertinent to note that the appellant has failed to justify the source of cash deposits made to its bank account. Since, the donation received in most of the cases is either equal to or more than Rs.50,000/-, therefore the capacity of donors to donate the donation above Rs. 50,000/-is must to be established. In the instant case, the source of cash donation is not established by the appellant and also in absence of supporting documents. It is the duty of the appellant and onus on the appellant to establish and prove the genuineness and capacity of the donor to donate the donation. The appellant has failed to prove the genuineness and capacity of the donors."
6. Aggrieved by the order of CIT(A), assessee has filed present appeal before the Tribunal. The assessee has filed two sets of paper book, one enclosing case laws relied on. In the other set of paper book, the assessee has enclosed, the list of donors, their address, telephone number, the amounts of donation, written submissions filed before the CIT(A) etc. The Ld.AR submitted that AO and CIT(A) have erred in applying rigor of section 68 of the Act in the assessee’s case as the said section will not apply in the case of a trust. It was submitted that to treat the deduction as anonymous and to bring into tax u/s.115BBC(3), the AO has to indicate that assessee trust has not maintained records disclosing identity of the donors. It was submitted by the Ld.AR that it is enough, if the records maintain by the trust indicate name & address of the donors and in such circumstances, donations cannot be treated as anonymous donations as per provisions of section 115BBC(3) of the Act. In support of Ld.AR’s contention, he relied on the following judicial pronouncements: i)Vaishnavi Educational Society Vs.DCIT in to 1181/Hyd/2014 vide order dated 07.11.2014 ii)Dhirendra Pal Singh Institure of Higher Education Vs.JCIT in ITA No.187/Agra/2016 vide order dated 13.07.2018 iii)Shanthi Niketan Trust Vs. Addl.CIT in ITA No..4109/Del/2015 vide order dated 07.01.2019; iv)DCIT Vs.Mayank Welfare Society in ITA Nos.232/Ind/2017 and 776/Ind/2018 vide order dated 29.10.2021. v)DCIT Vs.Gian Sagar Educational & Charitable Trust in ITA No.4775/Del/2015 and ITA 4692/Del/2015 vide order dated 21.10.2022 & vi) ITO Ward-1, Exemption Vs. Aishwarya Foundation in ITA No.103/Pat/2020 vide order dated 03.05.2023.
The ld.DR, on the other hand, submitted the donations are exceeding a sum of Rs.50,000/- and being cash donations necessarily the donee has to prove identity, genuineness and capacity of the donor donating sum exceeding sum of Rs.50,000/-.
We have heard rival submissions and perused material on record. The solitary issue is whether the cash donations totalling to Rs. 1,43,61,000 received by the assessee trust, which is registered u/s 12AA and 80G, is anonymous in terms of Section 115BBC(3) r.w.s 13(7) of the Act. Sub section 13(7) read as under:
(7) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section.
Sub-section 115BBC(3), which describes "anonymous donation", is as under: "115BBC(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."
In light of aforesaid provision, if the Trust has not maintained a record of the identity indicating the name and address of the donor, the donations can be treated as "anonymous". The assessee trust in this case has trained aspirants for police and fire service jobs for six months to one and half years in its premises. On perusal of facts on record, it is evident that assessee trust has maintained a file for each and every trainee wherein the details like name, address, educational qualification, physical measurements, cell number along with the photos of the trainees find place. Only such trainees, when successfully cleared the exams and got the job offers, have made cash donations ranging from Rs. 20,000 to Rs.1,01,000 to the Trust. From the records maintained by it, the Trust has furnished the name, address, cell number and the amount of cash donations received, before the Assessing Officer and CIT(A). However, the AO & CIT(A) has concluded that the assessee trust has not established a) the source of cash donations; & b) the genuineness and capacity of donors. Section 115BBC(3) does not require a trust to establish the source of the cash donations and genuineness of the transaction and capacity of the donors. This sub-section requires only identity of the donors are to be indicated and in the instant case neither the AO nor the CIT(A) have given a finding that the assessee trust has not maintained records indicating the identity of the donors. The Hon’ble Delhi High Court in the case of Director of Income Tax (Exemption) Vs. Keshav Social and Charitable Foundation [2005] 278 ITR 152(Del) has held that rigor of section 68 of the Act has no application in the case of trust. The relevant finding of the Hon’ble High Court read as follows:- "The assessee was a charitable trust providing medical advice for needy people in various parts and remote villages of Uttar Pradesh. It was registered under section 12A of the Income- tax Act, 1961. For the assessment year 1991-92, the assessee claimed benefit under section 11 of the Act for the donations it received during the relevant previous year. The assessee had furnished the list of donors. The Assessing Officer disallowed the claim stating that the assessee could not furnish details regarding the donors and that it was just a way of introducing unaccounted money into the books of the assessee trust and thus treated the amount as cash credit under section 68 of the Act. The Tribunal held that since more than 75 per cent. of the donations received by the assessee was spent for charitable purposes, the addition was not justified. On appeal to the High Court:
"Held, dismissing the appeal, that to obtain benefit of the exemption under section 11 of the Act, the assessee was required to show that the donation was voluntary. In the present 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 had not been filed or that the donors had not been produced did not necessarily lead to the inference that the asses see had tried to introduce unaccounted money by way of donation receipts. This was shown in the facts of the case, where admittedly 75% of the donations were applied for charitable purposes. Section 68 of the Act had no application to the facts of the case because the assessee had in fact disclosed the donations of Rs. 18,24,200/- 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 thus full disclosure of income by the assessee and also 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."
11 In the instant case, AO and CIT(A) have tried to bring in rigors of section 68 of the Act . In light of the Hon’ble Delhi High Court, the conclusion of AO and CIT(A) is not legally tenable. We also rely on the ITAT orders cited in para 6 of this order, wherein it was held that it is enough, if records indicate the names & addresses of are mentioned and in such circumstances, the donations cannot be treated as ‘anonymous donation’ as per provisions of section 115BBC(3) of the Act.
In light of aforesaid reasoning and following the judicial pronouncement cited supra, we delete the addition of Rs.1,43,61,000/-. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 28th February, 2025.