2020 (7) TMI 67 - AT - Income Tax

Assessment of trust - anonymous donation' - AO noted that assessee has not maintained the record of identity of the donors indicating the complete address of such donors hence, above donation is an anonymous donation therefore same is required to be taxed under section 115BBC - only reason for addition is that addition in the books of the trust in the fixed assets as well as its disclosure as introduction of capital fund was made merely by a book entry - HELD THAT - In the present case, the donors are identified, the assets are identified as it has been received by the assessee trust, the only issue that remains to be verified is the valuation of such assets. Before AO the donors confirmed by way of an affidavit that they have donated their identified land and building as well as plant and machinery to the assessee trust. AO despite having the above information could not show that, the donors are not existing or the assets are not existing. It is merely a case of donation of assets to the assessee trust where the assets and the donors both are identified. AO could have verified the land documents whether it stands in the name of the donors or not and whether same has been donated by them to the trust or not. This factor could also been verified by examining the existence of the trust properties and activities carried on it. The assessee could also have shown the documents of the land in the name of both the donors and how the same has been executed /transferred in the name of the above trust. Similar is the situation with respect to the plant and machinery - As this information has not been verified by the AO, this ground of appeal with respect to the addition is set aside to the file of the learned assessing officer with a direction to the assessee to show the existence of the land in the name of the donors and same is used by the trust for its activities. The assessee is directed to produce the relevant evidence before the assessing officer along with the necessary explanation which may be considered by the learned assessing officer and issue may be decided afresh. Accordingly, this issue is allowed with above direction. Addition in the hands of the assessee trust as anonymous donation - fact shows that assessee has shown the name and addresses of the donors. The assessee has also produced them before the assessing officer. The learned AO made the addition for the only reason that summons were issued to those donors but those summons could not be served and returned back to the AO. Definition of the anonymous donation is provided under subsection 3 of section 115BBC of the act. It provides that with respect to the voluntary donation, if the person receiving such contribution does not maintain a record of the identity indicating the name and address of the persons making such contribution and such other particulars as may be prescribed, then such donation can be considered as anonymous donation . In the present case, there is no information that any such other particulars has been prescribed as mentioned in subsection 3. Thus, the only condition is that assessee must maintain a record of identity indicating the name and address of the person making such contribution. In the present case the assessee has produced such persons who made voluntary contribution to the assessee. They also confirmed by the statement on oath before the ld AO. Based on this the AO himself stated that the identity of such persons were obtained. When the assessee has successfully demonstrated the name and address of the persons by producing them before the assessing officer along with their statement, the addition should not have been made as an anonymous donation . Naturally the name and identity of such persons have been shown by the assessee. Even otherwise in the assessment order itself the learned AO has mentioned that the authorised representative of the assessee has given the complete confirmation of those parties - AO merely doubted that when summons were not served on those parties, the letters containing the confirmation from the donors should have been received by the AO himself and it should not have come through the authorised representative of the assessee. This issue may arise in case of verification of the genuineness of the donation - lower authorities unjustifiably incorporated additional conditions to make the addition as anonymous donation which were not found in the income tax act. Addition made by the learned assessing Officer of ₹ 15 lakhs and confirmed by the CIT A deserves to be deleted. The orders of the lower authorities deserves to be reversed. In the result, ground relating to the addition as anonymous donation is allowed.

Summary

Issues:
1. Addition of ? 2,278,062
2. Donations received of ? 15 lakhs

Analysis:

Issue 1: Addition of ? 2,278,062
The appeal was filed by the assessee, a charitable trust, against the order of the Commissioner Of Income Tax (Appeals) concerning the addition of ? 2,278,062 by the Income Tax Officer (Exemption) under section 143(3) of The Income Tax Act 1961 for assessment year 2013-14. The trust was formed to create awareness among farmers and develop small-scale industries in rural areas. The assessing officer noted the introduction of capital fund of ? 2,278,062 and a donation of ? 15 lakhs received by the trust. The AO treated the donation as 'anonymous' due to incomplete donor addresses. The CIT - A partially allowed the appeal, confirming the addition of ? 2,278,062 and partially deleting the ? 15 lakhs addition. The ITAT directed the assessee to provide evidence of land ownership and assets transferred to the trust, setting aside the addition of ? 2,278,062 for reevaluation by the AO.

Issue 2: Donations received of ? 15 lakhs
The AO added ? 15 lakhs as an 'anonymous donation' due to incomplete donor addresses, despite the trust providing names and addresses of the donors. The CIT - A upheld the addition, stating the trust failed to provide adequate evidence. However, the ITAT noted that the trust had produced donors before the AO and confirmed their identities. The ITAT highlighted that the only requirement under section 115BBC is to maintain records of donor identities, which the trust had fulfilled. The ITAT held that the lower authorities wrongly imposed additional conditions for treating the donation as 'anonymous.' Consequently, the ITAT allowed the appeal, deleting the addition of ? 15 lakhs as an anonymous donation.

In conclusion, the ITAT allowed the appeal, directing the reevaluation of the ? 2,278,062 addition and deleting the ? 15 lakhs addition as an anonymous donation.