2022 (10) TMI 119 - AT - Income Tax

Assessment of trust - Addition u/s 68 - donation received by the assessee religious trust from various donors - assessee has explained the source of cash and also relying on the provisions of Section 115BBC (2) - HELD THAT - Facts show that assessee is religious trust. In the case of the assessee trust, the addition was made u/s 68 of the Act of the sum, which is already disclosed as income by the assessee trust in the nature of donation. In this case, the survey was conducted by the income tax department. The donation received by the assessee religious trust from various donors is reflected in the donation receipts, which were impounded during survey proceedings. The amount of donation received is treated as receipts in the Income and Expenditure account as voluntary contribution. According to the provisions of Section 68 if any sum is found credited in the books of accounts of the assessee including the trust, the nature and source of such credit is required to be explained to the satisfaction of the learned assessing officer. Otherwise, it may be added under Section 68 of the Act. There is no dispute on this aspect. It applies to all assesses without any exception. Even in the case of a charitable trust, which has offered income in its income and expenditure account in the form of voluntary donation, if such trust fails to explain the source of such voluntary contributions, section 68 of the Act may apply. Earlier decision holding that section 68 does not apply to voluntary contribution were rendered where there was no tax disparity in income taxed as normal income and income as unexplained cash credit under Section 68 of the Act. In the impugned cash where the receipts were impounded by survey team, income offered as voluntary contributions and purpose of such donation is explained, it cannot be added under Section 68 of the Act. Provisions of Section 115BBC were enacted to tax such donations in hands of certain charitable trust and institutions at the rate of 30%. However, sub-section 2 (b) of the Act excludes the trust established woolly for religious and charitable purpose from rigors of that Section. This is also explained in paragraph number 25 of circular number 14/2006 dated 28th December, 2006. In the above aspect and following the decision of the Hon'ble Delhi High Court 2015 (9) TMI 558 - DELHI HIGH COURT CIT (A) has deleted the addition. We do not find any infirmity in the order of the CIT (A) deleting the above addition - Accordingly, ground no. 1 of the appeal is dismissed.

Summary

Issues:
1. Addition under Section 68 of The Income Tax Act, 1961 for unexplained cash deposits.
2. Admission of revised grounds of appeal during appellate proceedings without granting opportunity to AO.
3. Taxation of anonymous donations received by charitable trust under Section 115BBC of the Act.

Analysis:

Issue 1: Addition under Section 68 of The Income Tax Act
The appeal was filed by the Deputy Commissioner of Income Tax against the appellate order passed by the Commissioner of Income Tax (Appeals) for A.Y. 17-18. The Assessing Officer had made an addition of Rs. 22,925,500 under Section 68 of the Act as unexplained cash deposits. The trust in question is a religious trust registered under Section 12 AA of the Act. The trust received cash donations for the construction of a Jain temple. The Assessing Officer contended that the trust failed to explain the source of cash deposits. However, the CIT (A) deleted the addition citing provisions of Section 115BBC, which exempts anonymous donations received by charitable trusts for religious purposes from taxation.

Issue 2: Admission of Revised Grounds of Appeal
The Assessing Officer raised a ground of appeal regarding the admission of revised grounds during the appellate proceedings without granting an opportunity to the AO, contravening Rule 46A of the IT rules. However, the issue was dismissed as the departmental representative did not present any arguments on this matter.

Issue 3: Taxation of Anonymous Donations
The Assessing Officer contended that anonymous donations should be taxed at the maximum marginal rate under Section 115BBC. The CIT (A) relied on a Delhi High Court decision and circulars to support the exemption of anonymous donations to wholly religious trusts from taxation. The tribunal upheld the CIT (A)'s decision, stating that the trust had disclosed the donations as income and explained the purpose of the contributions, thus not warranting addition under Section 68 of the Act.

In conclusion, the tribunal dismissed the appeal filed by the assessing officer, upholding the CIT (A)'s decision to delete the addition under Section 68 of the Act. The tribunal also dismissed the grounds related to the admission of revised grounds of appeal and the taxation of anonymous donations received by the trust.