Loading judgment…
Facts
The assessee trust filed a return of income at Nil. The Assessing Officer (AO) made additions on account of unverified non-corpus donations and disallowance of fee receipts. The CIT(A) restricted the addition on donations to 3% of the total amount, finding that only about 3% of donors had incomplete addresses.
Held
The Tribunal held that the CIT(A) was justified in restricting the addition for anonymous donations to 3%, as only a small percentage of donors had incomplete addresses. The Tribunal also deleted an addition of Rs. 25,57,790/- as it was not discussed in the assessment order.
Key Issues
Whether the addition made by the AO for unexplained donations, where only a small percentage had incomplete addresses, was justified. Whether an addition made without any discussion in the assessment order can be sustained.
Sections Cited
143(2), 68, 115BBC, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.:
These appeal and cross objection by the Revenue and Assessee are directed against the order of the Ld. Commissioner of Income Tax (Appeals)-I, Lucknow dated 07.09.2020, pertaining to the assessment year 2017-18. For the sake of convenience, these were heard together and are being disposed off by this common order. First, we will take up the Cross Objection No. “1. BECAUSE Learned Commissioner of Income Tax (Appeals) (hereinafter called CIT(A) was not correct in confirming disallowance to the extent of Rs. 510468.00. being of 3% @ of Donation received aggregating to Rs. 17051600.00 on adhoc basis to be treated as Anonymous Donation by treating as undisclosed income u/s 68 of IT Act, 1961, on the grounds of incomplete address of few Donors, furnished by trust to A.O. without specifically mentioning in the order the name of person(s) whose address is incomplete together with amount of donation received from him/them.
2. BECAUSE on the facts and in the circumstances of the case and in law the learned CIT(A) ought to have accepted the entire cash donation received by trust, amounting to Rs. 17051600.00 which has been shown as income by it and in support of which the trust has furnished name & address of Donors (which has also been accepted by CIT(A) in his order.
3. BECAUSE the Learned CIT(A) failed to appreciate that on the facts and in the circumstances of the case and in law the provisions of Section 68 of IT Act, 1961 cannot be applied to Donation received and shown as income by the trust.
BECAUSE the disallowance so erroneously confirmed by Learned CIT(A) deserves to be deleted in the present case.”
At the time of hearing before us, the Ld. Authorized Representative of the assessee has filed a letter dated 05.05.2025 stating that the assessee wants to withdraw of the cross objection. The Learned Departmental Representative for the Revenue has no objection for withdrawal of this cross objection.
Heard, the Ld. Representatives of the parties and perused the materials available on record. The assessee has requested for withdrawal of the cross objection. We do not see any reason for declining the request of the assessee. Moreover, Ld. DR also has not expressed any objection for such withdrawal in view of the fact that it does not affect or prejudice the interest of the Revenue. In view of the submissions made by the assessee, we permit the assessee to withdraw the cross objection. Accordingly, the cross objection filed by the assessee is dismissed as withdrawn.
“1. The Ld. CIT(A) has erred in law and on facts in holding that the appellant had submitted the list of all the donors along with their address during the assessment proceedings as per the requirement of Section 115BBC of the Income Tax Act, 1961 however assessee merely provided a list of names with generalized addresses which could not be used to verify the alleged donors as the said addresses were incomplete and referred to a large locality rather than referring to the residence of a specific individual.
2. The Ld. CIT(A) has erred in law and on facts in holding AO simply held that since the list was not submitted deliberately and the donors of the appellant resided in areas which are far off than the registered office of the appellant without appreciating the fact the assessee has also failed to provide any credible explanation as to how come it has convinced around 3882 donors to donate to its cause when more than 90% of its donors are from far flung areas of Kanpur (80Kms) and Allahabad(200kms) whereas the assessee is based in Lucknow and very few and nominal donors are from Lucknow. The assessee has failed to provide any satisfactory explanation as to how come people from far flung areas got ready to donate whereas no major donation could be sourced by the assessee from its established place of working.
3. The Ld. CIT(A) has erred in law and on facts in holding that the AO has not made any verification in respect of the donors list submitted by the appellant thereby failing to appreciate the fact that the assessee submitted its first response only after 5 months and just a week before the time barring limitation dated of 31.12.2019, clearly indicates that it is an intentional and deliberate delay on the part of the assessee to submit the donor details at the last point thereby eliminating any possibility on the part to the AO to undertake the necessary verifications in respect of the submitted donor and donation details.
4. The Ld. CIT(A) has erred in law and on facts in holding that invoking of provisions of Section 115BBC of the Act is justified only in respect of 3% donors without appreciating the fact that the assessee merely Provided a list of names with generalized addresses which could not be used to verify the alleged donors as majority of the said addresses were incomplete and referred to a large locality rather than referring to the residence of a specific individual. 5.The Ld. CIT(A) has erred in law and on facts in deleting the balance income of Rs. 25,57,790/which is technically incorrect as the AO has clearly mentioned in the assessment order the total income of the assessee at Rs. 1,96,09,390/- out of which only an income of Rs. 1,70,51,600/to be taxed as per Provisions of section u/s 115BBE of the Income-tax Act, 1961 at the flat rate of 60% (plus surcharge 25 Percent on such tax and cess as applicable) and the same has been computed as per the provisions of the Section 115BBC(1)(i) and 115BBC(1)(ii) of the Income Tax Act, 1961.
Appellant craves leave to add or amend any one or more of the grounds of appeal, as stated above as and when need of doing so arises with the prior permission of the Hon'ble Bench.”
CO. No.2/LKW/2022 Page 4 of 8 5. The Revenue has raised multiple grounds against reduction/deletion of addition. All the grounds are heard together and being decided together for the sake of brevity.
6. The facts giving rise to the present appeal are that in this case the assessee trust filed its return of income at Nil. The case was taken up for scrutiny under Computer Assisted Scrutiny System (CASS) and a notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”, for short) was issued to the assessee. In response to the statutory notices, online responses were filed by the assessee. It is also noted by AO that on 26.12.2019 only the Ld. Authorized Representative of the assessee submitted hard copies of the requisite details. The Assessing Officer further noticed that the assessee trust had received non-corpus donation of Rs.1,70,51,600/- from various persons. The Assessing Officer treated the same as unverified and made addition into the income of the assessee. Further, the Assessing Officer also made addition of Rs.20,50,000/- disallowing the total fee receipts of Rs.2,50,000/-. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A) who partly allowed the appeal of the assessee. Thereby, he restricted the addition to the extent of 3% of Rs.1,70,51,600/-. Aggrieved against this, both the Revenue and the Assessee have filed appeal and cross-objection respectively.
Apropos to the grounds of appeal, the Ld. Departmental Representative strongly supported the action of the Assessing Officer and contended that the Ld. CIT(A) was not justified in deleting the addition. He also contended that the assessee failed to provide relevant details related to receipt of donation from various persons timely. Hence, such information could not be CO. No.2/LKW/2022 Page 5 of 8 verified due to paucity of time. As the assessee provided legible copy at belated stage. Therefore, the Assessing Officer was justified in making the addition. He also contended that the Ld. CIT(A) has erroneously deleted the addition.
8. On the other hand, the Ld. Counsel for the assessee contended that the assessee had filed the requisite details confirmation from the donors and the Ld. CIT(A) has examined the same. He contended that no fault can be found in the finding of fact as arrived by the Ld. CIT(A). He thus strongly relied and supported the impugned order.
We have heard the rival submissions and perused the materials available on record. The Ld. CIT(A) has given a finding on fact by observing as under: -
“6.7 The details regarding the donations received by the appellant were submitted as required u/s 115BBC(3) of the Act. For the purpose of this section anonymous donations means any voluntary contribution refer to in sub-clause (iia) of clause 24 of section 2 of the Act, where a person receiving such contribution does not maintain a record of identity indicating the name and address of the person making such contribution and other such particulars as may be prescribed. Thus it is clear anonymous donations are those donations in which a person receiving the donation does not maintain record as per the requirement, prescribed in the Act. However, the only requirement of the Act respect to the maintenance of record of identity is the name and the address of the contributor and nothing else has been prescribed till date. Anonymous donation has been defined in the new section to mean any voluntary contribution referred to in section 2(24) (iia) of the Act, 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. To be excluded from the definition of anonymous donations the person receiving the donation is required to maintain the record of identity -indicating the name and address of contributor and such other “particulars as may be prescribed. Since no other particulars have been prescribed under the provisions the person receiving the donation is obligation to maintain the identity of donors indicating the name and address. In this case the AO has not made any verification in respect of the donors list submitted by the appellant. The AO in his assessment order has mentioned that the addresses were incomplete. 6.8 A perusal of the list submitted by the appellant shows that in most of the cases, the amount received by the appellant is in the range of Rs. 2,500/- to Rs. 4,900/- only. In some cases the contention made by the AO CO. No.2/LKW/2022 Page 6 of 8 regarding the incomplete addresses appears to be correct. However, the number of such cases is approximately 3% of the total number or donors. Such donors can be construed as anonymous donors in the appellant’s case. Thus invoking of provision of Section 115BBC in respect of these 3% donors is justified. However, the presumption Of the AO regarding the balance donors is legally and factually not tenable the appellant provided names and addresses of all these donors as per the provision of Section 115BBC. Addition cannot be made o conjecture and surmise as held by the Hon’ble Courts in plethora of cases. Thus, the addition made by the AO in respect of above non corpus donors, except for the 3% donors whose addresses and incomplete, as discussed above, u/s 115BBC is deleted and partial relief is allowed to the appellant. 6.9 Thus, part relief is allowed to the appellant in respect of the above ground of appeal
7. Ground of AppealNo.9 is consequential in nature and is thus not adjudicated.
8. Ground of appeal no.
10. Through this ground of appeal the appellant has objected to the addition of Rs. 25,57,790/- made by the AO without any discussion in this regard. A perused of the assessment order shows that the return of income was filed at Nil income while the assessment has been made at total income of Rs 1,96,09,390 . The AO has discussed, the addition made on account of unexplained cash credits u/s 68 r.w.s. 115BBE of the Act for Rs. 1,70,51,600/-. However, no discussion pertaining to balance of Rs. 25,57,790/- is made in assessment order. No details have been provided regarding the reason for which the said addition has been made. In view of the addition made by the AO cannot be sustained, accordingly, the same is directed to be deleted.”
10. The above finding of the Ld. CIT(A) is not rebutted by Revenue by placing any contrary materials on record. During the course of proceedings, the Ld. Counsel for the assessee has drawn our attention to the letter addressed to the ITO (Exemption) dated 20.12.2019 enclosing the list of donors. The Assessing Officer has not given any finding about the list submitted by the assessee. Undisputedly, the AO has invoked provisions of Section 68 of the Act on the ground that the assessee has failed to provide any satisfactory explanation regarding the nature and source of donation. Admittedly, by arriving at such an adverse finding, the AO has not brought any material on record suggesting that the claim of the assessee is not genuine. It appears ex-facie that no attempt to verify the CO. No.2/LKW/2022 Page 7 of 8 correctness of such claim was made. The finding is purely based on surmises without being supported by any credible evidence. The AO should have given clear findings about the veracity of such donations. It is not the case of the Assessing Officer that the name and addresses mentioned in the list is imaginary or fictitious. In the absence of such finding, we do not see any reason to disturb the finding of the Ld. CIT(A). So far, the addition of Rs.25,57,790/- is concerned, such figure is not discussed in the assessment order. The Assessing Officer had discussed only a sum of Rs.20,50,000/- in para no. 8 of its order. It is not discernible from the assessment order as where from such figure is taken, therefore, on this point as well finding of the Ld. CIT(A) is justified. The grounds of appeal of the Revenue are hereby dismissed.
In the result, the appeal of the revenue is dismissed and cross objection of the assessee is dismissed. Order pronounced in the open Court on 16/05/2025.