Relief to Indian Red Cross: ITAT sets aside Addition by AO during re-assessment proceedings [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench consisting of Pramod Kumar, Vice President, and Siddhartha Nautiyal, Judicial Member sets aside addition towards ‘Anonymous Donations’ thereby granting relief to Indian Red Cross Society.

The assessee, Indian Red Cross Society is a public trust running blood bank. The assessee is one of the branches of the Indian Red Cross Society situated in the State of Gujarat. The assessee conducts blood tests in their laboratory for different diseases and supplies the same to hospitals, both Government and private, against the letters from an authorized doctor at a concessional rate. During the year, Ld. Assessing Officer (AO) noticed that the assessee had deposited a sum of Rs. 89,60,505/- in its saving bank account but it had not filed a return of income for the impugned Assessment Year. The assessment was reopened u/s. 148 and 143(2) of the Act, in response to which the assessee filed a return of income on 05-06-2017 declaring a total income of Rs. Nil and claimed exemption on the surplus of Rs. 29,20,936/- u/s. 10(23C)(iiiae) of the Act. The Assessing Officer however did not accept the assessee’s contentions and held that the assessee is not entitled to exemption u/s 10(23C)(iiiae) of the Act since exemption therein is available to either hospital or other institutions, whereas the assessee is a blood bank not engaged in dispensing medical facilities but is only collecting, storing and supplying blood to the hospital. Further, the Assessing Officer held that since the assessee had not supplied a true copy of the letter, its genuineness was under doubt, and the claim of exemption cannot be the accepted basis of the above letter. Further, the Assessing Officer also held that the assessee is not working for philanthropic purposes as claimed by the assessee, but is working for profit which is evident from the fact that during the captioned year, the assessee recorded a nearly 61% surplus of its total receipts. Accordingly, the Assessing Officer denied the benefit of exemption u/s. 10(23C)(iiiae) of the Act and added a sum of Rs. 23,41,938/- to the total income of the assessee.

The Tribunal observed “In our view, once having accepted the assessee’s version regarding cash deposit of Rs. 89,60,505/-, wherein Ld. Assessing Officer did not make any addition on that count in reassessment proceedings (in fact, this aspect of cash deposit of Rs. 89,60,505/- does not even find mentioned in the entire reassessment order), the additions made by Ld. Assessing Officer on other grounds not finding part of reasons for reopening the assessment, are liable to be set-aside”

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