2024 (1) TMI 863 - HC - Income Tax

Maintainability of appeal u/s 260-A - Exemption u/s 11 - assessment of trust - cash donations were anonymous as contemplated u/s 115 BBC - substantial question of law of fact? - HELD THAT - Bearing in mind the inherent limitations in the light of the provisions of section 260A of the Act, it is to be noted at the outset that the issue regarding the exemption being claimed under section 11 cannot be said to be pure question of law which could be agitated in an appeal u/s 260A. As regards the factual dispute is concerned, we find no hesitation in concurring with the observations in the impugned judgment and order of the ITAT and the submissions of Mr. Sharma that by virtue of section 68 read with rule 46A, the onus is on the assessee to substantiate that the donations received by it are not anonymous donations. Once having borne in mind this aspect, it is quite apparent that at no point of time, the appellant was able to discharge this onus. Apart from the fact that it had even failed to file the returns, it had made some attempt to furnish some record and revenue had volunteered to verify genuineness by a sample check. Barring few instances, identity of the donors could not be confirmed in view of section 133(6). Pertinently, after the appeal was preferred before the first appellate authority a new set of donors list was furnished stating that the first list was submitted erroneously and still the enquiry did not result in identification of the donors. The appellant had pointed out about having received cash donations from 7145 donors. The result of the verification undertaken by the assessment officer to verify from some of the donors seeking confirmation did not yield results. Consequently the appellant had miserably failed to discharge the onus. Pertinently, during verification, 8 donors who were contacted denied to have paid any donation to the appellant. ITAT has observed that all these donations were received in cash from 7145 persons. Those were not found to have been deposited in the bank account. The letters issued under section 133(6) were returned unserved with the remarks address not found , insufficient address , addressee left . The inspection report mentioned about donors having not found on the given address. There were incomplete and vague addresses. It has drawn adverse inference against the appellant and has concluded that the decision of the assessment officer holding the donations to be anonymous u/s115 BBC of the Act was justified on facts and in law. No error or irregularity much less giving rise to any substantial question of law.

Summary

Issues Involved:
The appeal under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) regarding anonymous cash donations received by a trust primarily engaged in running educational institutions.

Issue 1:
The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the classification of cash donations as anonymous under section 115 BBC of the Income Tax Act.

The appellant failed to file returns initially, leading to a notice under section 142(1) of the Act. The assessment officer concluded that the cash donations were anonymous under section 115 BBC, but the first appellate authority disagreed, stating only a portion was anonymous. The ITAT allowed the revenue's appeal and refused to consider the appellant's appeal on merits due to a cross-appeal filed beyond the limitation period.

Issue 2:
The appellant raised substantial questions of law challenging the assessment officer's decision on the donations and the ITAT's confirmation of the assessment order.

The appellant argued that it had complied with the law by maintaining donor names and addresses, thus donations should not be considered anonymous under section 115 BBC. The appellant questioned the justification for treating the donations as anonymous, especially when the society was registered under Section 12 AA and enjoyed exemption under Section 11 of the Act.

Issue 3:
The burden of proof regarding the genuineness of donations and the appellant's failure to discharge this burden were key points of contention.

The assessment officer conducted a sample check, but the appellant could not substantiate the authenticity of the donations. Verification attempts with donors were mostly unsuccessful, with some denying making any donations. The ITAT upheld the assessment officer's decision, citing insufficient evidence to prove the donations were not anonymous.

Conclusion:
The High Court upheld the ITAT's decision, stating that the appellant failed to discharge the burden of proving the donations' genuineness. Despite attempts to verify donors, the lack of confirmation and incomplete/vague addresses led to the donations being classified as anonymous. The Court found no error or substantial question of law, dismissing the appeal and disposing of the pending civil application.