2020 (9) TMI 329 - AT - Income Tax

Exemption u/s 11 - Donation received treated as unexplained cash credit u/s 68 - assessee is a society registered u/s.12A and also enjoying the registration u/s.80G - AO issued notices u/s.133(6) to 49 persons which were either not served or remained unresponded - as submitted assessee was not allowed adequate time to prove the genuineness of the donors - HELD THAT - Show cause notice was issued on 11-12-2018 requiring the assessee to prove the claim of having received donations from identifiable persons. The assessee submitted reply on 24-12-2018 requiring some more time. Since the assessment was getting time barred on 31-12-2018, the assessee was not allowed the time and the order was passed on 24- 12-2018 itself. CIT(A) upheld the action of the AO in the impugned order taxing the amount u/s 115BBC of the Act. In addition, he further directed the AO to consider the applicability of section 68 of the Act read with section 115BBE of the Act. Under these circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to examine the case afresh. AR has undertaken to extend all possible cooperation by producing necessary evidence/donors as the AO may desire. Assessee appeal is allowed for statistical purposes.

Summary

Issues:
Confirmation of addition of ?2,35,89,700 as anonymous donations under section 115BBC of the Income-tax Act, 1961.

Analysis:
The only issue before the Appellate Tribunal was the confirmation of the addition of ?2,35,89,700 as anonymous donations under section 115BBC of the Income-tax Act, 1961. The assessee, a society registered under section 12A and enjoying registration under section 80G, received donations during the assessment year 2016-17. The Assessing Officer (AO) issued notices to 49 persons from the list of donors provided by the assessee, but most notices were returned or remained unresponded. The AO treated the donations as anonymous and made the addition under section 115BBC. The Commissioner of Income Tax (Appeals) upheld the AO's decision, further directing consideration under section 68 read with section 115BBE of the Act.

The Tribunal noted that the assessee is a charitable trust and argued that since 85% of the donations were applied for the trust's objects, section 115BBC should not apply. However, the Tribunal held that if a receipt is deemed anonymous donations, it falls under section 115BBC, affecting the exemption under other sections. The Tribunal highlighted that section 13(7) clarifies that anonymous donations are not excluded from total income, subject to tax under section 115BBC.

Regarding the time given to prove the genuineness of donors, the Tribunal found that the AO did not allow adequate time before passing the order. Considering this, the Tribunal set aside the impugned order and directed the AO to re-examine the case, providing the assessee with an opportunity to produce necessary evidence. The assessee assured cooperation in this regard.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fair examination by the AO. The order was pronounced on 7th September 2020.