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Facts
The assessee, a charitable trust, filed its return with 'Nil' income. The AO made an addition of Rs. 2,12,97,163/- on account of anonymous donations. The CIT(A) confirmed the addition, holding that the assessee failed to maintain accurate records of donations. The assessee appealed to the Tribunal.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal without providing the assessee an opportunity to respond to the remand report. This violated the principles of natural justice. Therefore, the matter was set aside to the CIT(A) for fresh adjudication.
Key Issues
Whether the principles of natural justice were violated by the CIT(A) by not providing an opportunity to the assessee to rebut the remand report, and if the matter should be set aside for fresh adjudication.
Sections Cited
143(3), 143(3A), 143(3B), 133(6), 142(1), 143(2), 115BBC, 2(24)(iia), 12A, 80G
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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आयकर अपील सं. / Assessment Year : 2018-19 Sangamner Medical Foundation Exemption Circle, And Research Institute, Aurangabad Navin Nagar Road, Tal.-Sangamner, Vs. Dist.-Ahmednagar-422605 PAN : AACTS4864L अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Suhas Bora Department by : Shri Akhilesh Srivastva Date of hearing : 26-06-2025 Date of 26-08-2025 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 25.03.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2018-19.
The assessee has raised the following grounds of appeal:- “On facts and in law
1. The Ld. CIT(A) erred in dismissing the appeal by violating the principles of natural justice on account of following: a. No opportunity provided to the appellant for submitting rejoinder or response to the remand report despite of admitting the additional evidences submitted by the appellant. b. The omission of an opportunity for the appellant to rebut the points raised in the remand report constitutes a clear violation of principles of natural justice. c. No information provided to the appellant with respect to the summons issued u/s 133(6) of the Act by the Ld. AO.
2. The Ld. CIT(A) has erred in dismissing appellant's appeal and confirming the action of the Ld. AO in assessing the total income at 2 AY 2018-19 Rs. 2,12,97,163/- as against the returned income 'Nil' without considering the following important facts: a. The books of accounts of the appellant are audited. b. The appellant is a charitable Trust registered under Bombay Trust Act. c. The appellant had produced the register for the cash donations received by it giving all particulars such as name, address, amount etc.
3. The Ld. CIT(A) as well as the Ld. AO while assessing the income at Rs. 2,12,97,163/- failed to point out any errors in the books of accounts and register maintained by the appellant trust.
4. The Ld. CIT(A) erred in confirming the action of the Ld. AO invoking the provisions of section 115BBC without bringing on record any material to treat the donation as anonymous donations.
5. The Ld. CIT(A) as well as the Ld. AO has erred in not considering the without prejudice contention of the appellant that in view of past assessment record and to purchase peace of mind the appellant trust agrees for considering 25% of the cash donations as anonymous donations without giving any valid reason for the same.
6. The appellant prays that – a. The addition amounting to Rs. 2,12,97,163/- may please be deleted. b. The assessment order may kindly be quashed as the same has been passed violating the principles of natural justice. c. Any other relief Your Honour may deem fit.
7. The appellant seeks permission to add, alter, amend or delete any of the above grounds of appeal.”
3. Briefly stated the facts are that the assessee is a trust engaged in the educational/medical charitable activities and is registered u/s 12A of the Income Tax Act, 1961 (the “Act”) and recognized u/s 80G of the Act. The main object of the trust is imparting education in rural areas. For AY 2018-19, it filed its return of income on 29.10.2018 disclosing income at Rs. Nil. The case was selected for complete scrutiny assessment under E- assessment Scheme, 2019 on the following issues :-(i) Receipts of Trust and (ii) Approval u/s 80 and Receipt of Voluntary Contributions. Accordingly, notice u/s 143(2) was issued on 22.09.2019 through ITBA. Subsequently, notice u/s 142(1) was issued and duly served upon the assessee electronically through ITBA on various dates during the course of assessment proceedings to which the assessee has submitted documents which were examined and verified by the Ld. Assessing Officer (“AO”). However the Ld. AO has not appreciated the submissions given by the assessee and accordingly made an addition amounting to Rs.2,12,97,163/- on account of anonymous donations under section 115BBC of the Act vide his order dated 021.03.2021 passed under section 143(3) r.w.s.143(3A) & 143(3B) of the Act.
4. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A)/NFAC. The Ld. CIT(A)/NFAC confirmed the additions made by the Ld. AO and dismissed the appeal of the assessee on the ground that the assessee has failed to maintain accurate and complete records of the donations received by observing as under :
“5. I have carefully considered the assessment order, the grounds of appeal, and the written submission of the appellant, along with the additional evidence submitted by the appellant. From the assessment order, it is noted that the appellant trust explained the voluntary contributions as donations received from numerous individuals residing in rural areas and provided a list of donors contributing Rs.2.000 each from 11,475 parties. However, the list did not establish the identity or addresses of the donors, only mentioning their names without allowing the assessing officer the opportunity to make further inquiries. The appellant further claimed during the assessment that the trust is primarily engaged in imparting education in rural areas and charges minimal fees to make educational facilities accessible to the rural population at an affordable cost. To achieve this, the trust was supported by many individuals through donations, and the appellant-maintained records of the names, addresses, and PAN (if provided) of these donors. Moreover, the appellant has offered to treat 25% of the donations as anonymous donations to be taxed under section 115BBC of the Act to resolve the matter amicably. The assessing officer, however, noted that the appellant could not furnish the names, addresses, or identities of the donors from whom the donations totalling Rs.2,25,25,500 were received, and accordingly assessed the same under section 115BC of the Act after giving allowance for 5% of the above amount. 5.1. During the appellate proceeding, the appellant provided a list of 11,475 donors, including the donor's name and the amount received (pages 11 to 236 of the paper book). The appellant claimed this list had been filed before the assessing officer. However, as rightly observed by the assessing officer, the list did not include the identity and address of the donors for further verification. Additionally, the appellant submitted another list containing the addresses of these parties (pages 338 to 582 of the filed paper book) as additional evidence under Rule 46A of the Income Tax Rules. The assessing officer, in his remand report, noted that they had randomly selected 120 of the parties and issued notices under Section 133(6) of the Act, requesting them to confirm the donations made. However, по responses were elicited as the notices could not be served due to insufficient or inadequate addresses, etc resulting in their return by postal authorities. The appellant also furnished some confirmation letters from a few donors confirming their voluntary donations (pages 237 to 336 of the filed paper book), with a sample of the confirmations provided as under:
5.2. It is noted from the details of the list of donors and the confirmation letters provided that all 11,475 parties have donated Rs.2000 each, without any variation. Given the improbability of such uniform contributions by all donors, it raises a high likelihood that the appellant manipulated the donations received anonymously, recording each as Rs.2000 to avoid maintaining records of identity and other particulars. The voluminous list of donors, coupled with insufficient address details provided by the appellant, makes it highly difficult to verify the legitimacy of these donations, rendering any such enquiry akin to searching for a black cat in a dark room. The income tax return (ITR) filed indicates that the appellant has received fees amounting to Rs.14,61,10,622 from students, and operates various educational institutions and colleges under the trust. Educational institutions typically collect additional donations beyond regular fees, often at the time of student admissions as one-time donations or capitation fees. It is plausible that the appellant collected donations from admitted students and disguised them as voluntary donations from unknown individuals. The appellant has admitted to receiving voluntary donations totalling Rs.2,25,25,500 but has failed to maintain true records of donor names and identities. Accordingly. these donations fall within the scope of "anonymous donations" as defined under section 115BBC and are liable for taxation as such. 5.3. The appellant relied on several judicial precedents to support its case for deleting the addition on the grounds that the voluntary donations were applied towards the objectives of the trust and that the appellant had maintained and produced a list of donors. Upon careful review of these decisions, I note that they cannot be applied to the appellant's case, as the list of donors submitted lacks credibility and may not accurately reflect the true nature of the alleged donations. Furthermore, Section 115BBC and Section 2(24)(iia) are included in the statute to prevent the introduction of unaccounted funds from the public or donors into charitable activities, irrespective of the fact that such funds are applied for the charitable purposes of the trust. Accordingly, I am of the considered opinion that the aforementioned decisions do not aid the appellant. 5.4. In light of the above circumstances, I am of the considered view that the appellant has failed to maintain accurate and complete records of the donations received. Therefore, I find no merit in the appellant's argument for relief in this matter, and I hereby confirm the addition made by the assessing officer, dismissing the appeal.
In the result the appeal is dismissed.”
Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
6. The Ld. AR at the outset submitted the Ld. CIT(A) erred in dismissing the appeal by violating the principles of natural justice as the assessee was not provided with any opportunity to submit rejoinder or response to the remand report despite of admitting the additional evidences submitted by the assessee during the appellate proceedings before him. He further argued the Ld. CIT(A) has dismissed the appeal on the basis of the remand report, however, a copy of the same was not provided to the assessee. He therefore prayed that the matter may be set aside to the file of the Ld. CIT(A)/NFAC for fresh adjudication on merits after giving an opportunity of hearing to the assessee to rebut the findings and observations of the Ld. CIT(A)/NFAC. In support thereof, the Ld. AR relied upon the decision of the Mumbai ITAT in the case of Allumilite Architectural P. Ltd. Vs. ITO 1 (1) 1, Mumbai, DCIT 1 (1), Mumbai, dated 28.02.2017 and Visakhapatnam ITAT in the case of SBS Paper Boards Private Limited Vs. ACIT, Circle-1 (1), Rajahmundry, dated 30.03.2022 wherein the Tribunal under the similar set of facts as that of the assessee in the present case, has set aside the entire matter to the file of the Assessing Officer for denovo adjudication on the ground that the assessee was not supplied with the remand report by the CIT(A) before deciding the issues against the assessee.
The Ld. DR supported the order of the CIT(A)/NFAC/AO.
We have heard the Ld. Representatives of the parties and perused the material available on record. From the perusal of the order of the Ld. CIT(A)/NFAC, we find that the Ld. CIT(A)/NFAC admitted the additional evidence filed by the assessee and had called for remand report from the Ld. AO, however, a copy the same was not provided to the assessee to file its response thereto, which action of the Ld. CIT(A)/NFAC has been challenged before the Tribunal by the assessee. The Ld. Counsel for the assessee submitted that since the assessee could not furnish its reply/objection to the remand report of the Ld. AO, the matter may be set aside to the file of the Ld. CIT(A)/NFAC to decide the issues afresh on merits after affording an opportunity of hearing to the assessee. We agree with the contention of the Ld. AR that the omission of an opportunity for the appellant to rebut the points raised in the remand report constitutes a clear violation of principles of natural justice as held by the Mumbai and Visakhapatnam Bench(es) of the Tribunal in the decisions (supra) relied upon by the Ld. AR.
Considering the totality of facts and in the circumstances of the case enumerated above, without going into the merits of the appeal, we deem it proper, in the interest of justice, to set aside the order of the Ld. CIT(A)/NFAC and restore the matter back to his file for adjudication afresh on merits as per fact and law after allowing one final opportunity of being heard to the assessee. The assessee is also hereby directed to provide the requisite support in terms of submitting the relevant documents/ evidence as may be required/called upon on the appointed date and make his submissions without seeking any adjournment under any pretext, failing which the Ld. CIT(A)/NFAC shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.