2019 (1) TMI 404 - AT - Income Tax

Addition of donations as anonymous donation u/s 115BBC - donations were neither genuine nor voluntary - assessee is a society as granted registration u/s. 12AA - notices u/s 133(6) were returned unserved and the assessee did not produce the donors - AO proceeded to hold the donations as being fictitious and unexplained cash credits to be added u/s 68 in view the deeming provisions of Section 115 BBC - addition of depreciation Held that - Section 68 of the Act has no application to the facts of the assessee because the assessee has duly disclosed the donations as its income. There was, thus, a full disclosure of income by the assessee and also the application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee are charitable in nature since it is duly registered under the provisions of section12A. Further, the AO has invoked provisions of section 115BBC to hold that the impugned donations were anonymous. As in the case of DIT (Exemptions) vs. Keshav Social & Charitable Trust (2005 (2) TMI 84 - DELHI HIGH COURT) held as complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce un-accounted money by way of donation receipts. As the assessee had disclosed the donation as income, the provisions of section 68 cannot be applied. As in the case of M/s. Vaishnavi Educational Society Versus The Deputy CIT Central Circle, Tirupati 2014 (11) TMI 350 - ITAT HYDERABAD held that where the names of the donors along with their addresses were furnished before the Investigation Wing of the department and were also recorded in the books produced by the assessee before the AO, such donations cannot be classified as anonymous donations as per the provisions of section 115BBC(3) of the Act. The only requirement u/s. 115BBC (3) is that the names and addresses of the donor should be maintained. In the present appeal, the assessee had not only disclosed its donations, but had also submitted a list of donors. AO proceeded to treat the same as anonymous donations only for the reason that the notices u/s 133(6) were returned unserved and the assessee did not produce the donors when it was called upon to do so. However, since the donations were duly treated as income by the assessee, section 68 could not have been invoked. Further, the assessee s case also does not fall in the mischief of section 115BBC because as per sub section (3), anonymous donations are those donations for which no details of the donors are maintained by the assessee. If provision of section 115BBC cannot be invoked, the impugned addition cannot be sustained. Accordingly, we set aside the order of the Ld. CIT (A) on the issue and direct the AO to delete the addition. Adding back of depreciation is concerned, we note that the averment of the Ld. AR is correct that depreciation has not been claimed as an application of income by the assessee and, therefore, there is no question of adding back the same to the income of the assessee. The assessee succeeds on this ground also and while setting aside the order of the Ld. CIT (A) on this issue, we direct the AO to delete this addition also. - Decided in favour of assessee

Summary

Issues:
Determining whether impugned donations can be treated as anonymous donations under Section 115BBC of the Income Tax Act. Assessing the correctness of adding back depreciation claimed by the assessee to their income.

Analysis:
1. Impugned Donations as Anonymous Donations:
The case involved assessing whether the donations received by the assessee could be classified as anonymous donations under Section 115BBC. The Assessing Officer (AO) added a substantial amount to the assessee's income, considering the donations as fictitious and unexplained cash credits. However, the assessee maintained records of donors' names and addresses, which were not disputed by the AO. The assessee argued that since full disclosure was made and the donations were not from bogus entities, the provisions of Section 68 did not apply. The ITAT referred to precedents, including the Delhi High Court and Hyderabad ITAT decisions, emphasizing that maintaining donor details prevents donations from being deemed anonymous. As the assessee had maintained donor details, the ITAT concluded that Section 115BBC could not be invoked, leading to the direction to delete the addition.

2. Addition of Depreciation to Income:
Regarding the addition of depreciation to the assessee's income, the ITAT agreed with the assessee's contention that depreciation was not claimed as an application of income. Therefore, the ITAT directed the AO to delete this addition as well. The ITAT found no basis for adding back the depreciation claimed by the assessee, leading to the allowance of the appeal.

In conclusion, the ITAT allowed the appeal of the assessee, setting aside the lower authorities' orders on both issues. The ITAT directed the AO to delete the additions made to the assessee's income, emphasizing the importance of maintaining donor details to prevent donations from being classified as anonymous under Section 115BBC.