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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI O.P. KANT
This appeal is preferred by the assessee against order dated 30.3.2015 passed by the Ld. Commissioner of Income Tax (Appeals), Ghaziabad {CIT (A)} for Assessment Year 2011-12.
Shree Bankey Bihari Educational Society vs JCIT 2. Brief facts of the case are that the assessee is a charitable society registered under Societies Registration Act, 1860 w.e.f. 18.10.2001. The society was granted registration u/s 12AA of Income Tax Act, 1961 (hereinafter called ‘the Act’) vide order dated 14.6.2002. The society is also approved u/s 80G of the Act. For the captioned year, the return of income filed declaring NIL income. The case was selected for scrutiny and the assessment was completed at a taxable income of Rs. 10,000,000 after making the following disallowances:-
Disallowance of depreciation amounting to Rs. 1,620,755/-
Treating donations of Rs. 10,000,000/- as unexplained cash credit u/s 68 of the Income Tax Act.
2.1 Aggrieved, the assessee approached the Ld. First appellate authority challenging both the additions/disallowances. However, the assessee got no relief from the Ld. first appellate authority. The assessee’s challenge to disallowance of depreciation was dismissed as being academic in nature and the disallowance pertaining to donations of Rs. 1 crore was upheld with the Ld. CIT (A) that the same could not be added u/s 68 of Shree Bankey Bihari Educational Society vs JCIT the Act but was to be added as anonymous donation u/s 115BBC of the Act.
2.2 Now, the assessee is before the Tribunal and has raised the following grounds of appeal:- i. “That the CIT (A) has erred on facts and in law in confirming the disallowance of depreciation of fixed assets amounting to Rs. 1,62,07,551/- ii. That the CIT(A) has erred on facts and in law in ignoring the fact that the appellant did not claim application of income for charitable purpose at the time of purchase of fixed assets and there is no dual claim of application of income as assumed by the AO. iii. That the CIT (A) has erred on facts and in law in not giving any reasons as to how the case laws relied upon by the appellant are not applicable specially the dismissal of Special Leave Petition (SLP CC 9735/2010) by Supreme Court vide order dated 19.7.2010 filed by the revenue in Supreme Court challenging judgment dated 19.08.2009 (allowing claim of depreciation) of Punjab & Haryana High Court in in the case of CIT v Manav Mangal Society which finally decided the claim of depreciation in favor of assessee. iv. That the CIT (A) erred on facts and in law in not giving any reasons on submissions made by the appellant in view of the insertion of section 11(6) inserted by the Finance Act, 2014 w.e.f. 1.4.2015 stipulating that in section 11 where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation in respect of any asset, acquisition of which has been claimed as an application of income u/s 11 in the same 3
Shree Bankey Bihari Educational Society vs JCIT or any other previous year and thus, even effective from AY 2015-16, depreciation on assets only where acquisition of asset has been claimed as application shall not be allowed. v. That the CIT (A) has erred on facts and in law in upholding the addition of Rs. 80,39,800/- u/s 115BBC out of total addition of Rs. 1,00,00,000/- u/s 68 as unexplained cash credit made by the AO on account of donation from M/s Kim Clothing Design Concept Pvt. Ltd vi. That the CIT (A) has erred in treating the donation as anonymous donation u/s 115BBC whereas the addition on account of donation by the AO was made u/s 68 of the Income Tax Act, 1961 as unexplained cash credit. vii. That the CIT (A) has erred on facts and in law in ignoring the fact that as the appellant has complied with the provisions of section 115BBC by filing list of doners with their complete particulars such as name, address, PA no., amount of donation etc, and consequently, the AO had not treated the donation as anonymous u/s 115BBC. viii. That the CIT(A) has erred in violating the principles of natural justice as neither he gave any opportunity to explain nor he sought any explanation from the appellant as to why the donation be not treated as anonymous donation u/s 115BBC specially when the AO has not held the donation as anonymous donation. ix. That the CIT(A) has erred in not passing a speaking order and not giving reasons for rejecting various contentions raised by the appellant before him. x. That the CIT(A) has erred in not following various judgments relied upon by the appellant.”
Shree Bankey Bihari Educational Society vs JCIT 3.0 At the outset, the Ld. Authorised Representative (AR) submitted that ground No. viii was not being pressed. Accordingly, the same is being dismissed as not pressed.
3.1 The Ld. AR submitted that ground Nos. 1 to 4 challenged the disallowance of depreciation to the tune of Rs. 16,20,755/- it was submitted that although the issue of depreciation is tax neutral, depreciation should not have been disallowed because of settled judicial precedents in this regard.
3.2 With respect to ground Nos. 5 to 7, it was submitted that these grounds challenged the action of the Ld. CIT (A) in deleting the addition u/s 68 of the Act but taxing the same as anonymous donations u/s 115BBC of the Act. It was submitted that the AO had taxed the donations of Rs. 1 crore as cash credit u/s 68 of the Act but the Ld. CIT (A) had held in the impugned order that the amount could not have been added u/s 68 but he invoked section 115BBC and brought the amount to tax. It was submitted that, undisputedly, the AO had not considered the said donations as falling within the ambit of section 115BBC of the Act and he had considered the amount as unexplained cash credit and had invoked the provisions of section 68. It was submitted that, thus, the AO had not considered the 5
Shree Bankey Bihari Educational Society vs JCIT taxability of the amount u/s 115BBC of the Act and ultimately the Ld. First Appellate Authority had made an entirely new case by making the addition u/s 115BBC of the Act although this issue was never before the AO. The Ld. AR drew our attention to the order of the Ld. CIT (A) wherein the Ld. CIT (A) had observed that since the identity of the donor was not proved, the impugned donation can be deemed as anonymous thus falling within the purview of section 115BBC. It was submitted that the assessee has duly complied with the provisions of section 115BBC (3) of the Act as the assessee has maintained record of the identity indicating the names and addresses of all the donors. It was submitted that the donor to whom this donation related namely M/s KIMO Clothing Design Concept Pvt. Ltd. denied having made the donation in response to notice issued u/s 133(6) of the Act. It was submitted that copies of the two cheques from the said donor were on record and the donation was received vide instrument nos. 464163 and 464155 drawn on the current account of the donor bearing No. 503011032860. It was submitted that this amount was duly credited in the bank account of the assessee wherein the numbers of the instrument/s were duly mentioned. The Ld. AR drew our attention to a copy of the bank statement in Shree Bankey Bihari Educational Society vs JCIT this regard. It was also submitted that none of these documents, including the receipt issued by the assessee, copy of ledger account of donation etc. were rejected by the department. It was submitted that in view of the overwhelming documentary evidences in favour of the assessee, the AO was incorrect in rejecting the claim of the assesee. It was also submitted that the books of accounts of the assesee were also duly accepted. The Ld. AR also submitted that it is not open for the Ld. First Appellate Authority to introduce in the assessment a new source of income and the assessment has to be confined only to those items of income which were the subject matter of original assessment. The Ld. AR submitted that the Ld. First appellate Authority has no power to discover a new source of income not considered by the AO in the order appealed against. Reliance was placed on numerous judicial precedents in this regard. The Ld. AR also placed reliance on judgment of the ITAT Delhi Bench in the case of ACIT vs. Shree Shiv Vankeshwar Educational & Social Welfare Trust (2019) 106 taxmann.com 249 (Delhi Tribunal) and Apex Education Society vs. ACIT in and submitted that it has been held that section 68 could not be invoked in case of the anonymous donations and only section 115BBC has to be Shree Bankey Bihari Educational Society vs JCIT resorted to and since the assessee has complied with the provisions of section 115BBC, the impugned addition was not sustainable.
3.3 With respect to the issue of depreciation, it was submitted that suitable directions may be given to the AO in this regard.
4.0 In response, the Ld. Sr. DR placed reliance on the order of the lower authorities and vehemently argued that the addition has been rightly upheld by the Ld. CIT (A).
4.1 With regard to depreciation also, reliance was placed on the concurrent findings of both the lower authorities.
5.0 We have heard the rival submissions and have also perused the material on record. The facts are not in dispute. The assessee society had claimed receipt of donation of Rs. 1 crore from one M/s. KIMO Clothing Design Concept Pvt. Ltd. It is the assesse’s claim that the receipt of donation is evidenced by copies of the two cheques of Rs. 50 lacs each drawn on the current account of the donor company bearing A/c No. 503011032860. It is the assessee’s claim that the first cheque dated 3.3.2011 of Rs. 50 lacs bearing No. 464155 was credited to Shree Bankey Bihari Educational Society vs JCIT the bank account of the assessee on 10th March, 2011 and the second cheque dated 15.3.2011 for Rs. 50 lacs bearing No. 464163 was credited to the bank account of the assessee dated 22nd March, 2011. A copy of the bank account of the assessee with Oriental Bank of Commerce bearing No. 765011000516 has also been placed on record. Since, in response to notice u/s 133(6) of the Act the said company had denied having made any donations, the AO had proceeded to invoke provisions of section 68 and had treated this amount as unexplained cash credit. The Ld. CIT (A), however, held that addition u/s 68 was not correct and the addition should have been made u/s 115BBC of the Act. As far as the action of the Ld. CIT (A) in holding that addition u/s 68 could not have been made is concerned, we agree with the observations of the Ld. CIT (A). The Hon’ble Allahabad High Court, which is a jurisdictional High Court for the assessee, has held in the case of CIT vs. Uttranchal Welfare Society (2014) 364 ITR 398 (All) that section 68 has no application where the assessee has disclosed donations as its income. The Hon’ble Allahabad High Court, while holding such, followed the judgment of the Hon’ble Delhi High Court in the case of DIT (Exemption) vs. Keshav Society & Charitable Foundation reported in (2005) 278
Shree Bankey Bihari Educational Society vs JCIT ITR 152 (Delhi). Now, the only question, thereafter, remaining is as to whether the Ld. CIT (A) has rightly invoked the provisions of section 115BBC for treating the amount as anonymous donations after rejecting the applicability of section 68. Admittedly, the department’ s appeal for this year has been dismissed on account of low tax effect in vide order dated 14.3.2019 and, therefore, now we only restrict ourselves to looking at the taxability of the impugned amount with respect to the provisions of section 115BBC of the Act. Admittedly, in this case, the assessee has provided the name and address of the donor. However, the donor has denied having made any such donation. All the same, it is the assessee’s claim that receipt of donation is evidenced by the copy of cheques and copy of bank account as aforesaid. These have been placed in the paper book filed before the Tribunal also. A perusal of the impugned order shows that the lower authorities have not commented on these evidences. Therefore, it is our considered opinion that the moment the assessee has provided the names and addresses of the donor, he goes out of the purview of section 115 BBC. However, since the donor has denied having made the donation, it will be in the fitness of things that the assessee’s claim of having
Shree Bankey Bihari Educational Society vs JCIT received the impugned donation is verified by the AO vis a vis the copy of cheques and the bank account of the assessee. Accordingly, we restore the issue to the file of the AO with the direction to allow the assessee’s claim if on verification and examination it is found that the copies of the cheques and the bank account of the assessee establish the receipt of donation notwithstanding the donor having denied giving of donation. The AO, while passing the order will also have to bear in mind the binding judicial precedent in this regard wherein it has been held that if the assessee provides the name and address of the donor, the mischief of section 115BBC is not attracted. Accordingly, this issue is restored to the file of the AO for the limited purpose of examining the veracity of the copies of the cheques and the bank account statement after providing due opportunity to the assessee.
5.1 With respect to depreciation, the AO is directed to allow the claim of the assessee after proper verification and after giving adequate opportunity to the assessee.
6.0 In the final result the appeal of the assessee stands partly allowed for statistical purposes.
Shree Bankey Bihari Educational Society vs JCIT Order pronounced in the open court on 18/10/2019.