The Patna bench of the Income Tax Appellate Tribunal (ITAT) removed the addition based on compliance with donation records under Section 115BBC of the Income Tax Act.
The Aishwarya Foundation Trust is a charitable organization registered under Section 12AA of the Act. It filed its return of income for the year under consideration declaring total income at ‘Nil’.
The Case of the assessee was selected for scrutiny through CASS followed by the issuance of notice under Section 143(2) & 142(1) of the Income Tax Act. During the course of assessment proceedings, the Assessing Officer noted from the income and expenditure account that the assessee had shown income at Rs.2,61,72,000/- which was received as a donation and incurred expenses to the tune of Rs.2,22,47,910/- which resulted in income over expenditure at Rs.39,25,443/-.
The Assessing Officer requested the assessee to provide evidence regarding the authenticity of certain donations. The assessee complied and provided a list of 1371 individuals who had made the donations, with none of the donations exceeding Rs.20,000. However, when the Assessing Officer attempted to verify the donations by contacting 109 individuals from the list, they either could not be reached or denied making any donation to the assessee.
As a result, the Assessing Officer deemed the claim of the assessee regarding the receipt of Rs.2,61,72,000 as baseless and bogus, categorizing it as an anonymous donation under Section 115BBC of the Income Tax Act. The income of the assessee was then assessed at Rs.2,87,88,843.
The aggrieved assessee carried the matter in appeal before the First Appellate Authority, who granted relief by deleting the addition made by the Assessing Officer under Section 115BBC of the Income Tax Act.
In an appeal before the Tribunal, Counsel for the Revenue argued that the identity of the donors could not be established when summonses were issued to 110 individuals out of the provided list of 1371 donors. Consequently, the Assessing Officer correctly added the amount under section 115BBC of the Income Tax Act.
The counsel for the assessee argued that the Assessing Officer only contacted 109 individuals for confirmation of their donations, and most of them confirmed their contributions either personally or through registered posts. He further added that according to Section 115BC of the Income Tax Act, the recipient of a donation is only required to maintain the names and addresses of the donors, and no addition can be made for anonymous donations solely based on the absence of donor confirmations.
The bench consisting of two members, the Judicial Member Sonjoy Sarma and the Accountant Member Manish Borad observed that “the assessee in the present case has duly complied with the requisites by maintaining the records of the donors in the form of their names and addresses thereby not making them anonymous donations and resultantly not attracting the rigours of the Section 115BBC of the Income Tax Act. The Assessing Officer had conducted due verifications and enquiry at his end but has failed to point out anything constructive leading to the conclusion that the donations in question were anonymous”.
As a result, the appeal for the revenue was dismissed.
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