9911796707
TMI Blog2025 (2) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... see that it is a trust existing both for charitable and religious purposes. 3. The grounds of appeal raised by the assessee give rise to the following issues:- (a) Whether the assessment order has been passed within the limitation period prescribed u/s 153 of the Act or not? (b) Whether reopening of assessment of the year under consideration u/s 147 of the Act, without bringing any new tangible material to support his view of escapement of income is valid or not? (c) Whether the Ld CIT(A) was justified in rejecting the claim of the assessee that the deduction of 15% allowed u/s 11(1)(a) of the Act should be allowed on gross receipts? (d) Whether the Ld CIT(A) was justified in rejecting the claim for accumulation of income u/s 11(2) of the Act? 4. The facts relating to the case are discussed in brief. The assessee is having a temple complex in the town of Shirdi consisting of Samadhi of a popular Saint fondly called as "Shri Sai Baba" and also other deities. Shri Sai Baba has got millions of followers/devotees spread across the world, who worship the Samadhi of Shri Sai Baba, who departed from this mortal world on 15thOctober 1918.Hence, millions of people visit the temple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al institution referred to in sub- clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23-C) of section 10 or any trust or institution referred to in section 11, includes any income by way of any anonymous donation, the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated at the rate of thirty per cent. on the aggregate of anonymous donation received in excess of the higher of the following, namely:- (A) five per cent. of the total donations received by the assessee; or (B) one lakh rupees; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received. (2) The provisions of sub-section (1) shall not apply to any anonymous donation received by- (a) any trust or institution created or established wholly for religious purposes; (b) any trust or institution created or established wholly for religious and charitable purposes other than any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r charitable and religious purposes and hence the provisions of sec.115BBC will not apply to it. The AO held that the assessee cannot be considered as a religious trust, since it is recognised as a charitable trust only u/s 80G of the Act and further the recognition u/s 80G is granted only to charitable trust. Accordingly, he held that the exception provided in sec.115BBC for wholly religious trusts and wholly religious and charitable trusts will not be applicable to the assessee. Accordingly, the AO brought to tax the hundi collections/charity box collections as anonymous donations in AY 2015-16, in the assessment order passed by him on 31-12-2017. 9. The AO noticed that the assessee has not offered the hundi collections/charity box collections as the income taxable as anonymous donations u/s 115BBC of the Act in assessment year 2013-14, even though the assessee has been registered u/s 80G of the Act as a charitable organisation. The AO also noticed from the Annual Information Report (AIR) relating to AY 2013-14 that the assessee has made cash deposits of around Rs. 257 crores in its bank accounts, which would include anonymous donations also. Accordingly, based on the stand take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (SC)102 ITR 287 In addition to that it is pertinent to refer to the authority of Hon'ble Supreme Court in case of Ess Ess Kay Engineering Company Pvt. Ltd. (2001) 247 ITR 818 (SC). To quote from the decision - "This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income Tax Officer could proceed to reopen the case, it is not a case of mere change of opinion. We are not inclined to interfere with the decision of High Court merely because the case of the assessee was accepted as correct in the original assessment of this AY. It does not preclude the ITO to reopen the assessment of an earlier year on the basis of his finding of facts made on the basis of fresh materials in the course of assessment for the next assessment year." In the case of NDTV vs DCIT CA no. 1008 of 2020. It was again held by the Supreme Court that the subsequent fact that come to the knowledge of the assessing officer can be taken into account to decide whether the assessment proceeding should be reopened or not. Information which comes to the notice of the AO during proceedings for subsequent AY can definitely form tangible material to invoke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible material in his hand on the basis of which here proceeded to form in reason to believe in recent case of Indu Lata Rangwalav. Deputy Commissioner of Income-tax[2017] 80 taxmann.com 102 (Delhi) the hon'ble Delhi High Court has extensively reviewed the judicial pronouncement of Hon'ble Supreme Court existing of the subject of assumption of jurisdiction by AO to reassess a return where only 143(1)(a) order of processing was earlier passed and have summarised the legal requirement as follows- "Summary of the legal position 35.1 The upshot of the above discussion is that where the return initially filed is processed under Section 143(1) of the Act, and an intimation is sent to an Assessee, it is not an 'assessment' in the strict sense of the term for the purposes of Section 147 of the Act. In other words, in such event, there is no occasion for the AO to form an opinion after examining the documents enclosed with the return whether in the form of balance sheet, audited accounts, tax audit report etc. 35.2 The first proviso to Section 147 of the Act applies only (i) where the initial assessment is under Section 143(3) of the Act and (ii) where such reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross some fresh tangible material to form 'reasons to believe that income has escaped assessment. 35.8 In the assessment proceedings pursuant to such reopening, it will be open to the Assessee to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. 35.9 The decisions of this Court and other Courts to the extent inconsistent with the above decisions of the Supreme Court cannot be said to reflect the correct legal position. 5.4.7 Further, the reason to suspect is a wider term and enquiry carried on by AO pursuant to receipt of "reason to suspect" leads to formation of "reason to believe" or otherwise. The availability of tangible material alone gives a reason to suspect that income might have escaped assessment. However, when this "reason to suspect" is calibrated against the AIR information and the information contained in the ITR filed by the assessee has given rise to reason to believe in the case of the Assessee. Since the reason to believe is specific, no imputation can be made that the case has been reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferings account of respect, esteem, regard, reference and their prayer for the deity/ Sidhapeeth. Such type of offering are made/put into the duration box by numerous visitors anits generally not possible for any such type of institutions to make an keep record of each of the donor with his name address etc." A plain reading of this part of operative paragraph indicates that ITAT was aware that Gurudev Seedhapeeth was either religious or wholly religious and charitable trust. From the decision of the ITAT in this case it is clear that in order to understand the scope of under section 115BBC the object for the Trust is of guiding importance. However, there is no discussion on the issue if the assessee before the ITAT was purely charitable and therefore the provisions of section 115BBC(2) did not apply on the assessee. 5.4.9 It is trite that what is binding on the Sub-ordinate Judicial Authority is the ratio decided and not merely what has been decided. There are number of authorities which have explained the Doctrine of binding precedence. In the decision in State Financial Corporation. v. Jagadamba Oil Mills (AIR 2002 SC 834) the Supreme Court has observed as follows: "19. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 3 are dismissed so far it relates to assumption of jurisdiction by the AO under section 148 and legality of assessment order passed is concerned. So far as these grounds relates to quantum of addition it will be decided on the basis of subsequent decision on other grounds of appeal." On merits, the Ld CIT(A) held that the assessee is both charitable and religious trust and hence it would fall within the exceptions provided u/s 115BBC(2) of the Act. Consequently, he held that the anonymous donations received by the assessee are not taxable in the hands of the assessee. The Ld CIT(A) confirmed other additions made by the AO. Aggrieved, both the parties have filed these appeals before the Tribunal. 12. Since the legal issue relating to validity of reopening of assessment of AY 2013-14 raised by the assessee would go to the root of the matter, we shall proceed to adjudicate the same first. 12.1. The Ld A.R submitted that the assessing officer has reopened the assessment without bringing any fresh tangible material relating to the year under consideration on record, i.e., he has relied upon the very same material already available on record in order to entertain the belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration, i.e., in AY 2013-14 have not been offered to tax, the AO has entertained the belief that there was escapement of income in AY 2013-14 and accordingly reopened the assessment. He submitted that the AO has conveniently ignored the registration granted by a higher authority u/s 10(23C)(v) of the Act, which is granted only to a wholly religious institution &wholly religious and charitable institution. Had the AO considered the approval granted u/s 10(23C)(v) of the Act, he could not have formed the belief that the provisions of sec.115BBC of the Act will be applicable to the assessee and consequently, the question of escapement of income would not have arisen. The Ld A.R contended that it is imperative for the AO to consider all the documents available in the record before reopening of assessment and he cannot pick and choose only one of the documents to suit his convenience in order to form the belief that there was escapement of income. Accordingly, he submitted that the opinion so formed by the AO in not valid and hence the reopening of assessment is not in accordance with law. Further, the AO has not brought on record any fresh tangible material to support h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments in many cases, where huge cash deposits were made into the bank accounts by various assessees during demonetisation period, even if it is case of deposit made out of cash balance available in the books. Accordingly, he submitted that it is not correct to say that the AO has not based his reasons on registration granted u/s 80G alone. 12.5. He further submitted that it is well settled proposition of law that the belief entertained by AO at the time of recording reasons for reopening has to be a prima facie belief only, i.e., it is not required that the escapement of income should be proved to the hilt at the time of recording reasons itself. Further, it may so happen that the prima facie belief may fail ultimately at the time of framing of assessment resulting in accepting total income determined earlier without making of any addition, but it will not make the reopening invalid. 12.6. With regard to the contention of Ld A.R that the provisions of sec.80G permits spending of money for religious purposes upto 5% of its revenue, the Ld D.R submitted that it is leverage given to the Charitable organizations and hence, merely, because a charitable organizations spends upto 5% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing his reasons for reopening. This is so because, through the reasons so recorded, the AO is required to establish that he has entertained belief that there was escapement of income. When the validity of reopening of assessment is being challenged, it is imperative for the appellate authorities to examine the reasons so recorded by the AO. In this year, the reasons recorded by the AO read as under:- "The assessee M/s Shree Sai Baba Sansthan Trust (Shirdi) has filed its return of Income for the A.Y. 2013-14 on 26.09.2013 which was later revised on 13.11.2013: The return was processed us 143(1) on 14.03.2015. 2. The trust is registered as a Charitable Organization with DIT(E). Mumbai u/s.124 vide Registration No. TR/3033 dated 24.08.1977. The trust is also approved u/s 80G vide approval no. 1896/2008-09 dated 25.08.2009. The approval u/s 80G(5) is available to Charitable Trusts/Institutions only indicating that the assessee is a charitable organization. The assessee trust receives anonymous donations (Hundi Collection/ Charity Box collection) running in crores which was to be offered for tax as: per provision of section 115BBC which the assessee has failed to do. From perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed separately from Addl. Commissioner of income Tax (E), Range 2, Mumbai as per provisions of section 151 of the Act." 13.1. The gist of reasons is summarized by us below:- (a) The assessee is registered u/s 80G of the Act. The approval u/s 80G(5) is granted only to trusts/ institutions registered as Charitable Trusts/Institutions. Hence the assessee can be considered as a charitable organization only. The assessee trust has received anonymous donations by way of Hundi collections/charity box collections running in crores, which was not offered to tax by the assessee as per the provisions of sec.115BBC of the Act. (b) From the perusal of AIR transaction report, a cash deposit of Rs. 257.61 crores were made in different banks which includes anonymous donations also. (c) The return of income filed by the assessee has been processed u/s 143(1) of the Act only and no assessment order has been passed as stipulated u/s 2(40) of the Act. Hence, the provisions of clause (b) of Explanation 2 to section 147 are applicable to the facts of this case (as there is understatement of income by the assessee by not offering the anonymous donations u/s 115BBC of the Act). Hence, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd charitable purposes, which may be approved by the prescribed authority, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof." 14.1. At the time of recording reasons for reopening, the AO should be aware of the approval granted to the assessee u/s 10(23C)(v) of the Act, which is granted to a trust (including any other legal obligation) or institutions existing wholly for public religious purposes or wholly for public religious and charitable purposes. Thus, it is seen that the assessee is recognized as charitable trust u/s 80G and wholly charitable and religious trust u/s 10(23C) of the Act. If both these approvals granted by the income tax authorities are read together, there should not be any doubt that they have recognized the assessee trust existing "wholly for charitable and religious purposes". Accordingly, had the AO considered both these approvals, he would not have entertained the belief that the assessee would be covered by sec. 115BBC of the Act. 14.2. Since the AO has relied upon the approval granted to the assessee u/s 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5BBC(3) of the Income tax Act and hence, such donations were taxable u/s 115BBC(1) of the IT Act, unless exempted under sub-section (2) of sec. 115BC of the Act. The other reason recorded by the assessing officer was to the effect that the income received by the assessee in the form of ornaments and jewellery has not been disclosed in the Income and Expenditure account, which prima-facie shows failure on the part of the assessee to comply with the provisions of sec.13(1)(d)(iia) of the IT Act. In the writ petition filed by the assessee challenging the reopening of assessment of AY 2014-15, the Hon'ble jurisdictional Bombay High Court allowed the writ petition of the assessee and quashed the reassessment notice issued by the AO for AY 2014-15. The gist of reasoning given by the Hon'ble High Court is summarized below:- (a) The reasons for reopening of assessment is not based on any fresh/new tangible material but on a new opinion being formed on the legal provisions. (b) In fact, the reasons point out that the notice u/s 148 has been issued on the basis of material which were already part of the assessment proceedings and which were furnished by the petitioner and which formed ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the return of income filed by the assessee had been processed u/s 143(1) of the Act. It is pertinent to note that the return of income filed by the assessee for the year under consideration has been processed u/s 143(1) of the Act. In support of this legal proposition, we may rely on the decision rendered by Hon'ble Delhi High Court in the case of CIT vs. Orient Craft Ltd (354 ITR 536)(Del). In this case, the Hon'ble Delhi High Court held as under:- "We think that the point taken on behalf of the assessee that even an assessment made under Section 143(1) of the Act can be reopened under Section 147 only subject to fulfillment of the conditions precedent, which include the condition that the Assessing Officer must have "reason to believe" that income chargeable to tax has escaped assessment, is sound. It is true that no assessment order is passed when the return is merely processed under Section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognised by the Supreme Court itself in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd.(2007) 291 ITR 500, a decision that was relied upon by the revenue, that even wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings even when intimation under section 143(1) had been issued. The inevitable conclusion is that the High Court has wrongly applied Adani's case [1999] 240 ITR 224 (Guj) which has no application to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act." .................. 11. The entire law as to what would constitute "reason to believe" was summed up by H. R. Khanna, J, speaking for the Supreme Court in Income Tax Officer v Lakhmani Mewaldas (1976) 103 ITR 437. The following principles were laid down:- (a) The powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are "reason to believe" and not "reason to suspect". (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assumption of the Revenue that somehow the words "reason to believe" have to be understood in a liberal manner where the finality of an intimation under Section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in Section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-à-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appear to be self- defeating, because if an "intimation" is not an "assessment" then it can never be subjected to section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody's case that an "intimation" cannot be subjected to section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al filed by the Revenue. As noticed earlier, the Revenue has challenged the decision of the Ld.CIT(A) in holding that the assessee is established for wholly religious and charitable purposes and hence, the provisions of section 115BBC of the Act will not be applicable to it. 20. We heard the parties and perused the record. We notice that the Ld CIT(A) has followed the decision rendered by the Co-ordinate Bench of the Tribunal in the assessee's own case in the order dt. 25-10-2023 passed for AYs. 2015-16 to 2018-19 in ITA Nos. 3049, 3210 and 3204/Mum/2022 respectively in holding that the provisions of sec.115BBC are not applicable to the assessee. The Tribunal had held in the above said appeals that the assessee herein is a charitable and religious trust. We notice that the order so passed by the Co-ordinate Bench of the Tribunal has since been upheld by the Hon'ble Bombay High Court vide its order dt. 8th October, 2024 passed in Income Tax Appeal Nos. 598, 14650 and 14652 of 2024. Since the view taken by the Tribunal has been approved by the Hon'ble jurisdictional Bombay High Court and since the Ld CIT(A) has followed the decision of the Tribunal, we do not find any reason to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable purpose, the same will get out of the tax net but so far as the income which is not so applied during the previous year is concerned, at least 25 per cent of such income or Rs. 10,000, whichever is higher, will be permitted to be accumulated for charitable or religious purpose and it will also get exempted from the tax net. Then follows sub-section (2) which seeks to lift the restriction or ceiling imposed on such accumulated income during the previous year and also brings such further accumulated income out of the tax net if the conditions laid down in section 11(2) are fulfilled. The contention that the investment as contemplated by section 11(2)(b) must be investment of all accumulated income in the Government securities, etc., namely, 100 per cent of the accumulated income and not only 75 per cent thereof and if that is not done then, only the invested accumulated income to the extent of 75 per cent will get excluded from income-tax assessment, the remaining 25 per cent of the accumulated income will not earn such exemption, could not be accepted. Section 1^(1)(a) operates on its own. By its operation two types of income earned by the trust during the previous year f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by section 11(2). Section 11(2) does not operate to whittle down or to cut across the exemption provisions contained in section 11(1)(a) so far as such accumulated income of the previous year is concerned It has also to be appreciated that sub-section (2) of section 11 does not contain any non obstante clause like notwithstanding the provisions of sub-section (1)' Consequently, it must be held that after section 11(1)(a) has full play and if still any accumulated income of the previous year is left to be dealt with and to be considered for the purpose of income-tax exemption section 11(2) can be pressed in service and if it is complied with then such additional accumulated income beyond 25 per cent or Rs. 10,000, whichever is higher, can also earn exemption from income-tax on compliance with the conditions laid down by section 11(2). It is true that section 11(2) has not clearly mentioned the extent of the accumulated income which is to be invested. But on a conjoint reading of the aforesaid two provisions of sections 11(1) and 11(2) this is the only result which can follow. Therefore, if the entire income received by a trust is spent for charitable purposes in India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Community Organization [2001] 116 Taxman 608/248 ITR 1 (SC) wherein it has held that the accumulation u/s 11(1)(a) has to be computed on the gross income by observing and holding as under: "3. The question that really required consideration is whether, for the purposes of section 11(1)(a) of the Income Tax Act, 1961 ("of the Act), the amount for the grant of exemption of twenty five percent should be the income of the trust or it should be its total income determined for the purposes of assessment to income tax. This question has to be answered in the light of these facts the assessee trust, received donations in the aggregate sum of Rs. 2,57,376/- It applied thereof for its charitable purpose the aggregate sum of Rs. 1,70,369/-leaving a balance of Rs. 87,010/-. The question is whether the assessee is entitled to accumulate twenty five percent of Rs. 2,57,376/- as it contends, or twenty five percent of Rs. 87,010/- as the revenue appeared to contend." 32.2. Considering the facts of the case and ratio laid down by the Hon'ble Apex Court we are inclined to direct the AO to allow the accumulation u/s 11(1)(a) of the Act on the gross receipt of the assessee and not on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it has been held that any inaccuracy or lack of full declaration in the prescribed format by itself would not be fatal to the claimant. The relevant observations made by Hon'ble Gujarat High Court are extracted below:- "8. Section 11(2) of the Act provides that eighty five percent of the income which is not utilized by the Trust for charitable or religious purposes would not be included in the total income of the previous year of receipt of the income provided the conditions laid down in clause (a) to (c) contained therein are satisfied. Clause (a) in particular, which is applicable, provides that such person furnishes the statement in the prescribed form and in prescribed manner to the Assessing Officer staying the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart which shall in no case exceed five years. Undoubtedly therefore, the statement of purpose for which the income is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit under sub-section (2) of section 11 of the Act. However, that by itself would not mean that any i ..... 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