ROHILKHAND EDUCATIONAL CHARITABLE TRUST,BAREILLY vs. DCIT, CENTRAL CIRCLE, BAREILLY

On the facts and circumstances of the case, the assessment order passed by the leaned authorities below is in violation of the principle of natural justice and without giving adequate time and opportunity to the assessee to represent its case and to file its replies and clarification, is bad in the eye of law and liable to be quashed.

On the facts and circumstances of the case, the learned authorities below have erred, both on facts and in law, in making assessment at an income of Rs. 50,48,01,279 as against NIL income declared by the assessee.

The learned authorities below have erred in law as well as on facts in not allowing the charitable expenditure at Rs. 20 crore, being donation to other charitable trust registered under section 12A and having recognition under section 80G(5) is also against law.

While passing order treating the Trust as business entity Ld. A. O. was under obligation to allow deduction under section 80G. However, no such deduction is allowed.

On the facts and circumstances of the case, the learned authorities below have erred, both on facts and in law, in charging interest under Sections 234A, 234B and 234C of the Act. 11. The appellant craves leave to add, amend or alter any of the grounds of appeal.”

The facts of the case are that, in the assessment year 2017-18, the ld. AO observed that the registration of the assessee trust had been cancelled by the ld. PCIT (Central), Lucknow, vide his order under section 12AA(3) of the Income Tax Act, 1961 passed on 20.03.2019. In view of the same, he held that the assessee was not eligible to claim the benefit of section 11 and 12 of the Income Tax Act, 1961. From a perusal of the return of income, he found that the assessee had claimed the benefits under these sections in its return. Accordingly, the assessee was asked to show cause in this regard and after considering the reply of the assessee, the ld. AO added back a sum of Rs.7,68,95,000/- received as corpus donation. He also brought the surplus of Rs.18,18,45,925/-to tax, which had been claimed as exempt under section 11(1) of the Act. The ld. AO also disallowed the accumulation of Rs. 22,00,00,000/- under section 11(2) of the Act and furthermore added back the same of Rs.14,96,91,583/- claimed as purchase cost of fixed assets and application of income. However, he thereafter allowed a deduction of Rs.1,55,15,994/-, being the depreciation on the same. The ld. AO also observed that the assessee had deposited cash amounting to Rs. 5,59,55,800/- in its various bank accounts during the demonetization period. He asked the assessee to furnish copies of the cash book and comparison chart of monthly cash deposits of F.Y. 2016-17 and F.Y. 2015-16 alongwith explanation of significant increase in the F.Y. 2016-17. However, he recorded that the assessee neither furnished copy of the cash book nor any other details in this regard though asked specifically. Accordingly, he held 3 & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 the cash credit of Rs.5,59,55,800/- to be unexplained and added the same back under section 68 of the Act. Finally, noticing that the assessee had claimed an aggregate expenditure of Rs.67,71,75,436/- (excluding depreciation), as expenses in its income and expenditure account, the ld. AO asked the assessee to furnish copies of bills and vouchers related to such expenses, but the assessee furnished only the ledger accounts. Therefore, the ld. AO held, that as the genuineness of the expenses could not be verified, leakages could not be ruled out and on this account and he added back 10% of such expenditure amounting to Rs.6,77,19,543/-.

In the assessment year2018-19, the ld. AO observed that a donation of Rs.4,00,00,000/- had been made to M/s Keshraj Educational Trust and another donation of Rs.16,00,00,000/- had been given to M/s Varunarjun Trust and that these donations had been parked by those trusts in bank accounts inthe form of fixed deposits. However, since the assessee was not eligible to claim the benefits of section 11 and 12, in view of the order under section 12AA(3) of the Act dated 20.03.2019 passed by the ld. PCIT, Central, therefore, donations were held to be not allowable as a deduction to the assessee and therefore, were added back to the income of the assessee. The ld. AO further noted that during the assessment year in question, the assessee had incurred excess of income over expenditure of Rs.30,48,01,279/- and in view of the cancellation of the registration of the trust, held the same to be liable for taxation. Accordingly, an addition of this amount was also made.

In the assessment year 2018-19, regarding the issues of addition of Rs.50,48,01,279/- against nil income declared by the assessee, the assessment as an AOP against the status of charitable trust and the addition of excess of income over expenditure amounting to Rs.30,48,01,279/- after denying the assessee the benefit of section 11, the ld. CIT(A) took note of the submissions of assessee that the additions had been made merely on the ground that in the case of the assessee trust, registration under section 12A had been cancelled by the Pr. CIT and that 12A registration could not be cancelled retrospectively. She further recorded the submissions of the assessee that the donations given by the assessee trust to other trusts had also been denied only on this basis. She held that the case had been centralized consequent to search and seizure operation and the necessary notices had been issued by the Assessing Officer providing opportunities to the assessee and the order under section 143(3) had been passed after examining the explanations and submissions made by the assessee and in view of the same, she was of the opinion, the assessment order was neither invalid in the eyes or law or on facts. On the issue of jurisdiction not vesting with the ld. AO and the order being passed in violation of the principles of natural justice, she held that at the time of passing the order, the assessee trust did not have registration under section 12A of the Act and the registration was only subsequently restored by the ITAT. The ld. AO was justified in completing assessment based on the facts prevailing at the time when he passed the order. Further, she noted that notices under section 142(1) had been given on numerous occasions and therefore, she & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 did not find any merits in these grounds laid by the assessee. On the merits of the case, she held that restoration of registration under section 12A does not automatically entitle the assessee to claim exemptions under section 11(1) and section 11(2) of the Act unless the requirements of these sections of the Act read with Rule 17(2) of the Income Tax Rules and other relevant provisions of the Act were fulfilled. Going through the provisions of section 11(1)(a), she held that income derived from property held under trust was to be treated as exempt to the extent that such income was applied to charitable purposes in India. She remanded the matter to the assessing officer for examination of this and noted the submissions of the Assessing Officer in the remand report that the main object of the assessee trust was to provide medical relief and medical education but the main object of M/s Keshraj Educational Trust ( to whom a donation of Rs 4 crores had been made ) was to establish and support educational institutions like Management Colleges, Engineering Colleges and other Professional Colleges. Furthermore, that trust was not maintaining / running any hospital since its inception till date. The ld. AO had also pointed out that the donation received from the assessee trust had not been utilized fully by the donee trust and therefore, placing reliance on the decision of the Hon’ble ITAT Allahabad Bench in the case of Nazareth Hospital Society vs. DCIT (Exemption) (2021) 159 taxman.com 394 Allahabad-Trib dated 18.02.2021, She held that donation made by one charitable trust to another charitable trust will only be treated as application of income in the hands of the donor-trust, if the other charitable organization advances the same cause as that of the of the donor charitable trust. She considered the judgments of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. J.K. Charitable Trust 196 ITR 31 (AP) and the judgment of the Hon’ble Delhi High Court in the case of the Mool Chand Khairati Ram Trust vs. DIT (Exemptions) 59 taxman.com 398 (Del) and thereafter upheld the disallowance of Rs.4,00,00,000/- on account of the donation given to M/s Keshraj Educational Trust as it did not comply with the mandate of section 11(1)(a) of the Act. She also took note of the Assessing Officer’s remand report which found that three trustees & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 of the assessee’s trust were also trustees in the case of M/s Keshraj Educational Trust and M/s Varunarjun Trust and she held that this constituted a violation of section 13(3) of the Income Tax Act, 1961 therefore, she upheld the decision of the AO to disallow Rs.20,00,00,000/- on account of donations made to related trusts. On the exemption claimed by the assessee amounting to Rs.30,48,01,279/- being surplus of income under section 11, she pointed out that even if one instance of application or use of the income or property of the trust directly or indirectly for the benefit of any prohibited person arose, the trust will lose exemption in respect of the entire income. Since the trust had violated the provisions of section 13(1)(c)(ii) of the Act, it was not entitled to exemption under section 11 of the Act on the entire surplus of the assessee amounting to Rs.30,48,01,279/- and therefore, she confirmed this addition also and dismissed the appeal of the assessee trust on these grounds. She also rejected the plea of the assessee that the Assessing Officer was under obligation to allow deduction under section 80G, pointing out that no written submissions had been furnished in support of these grounds and also noted that donations made to M/s Keshraj Educational Trust and M/s Varun Arjun Trust had been claimed as application of income and not claimed as deduction under section 80G. In view of these facts, she held that the ground raised

Before we proceed to adjudicate upon the merits of the additions, it is important to address the legal grounds that have been raised by the assessee against the two assessments. In the assessment year 2017-18, the assessee has drawn our attention to the fact that the assessment order that was issued by the Assessing Officer did not carry the name of the assessee, the date of the order or the section and / sub section under which the assessment was made. Neither did it contain the PAN number of the assessee or the assessment year. The assessee has agitated that, on these accounts, the assessment order is invalid in the eyes of law. However, the ld. CIT(A) has pointed out that the assessment order indicates a DIN number which also contains the section under which the assessment was done and that the same was accompanied by a demand notice that had the PAN number, date, assessment order specifically mentioned DIN and notice number whereby a demand of Rs.57,91,04,955/- had been raised. On these accounts, the ld. CIT(A) has held that there was no confusion in the mind of the assessee and this is evidenced by the appeal filed by the assessee in Form No.35. She has also invited our attention to the provisions of section 292B of the Income Tax Act. We have duly considered the matter. It is true that Assessment proceedings under section 143(3) were initiated in respect of the assessment year in question and proceedings were on going. It is also true that the Assessment Order was uploaded on the portal and was visible to the assessee through its’ log in credentials. The assessment order had a DIN which indicates that it was an order under section 143(3). It is digitally signed by the Assessing Officer. Furthermore, it was accompanied by a demand notice that indicated all the missing details. In view of these facts that make out that a proceeding was validly initiated, ongoing and concluded by way of an order that was communicated to the assessee, we are in agreement with the ld. CIT(A), that the issue is covered under the provisions of & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 section 292B and the omissions in the order cannot invalidate it. As regards the validity of the demand notice, on perusal of the details relating to the same as given in para 8.2 of the order of the ld. CIT(A), it appears that the tax and interest that have been computed against the assessee, do not appear to be in congruence with the income indicated in the demand notice. But in our view, this does not render the demand notice as invalid because it has been issued pursuant to a proceeding and an order. Rather it would be a rectifiable mistake apparent from record which may be corrected either at the behest of the assessee or suo moto by the assessing officer. Therefore, we are not inclined to interfere with the order of the Ld CIT(A) on this issue, especially because the said demand notice would undergo further modification on account of appeal effect to be given, after the passing of these orders. Accordingly, Grounds numbers 1 to 3 of the Assessee’s appeal in AY 2017-18 are dismissed. As regards, the legal issues taken by the assessee in AY 2018-19 relating to lack of jurisdiction of the Assessing Officer, we observe that following a search, the case of the assessee trust was centralized with the present Assessing officer. The Ld AR has also not offered any arguments to explain why the Ld Assessing Officer did not enjoy the jurisdiction to assess the income of the Assessee. Therefore, we dismiss ground no. 1 to3 in AY 2018-19 also.

Coming to the additions made on account of alleged involuntary contribution to the corpus fund, we note that merely because the assessee wrote to the donors asking them to make donation towards the corpus, does not make these donations as involuntary. The assessee had no power to compel the donors to make these donations against their free will. Therefore, there is no justification in holding that the donations that were made were not voluntary. It is observed that the assessee was subjected to a search under section 132 of the Income Tax Act. However, no material has been brought on record by the Assessing Officer in the course of the assessment proceedings, to suggest any malpractice in the receipt of these donations towards the corpus, on the basis of which it could be held that the donations to the corpus were not genuine. Therefore, the donors & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 having clearly stated that they were making the donation towards the corpus, there is no reason to ascribe an involuntary nature to such donations, only on the fact that the assessee had asked for them, or to prescribe conditions such as purpose of utilization, where the donors have indicated that the donation was towards the corpus. The addition of Rs.7,68,95,000/- made on this account being unsustainable, is therefore liable to be deleted. However, the LD CIT(A) has indicated in her order that the assessee has not placed confirmations in respect of 5 donors amounting to Rs 1,95,40,000/-. Therefore, the donations made by these 5 donors are restored to the file of the assessing officer for submission of their confirmations, while the remaining additions made on account of corpus donations are deleted. With regard to the addition of Rs. 18,18,45,924/- that are claimed as exempt under section 11(1) of the Income Tax Act being upto 15% of gross receipts, we note from a perusal of Form No. 9A and the provisions of Clause (2) of the Explanation to section 11(1) of the Income Tax Act, that such form is to be filed in a case where less than 85% of the income is applied towards charitable purposes on account of the funds not being received or on any other account. There does not appear to be any requirement for the same to be filed in every case prior to the filing of return, where atleast 85% of the income has been applied towards charitable purpose. The assessee already having been granted the benefit of registration under section 12A, can therefore, not be denied the accumulation under section 11(1)(a) of Rs. 18,18,45,924/-. Accordingly, the addition sustained in this regard is unwarranted and is therefore deleted.

On the issue of accumulation under section 11(2), this Bench has extensively considered the requirements of the said section in the matter of Income Tax Officer vs. Awas Evam Vikas Parishad in & 533/LKW/2014, vide our order dated 28.02.2025. In the same, we have held as under:- “24.We observe that the facts of the assessee’s case and the arguments presented by the learned AR in furtherance of its’ claim are quite similar to the case of DIT(Exemption) vs. Trustees of Singhania Charitable Trust 199 ITR 819 (Cal), as many of the facts in that case resemble that of the assessee parishad. In 23 & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 that case, the assessee, a public charitable trust had claimed exemption under section 11 for assessment year 1984-85, including for accumulation under section 11(2), for which purpose it had filed Form No.10. In the said form, as purposes of accumulation of income, the assessee had listed all the charitable objects for which it was created. These were 16 in number. The resolution passed by the Board of Trustees of the trust was to the effect that the balance of unapplied income of the year was to be accumulated and / or set apart for application to any one or more of the objects of the trust as set out in Item Nos. (I)to(XVI) under paragraph 1 of the deed of the trust. The assessment was completed allowing the exemption under section 11, including accumulation under section 11(2). Subsequently, the ld. Commissioner revised the case under section 263. According to him, section 11(2) contemplated only specific or concrete purposes and since those were not specified by the assessee, the assessment order was erroneous and prejudicial to the interest of revenue. Accordingly, the assessment was set aside. On appeal to the Tribunal, the Tribunal held, that on an examination of the scheme of the Act, since a plurality of charitable purpose was not ruled out, no objection could possibly be taken to the assessee listing out all its objects in Form No.10. It held that it had complied with the provisions of the Act and disagreed with the findings of the Commissioner. Before the Hon’ble Calcutta High Court, it was contended on behalf of the assessee that one purpose of accumulation was interlinked with the other and therefore, the mention of all the purposes did not make any difference and satisfied the requirements of section 11(2). However, the Hon’ble Calcutta High Court observed that the Tribunal’s decision overlooked the scheme relating to accumulation of income for particular future use. It held that while accumulation under section 11(1) could be taken for the broad purposes of the trust as a whole, which is why the statute did not require an assessee to state to specify the purpose, long term accumulation was only permissible under sub section (2) and that could only be for a definite and concrete purpose or purposes. The Hon’ble High Court held that the assessee had sought permission to accumulate for the objects as enshrined in the trust deed in a blanket or global manner which, in its view, was definitely not in the contemplation of section 11(2), when it was construed in its setting. The Hon’ble High Court held that accepting the assessee’s contention that saving and accumulation of income for future application was for the purposes of the trust under widest terms so as to embrace the entirety of the objects clause of the trust deed, would render the requirement of specification for the purposes of acquisition in that sub section, redundant. The Hon’ble High Court further observed that when section 11(2) required the specification of the purpose, it did so with the objective of calling an assessee to state some specific purpose, out of the multiple purposes for which the trust stood; had it not been so, there would not have been any mandate for such specification since, in any case, a charitable trust could, in no circumstances, apply its income, whether current or accumulated, for any purpose other than the objects for which it stood. The very fact that the statute required the purpose of accumulation to be stated, implied that such a purpose be a concrete one, an itemized purpose for a purpose instrumental or ancillary for the implementation of its object or objects. The very requirement or purpose predicated that the purpose must have an individuality. The Hon’ble High Court further observed that it was not necessary that the assessee had to mention only one specific object; there could be setting apart and accumulation of income for more objects than & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 one, but whatever the objects or purposes might be, the assessee must specify in the notice, the concrete nature of the purposes for which the application was being made. Plurality of purposes of accumulation may not be precluded, but it must depend on the exact and precise purposes for which the accumulation was intended; generality of the objects of the trust could not take the place of the specificity of the need for accumulation. According to the Hon’ble High Court, the provision of section 11(2) was a concession provision to enable a charitable trust to meet the contingency, where the fulfilment of any project within its object or objects, needed heavy outlay calling for accumulation to amass sufficient money to implement it and, therefore, specification of purpose, as required by section 11(2), admitted of no amount of vagueness about such purposes. The facts of the assessee’s case are exactly similar to the facts in the case of DIT(Exemption) vs. Trustees of Singhania and Charitable Trust (supra). In this case also, the assessee has filed the Form 10, in which it has given notice of accumulation for the generality of the objects of the functions of the parishad as enshrined in section 15 of the U.P.A.E.V.P.A. 1965. The ld. AR has submitted that the functions (which are 21 in number) are all inter-related and because the assessee parishad cannot spend any money outside of its objects, it is fully compliant with the requirements of section 11(2) of the Act. 25.Another decision upon which the Ld CIT(A) has relied in order to deny the benefit of accumulation under section 11(2) to the assessee, is that of the Delhi Tribunal in the case of Sir Sobha Singh Public Charitable Trust vs Assistant Director of Income Tax (Exemption)79 ITD 1(Del). In this case there was a difference of opinion between the members as to whether that assessee was eligible for accumulation in the given facts of that case and the matter had to be referred to a third member. However, both Members were unanimous in their understanding that specificity was required in the notice in Form 10 for compliance to the provisions of section 11(2). Para 5, of the order written by the Accountant member is worth reproducing in this regard. In the said para it was held as under:- “5. We have carefully considered the rival submissions, gone through the material placed on record to which our specific attention was drawn and the decisions cited on both sides. As per the provisions of section 11 of the Act, the income applied for charitable or religious purposes is not taxable. This is subject to certain conditions laid down therein. The income so applied is to be for the purposes or objects the trust has. The Trust is allowed to accumulate part of its income both under section 11(1)(a) as well under section 11(2) of the Act. Under section 11(1)(a) or (b) accumulation is to be 25% of the income and under section 11 (2) it is to be 75% of unapplied income as referred to, in clause (a) or clause (b) of sub-section (1), read with the Explanation therein. In case of former, the accumulation is for a short period i.e., not beyond the year next succeeding and in case of latter, it can be for 10 years. While in case of former, no conditions are prescribed under the Act, in case of latter, the person has to specify both the purpose as well the period for which the income is to be accumulated. Further the money so accumulated or set apart is to be invested or deposited in forms or modes as specified in sub-section (5) of section 11 of the Act. Rule 17 of Income Tax Rules prescribes the notice as mentioned in sub- section (2) of section 11 of the Act. Form No. 10 prescribes the format of a notice to be given to the prescribed authority conveying the intention and purposes for which the income is to be accumulated or set apart. The aforesaid format makes a & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 reference to the resolution passed by the Trustees to accumulate the surplus funds. Space has also been provided for indicating purposes/objects for which accumulation is sought. From the aforesaid format it is clear that the setting apart of the income could be for more than one purpose. As per language used in clause (b) of sub-section (2) of section 11, the purpose for which the income is being accumulated or set apart has to be specific. The expression specific as commonly understood is something which is contrary to what is general and vague. As per the meaning given in the Random House Dictionary of the English language (the Unbridged Edition), the expression 'specific connotes having a special application explicit, or definite, to state one's specific purpose as against this, the expression general has been defined as 'pertaining to all persons or things belonging to the group or category...... common to most prevalent or usual. not limited to one class, field, product, service ete. Thus, the purpose has to be a definite and precise one. The expression 'specific' has to be read in the context and the text in which it has been used. Since the same has been used in the context of purpose, the same has to be definite and concrete one in distinction to general or vague one. At the same time, it could not be for all the purposes as given in the Trust Deed which would make the provisions of sub-section (2) of section 11 as meaningless. As held in the case of Trustees of Singhania Charitable Trust (supra), the requirement of specification of purpose predicates that the purpose must have an individuality. The aforesaid interpretation also stands to reason when seen in the back-ground that the Legislaturein its wisdom has provided for accumulation of surplus funds to the Trust, both under sections 11(1)(a) or (b) and 11(2) of the Act. There is both a distinction and the purpose behind the aforesaid two provisions. While in case of section 11(1)(a) of the Act, the accumulation could be for such purposes (not specific) it is not so under section 11(2) of the Act. The Trust must communicate in specific terms the purpose or purposes for which it wants to accumulate or set apart the income. The concession as allowed in the Act is perhaps to meet a contingency where the fulfilment of a project requires heavy outlay and calls for accumulation of funds, as observed in the case of Singhania Charitable Trust. The language of section which is clear and unambiguous could not be interpreted in any other manner than what has been conveyed in case of Trustees of Singhania Charitable Trust (supra).”

It is however, pertinent to mention that the Hon Supreme Court in the said judgment of Dilip Kumar, has clarified that, in the said case, they were only concerned with a situation where there was an ambiguity in the exemption notification or the exemption clause. However, with regard to the question of whether a person claiming exemption, was required to comply with the procedure strictly to avail the benefit, the Hon’ble Supreme Court, referred to its own earlier judgment in the case of CCE vs. Hari Chand Shri Gopal (2011) 1 SCC 236 in which case, the Constitution Bench had held that, if exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed a fulfilled exactly, though at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. The Constitution Bench in that case, then considered the doctrine of substantial compliance and held in paragraph 33 and 34 of its order as under:- “33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.

The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential.” Thus, considering that that there is no ambiguity in the wordings of section 11(2),the only question left to be determined is whether stating of specific purposes for accumulation in form 10, as provided in section 11(2), was a mandatory or directory condition to claim the benefit of accumulation. If the nature of compliance was mandatory, then it would have to be exactly complied with as laid down by the Hon’ble Supreme Court in the case CCE vs. Hari Chand Shri Gopal (supra) but if it was directory then some leeway could be offered, by noting that the assessee had substantially complied with its provisions by filing a Form 10 stating the general purpose for accumulation. We believe the answer to this question lies in the provisions of section 11(3A). Section 11(3A) of the Act reads that, where due to circumstances beyond the control of a person in receipt of income, which has been invested or deposited in accordance with the provisions of clause (b) of sub section (2), cannot be applied for the purpose for which it was accumulated or set apart, the ld. AO may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India, as is specified in the application by such person and is in conformity with the objects of the Trust and thereupon, the provisions of sub section 3 will apply, as if the purpose specified by such a person in the application under this sub section, were a purpose specified in the notice given to the ld. AO under clause (a) of sub section (2). Thus, from a plain reading of section 11(3A), it becomes clear that specificity of purpose is mandatorily required as per the provisions of section 11(2), failing which, section 11(3A) would be rendered otiose. No provision of the Act can, in our opinion, be interpreted in such a manner, so as to render a related provision as otiose. Therefore, in view of the specific provisions contained in section 11(3A) which point out that, if the assessee who has accumulated the income for a particular purpose cannot spend it for that purpose, he can spend it on any other purpose within its objects, with the permission of the ld. AO, and then such other purpose would be treated as the purpose given in Form No.10 submitted under Rule 17 & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 and section 11 (2)(a) as the purpose of accumulation, makes it clear that the said provision could not be operable, if the arguments of the assessee were accepted that the notice of accumulation for the general objectives of trust were compliant with the requirement of section 11(2). In the circumstances, after considering the provisions of section 11(2)(a) and section and section 11(3A), we are inclined to agree with the ld. CIT(A), that the assessee cannot be allowed the benefit of accumulation on the basis of such a loosely worded notice under section 11(2), that does not enable the ld. AO to subsequently examine whether the purposes for which the amount was accumulated, was actually utilized for such purposes. Therefore, the decision of the LdCIT(appeals) on this account for the assessment year 2007-08 is accordingly upheld and ground no 1 of the assessee’s appeal is accordingly dismissed.” Therefore, following our orders in the aforesaid matter, we hold that the ld. CIT(A) was justified in refusing to allow the accumulation of income by the assessee trust under section 11(2), without stating the specific purpose for which the income was being accumulated. The addition of Rs. 22,00,00,000/- made in this regard is accordingly confirmed.

With regard to the disallowance of purchase cost of fixed assets during the year aggregating to Rs.14,96,91,583/-, as being application towards charitable purposes, we observe that the disallowance was only made by the Assessing Officer because of the fact that the assessee was not enjoying exemption under section 11 due to the cancellation of registration under section 12A. However, once the said registration stood restored and it had been established that the said capital expenditure was made for a purpose, which was within the objects of the assessee trust, there does not appear to be any reason for the Assessing Officer to desire its application for any other purpose within the objects or for the ld. CIT(A) to speculate that such assets, if acquired, would only be for earning more income. This is because the assessee is a public charitable trust and is obliged under law to apply its income towards public charitable purposes. We, therefore, see no justification for the sustenance of the addition and we accordingly delete the same. With regard to cash deposits aggregating to Rs.5,59,55,800/-, that had been made by the assessee during the demonetization period, we observe that the assessee had filed an explanation explaining how the amounts were reflected in its books of accounts and emanating out of the same. We find that no exercise has 29 & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 been taken by the Assessing Officer or the ld. CIT(A), to disprove any of the sources of the assessee. Rather they have indulged in speculation to conceive of where the amounts may have come from. We are of the opinion that such conjectures cannot form the basis of an addition under section 68. Furthermore, we note that the assessee has offered these receipts as its income in its income and expenditure account. However, after considering the provisions of section 68 that mandate a higher rate of tax, we deem it appropriate to restore this matter back to the file of the ld. Assessing Officer for de novo consideration of the submissions made by the assessee and to enable the assessee to file the necessary evidences before the ld. Assessing Officer, in support of such submissions. Furthermore, on the issue of adhoc disallowance of expenses of Rs.6,77,19,543/-, we observe that the disallowance had been made only because the assessee did not produce certain bills and vouchers before the Assessing Officer. While it is clear that the assessee is obliged to furnish evidence in support of the expenditures made by it, the Assessing Officer’s action in making an adhoc disallowance, without pointing out any specific defect in the books of the assessee cannot be sustained. The assessee has maintained that it is a public charitable trust, which maintains all its records and produces them for audit. Accordingly, in the interest of justice, we deem it necessary to restore this issue back to the file of the Assessing Officer, so that the Assessing Officer may call for proof of such expenditure which he doubts and the assessee may be given an opportunity to furnish the necessary evidences in this regard. Thus, Ground no. 4 & 5 of AY 2017- 18 are held to be partly allowed. Ground no. 6 does not require a decision as no fresh grounds have been preferred or amended. Accordingly, is held to be partly allowed.

Coming to the assessment year 2018-19, we note that the disallowances have been made by the Assessing Officer purely on the grounds that the registration to the assessee trust had been cancelled by the ld. Pr. CIT, Central on 20.03.2019, but subsequently have been sustained on the strength of the remand report wherein it had been pointed out that certain trustees of the assessee trust & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 were also trustees of M/s Keshraj Education Trust and M/s Varunarjun Trust. Consequently, the provisions of section 13(2)(h) have been invoked to suggest, that the trust falls under the conditions of section 13(1)(c). However, we note from Explanation 3 to sub section 11 of section 13, that for the purposes of this section, a person shall be deemed to have a substantial interest in a concern if a person is entitled to not less than 20% of the profits of that concern. That being the case, to our mind it is doubtful as to whether the giving of donations to another public charitable trust in which the trustees of the assessee trust are also associated with, can be considered to be a violation of section 13(1)(c) owing to the provisions of section 13(2)(h), because a public charitable trust, which is not entitled to distribute its profits, cannot be classified as a concern in which the common trustees have a substantial interest , given the definition of the same in Explanation 3 to Section 11. Thus, the giving of donations by one public charitable trust to another, having common trustees, would not require the exemption of the assessee trust to be withdrawn, so long as it could not be proved that the income of the donee trust was being utilized for the benefit of the trustees in some way. However, these aspects have not been looked into by the Assessing Officer during the course of assessment or examined at all during remand proceedings either. Hence the withdrawal of exemption from the assessee trust by alleging violation of section 13(1)(c) read with section 13(3), without bringing any such facts on record is held to be unjustified and unsustainable. We note that the ITAT Kolkata Bench in the case of St Joseph’s Convent Chandan Nagar Educational Society vs JCIT(OSD) Circle 2, Hoogly in (Kol) of 2012, has also held that the payment made by one trust to another as donation, does not fall in any of the categories of section 13(3). That section only refers to payments to individuals, their relatives or concerns in which they have substantial interest .Further the Kolkata bench has held in that case, that when the donation given by one trust to another out of current years income is permitted in section 11, the same cannot be curtailed by another provision of the Act (i.e. Section 13(1)(c) read with section 13(3) of the Act) as it would defeat the very purpose of such provision . Hence it & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 was held that the payment of donation by one public charitable trust to another is not in violation of section 13(1)(c) of the Act as the said payment is not made for the benefit of any person referred to in section 13(3), either directly or indirectly. We are in agreement with the views of the Kolkata bench and since no instance of utilization of funds of the donee trusts for the benefit of the common trustees have been brought on record by the Ld AO or the CIT(A), we hold that the decision to disallow the donation to both the trusts, as application of income, on this ground was unjustified.However, while the disallowance in respect of Varun Arjun Trust has not been made on any other account and for this reason we allow the application in respect of the said donation , we note that the Ld CIT(A) has alsobrought on record the fact that the aims and objects of M/sKeshraj Educational trust were not the same as that of the assessee trust and for this reason the donation to them cannot be regarded as application in the assessee’s hands. We believe this aspect requires more enquiry and the assessee is required to explain as to how, if this is so, then the donation towards M/s Keshraj Educational trust can be considered as furtherance of the objectives of the assessee trust and therefore application of income in its hands. In the interests of justice, we restore this matter to the file of the assessing officer so as to enable the assessee to satisfy the assessing officer that donations so made were towards furtherance of the objectives of the assessee trust. Ground number 8 is therefore partly allowed as above.

In view of our finding that the provisions of section 13(1)(c) read with Section 13(3) have been incorrectly applied against the assessee by the Ld AO and the Ld CIT(A), we see no justification for denial of exemption to the assessee and assessing it as an AOP. Accordingly, we hold that the assessee is entitled to be assessed as a charitable trust under the provisions of section 11, 12 & 13 and therefore ground number 6 is held to be allowed. Furthermore, since, the disallowance on account of surplus has only been made because of the denial of exemption, owing to alleged violation of section 13(1)(c) r.w.s. 13(3) and as the said issue has been decided by us in favour of the assessee, there remains no basis & 182/LKW/2024 Rohilkhand Educational Charitable Trust A.Ys. 2017-18 & 2018-19 to sustain the addition made by the assessing officer in this regard. Accordingly, we deem it appropriate to delete this addition as the assessee is entitled to accumulate this surplus of up to 15%, without paying tax as per the Provisions of Section 11(1)(a) Accordingly the addition of Rs.30,48,01,279/- is deleted. Ground no 7 is accordingly allowed and ground no 5 is partly allowed. With regard toground no. 9, the same is rendered infructuous on account of the recognition of the assessee as a public charitable trust by the ITAT and is accordingly dismissed. Ground no.10 being consequential to the additions made in assessment or appeal is also dismissed as infructuous since the additions have been deleted or restored to the file of the Assessing Officer. Ground no. 4 is also rendered infructuous as the assessee has been heard on all issues. Ground no. 11 does not require a decision. Therefore, is also partly allowed.

In the result, both appeals of the assessee in