2020 (1) TMI 959 - AT - Income Tax

Exemption u/s 11 - Anonymous donation - assessee accommodating such donations received as fees - HELD THAT - In this case, the seized material for the assessment year 2013-14 gives an impression that the amount was collected from the students. However, it is not known that such donations were collected from students or any other party who are related to the students at the time of admission. These facts were not examined either by the Assessing Officer or by the CIT(A). Even though there was no prohibition for receiving voluntary donations from the general public, collecting capitation fee for admission of the students in any educational institution is prohibited and it is a punishable offence under the State Enactment. The assessee claims that necessary materials were filed before the Assessing Officer to establish the identity of the donors and also the confirmation letters. In this situation, this Tribunal is of the considered opinion that this matter needs to be re-examined by the AO. Accordingly, the orders of both the authorities below are set aside and the entire issue raised by the assessee including voluntary donations, anonymous donations and salary advance said to be received from the staff, etc., are remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the matter and bring on record the nexus between the donations and the donors in respect of each donation and there after decide the issue afresh Penalty U/s.271(1)(c) - Unexplained cash deposits - HELD THAT - Assessee has disclosed the entire receipt of donations. However the Assessing Officer found that it is not a voluntary donation but anonymous donation. The fact that the assessee has disclosed the entire donation and claimed exemption U/s.11 of the Act is not in dispute. When the assessee has disclosed the entire receipt and the expenditure and claimed the same as exempted U/s.11 of the Act, merely because the assessee could not furnish the details of the persons from whom the donations was received, cannot be a reason for concluding that the assessee concealed any part of income or furnished inaccurate particulars. Making a statutory claim U/s.11 of the Act cannot be construed as furnishing inaccurate particulars. In the case of CIT Vs. M/s. Reliance Petro Products Pvt. Ltd., 2010 (3) TMI 80 - SUPREME COURT assessee claimed certain amount as expenditure, however the Assessing Officer disallowed the claim of the assessee and also levied penalty. The Apex Court found that when the assessee claims certain amount as expenditure, merely because the assessee could not furnish the entire details, it cannot be said that there was concealment of income or furnishing inaccurate particulars - mere claim of exemption U/s.11 of the Act, in respect of the so called donations received by the assessee cannot be a reason for levy of penalty U/s.271(1)(c) of the Act. In view of the above discussions, we are unable to uphold the orders of the lower authorities. Accordingly the same is set aside and the penalty levied u/s.271(1)(c) is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Voluntary donations and their classification as anonymous donations.
2. Penalty levied under Section 271(1)(c) of the Income Tax Act.
3. Applicability of Section 271AAA for penalties.

Detailed Analysis:

1. Voluntary Donations and Their Classification as Anonymous Donations:
The assessee, an educational trust registered under Section 12AA of the Income Tax Act, faced multiple searches, the third of which led to the present proceedings. The trust received voluntary donations, which were partly in cash and partly by demand drafts. The assessee provided confirmation letters from donors, but the Assessing Officer (AO) treated these donations as anonymous due to the inability to establish the identity of all donors. The AO brought these donations to tax, asserting they were not voluntary but anonymous. The Tribunal noted that although the assessee claimed the donations were voluntary and provided some confirmations, the matter required re-examination to establish the nexus between donations and donors. The Tribunal set aside the orders of the lower authorities and remitted the issue back to the AO for a fresh examination.

2. Penalty Levied Under Section 271(1)(c) of the Income Tax Act:
For the assessment year 2011-12, the AO levied a penalty under Section 271(1)(c) due to unexplained cash deposits in the bank. The assessee claimed these were tuition fees and outpatient deposits, with a portion from opening cash on hand. The AO accepted part of the opening cash but treated the remaining amount as anonymous donations, leading to the penalty. The Tribunal observed that the assessee disclosed the entire receipts and claimed exemption under Section 11. The Tribunal referenced the Supreme Court judgment in CIT vs. Reliance Petro Products Pvt. Ltd., which held that merely making a statutory claim cannot be construed as furnishing inaccurate particulars. Consequently, the Tribunal found no grounds for penalty under Section 271(1)(c) and deleted it.

3. Applicability of Section 271AAA for Penalties:
The assessee argued that any penalty should be levied under Section 271AAA, applicable for searches initiated between 01.04.2007 and 01.07.2012. The AO countered that Section 271AAA applies only to the searched person, not to other entities like the assessee trust. The Tribunal did not explicitly rule on this issue, as it found no basis for the penalty under Section 271(1)(c) itself.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, remitting the matter of donations back to the AO for fresh examination. It also deleted the penalty levied under Section 271(1)(c), emphasizing that the assessee's disclosure of receipts and claim for exemption under Section 11 did not constitute concealment or furnishing inaccurate particulars. The judgment underscores the importance of thorough examination and proper classification of donations and the conditions under which penalties can be justifiably levied.