TaxTMI 
TaxTMI 
2025 (2) TMI 1126
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....of the Act, accepting the claim of the assessee 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....
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....n assessee, being a person in receipt of income on behalf of any university or other educational 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 fo....
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.... they were received without name and address of the contributor. The AO did not accept the contentions of the assessee that it is a trust existing wholly for 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 ass....
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....on the foundation of which a reason to believe can be formed. The AO has aptly relied upon the authority of Hon'ble Supreme Court in the case of Kalyanji Mavji vs. CIT (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 th....
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....hubchandani Healthparks Pvt. Ltd. vs. ITO [2016] 384 ITR 322 (Bom.)(HC) relied upon by the AR in the Video Conference. 5.4.6 It will pertinent to note that though in the impugned order the AO had 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....
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....initial return is processed under Section 143(1) of the Act, the AO can form reasons to believe that income has escaped assessment by examining the very retum and/or the documents accompanying the return. It is not necessary in such a case for the AO to come across 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 "re....
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.... "When we read clause (a) and clause (b) of sub section (2) in harmony and in consonance with each other then it become clear that the provisions of sub section (1) will not apply to the donations like that has been received by the assessee in donation boxes from numerous devotees who have offered the offerings 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 t....
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.... case even after considering the ratio of above cited case does not in any way amounts to re-agitating a legal issue on which the binding precedence is already available. 5.4.11 in terms of the discussion above read along with the order of the AO dt. 31.08.2018 rejecting the objection filed by the assessee against assumption of jurisdiction u/s 148. ground no. 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 ....
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....he Act and hence, the assessee would be covered by sec.115BBC of the Act. He has taken this kind of view in assessment year 2015-16 and accordingly assessed the anonymous donations received by the assessee in the form of Hundi collections/charity box collections as income of the assessee u/s 115BBC of the Act. Since the anonymous donations received by the assessee during the year 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 ass....
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....rein it is reported that the assessee has deposited huge amount of cash into various bank accounts, which would include anonymous donations also. Hence the information about huge cash deposits made by the assessee was also one of the reasons recorded by the AO to form belief that there was escapement of income. In this regard, the Ld D.R submitted that the revenue has reopened assessments 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 determine....
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....nd it is noticed that the revenue has not preferred appeal before Hon'ble Supreme Court, even though the decision for AY 2015-16 was rendered by Hon'ble Bombay High Court on 8th October, 2024. 13. We heard rival contentions on the legal issue of validity of reopening of assessment. There cannot be any dispute that the reopening of assessment is required to be done by the AO after recording 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 ap....
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....essed u/s 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to action 147 are applicable to facts of this case and the assessment your under consideration is deemed to be case where income chargeable to tax has escaped assessment. This case is within four years from the end of the assessment year under consideration. Hence necessary sanction to issue the notice u/s. 148 has been obtained 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 incl....
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.... Ld CCIT and it is still subsisting. The provisions of sec. 10(23C)(v) read as under:- "10 In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-- .............. (23C) any income received by any person on behalf of --- ................. (v) any trust (including any other legal obligation) or institutions wholly for public religious purposes or wholly for public religious and 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 whol....
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....re liable to be rejected. 16. The Ld A.R submitted that the assessing officer had also reopened the assessment of the assessee of the succeeding year also, i.e., AY 2014-15 after completing the assessment of that year u/s 143(3) of the Act. The primary reason for reopening the assessment of that year was also related to the donations received by the assessee in cash or in kind and the AO was of the view that the cash donations received in the boxes falls within the definition of "anonymous donations" u/s 115BBC(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 a....
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....r on a mere change of opinion. If such course of action is recognized, it would lead to arbitrary consequences and result in multiple assessment orders being passed on the same materials available with the Assessing Officer, which is not the legislative intention Section 147 would wield." 17. Even though the reopening of the assessment of AY.2014-15 has been done after completion of original assessment u/s 143(3) of the Act, yet the settled principle is that the basic ingredients to be fulfilled for reopening of assessment will not change, even 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 ....
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....atever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment 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:- ....
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....ter 1.4.1989 the Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. This judgment has laid emphasis on two more aspects: that there can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power. 13. Having regard to the judicial interpretation placed upon the expression "reason to believe", and the continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the courts. 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 int....
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....led" an intimation issued under section 143(1) can be subjected to proceedings for reopening. The court also emphasised that the only requirement for disturbing the finality of an intimation is that the assessing officer should have "reason to believe" that income chargeable to tax has escaped assessment. In our opinion, the said expression should apply to an intimation in the same manner and subject to the same interpretation as it would have applied to an assessment made under section 143(3). The argument of the revenue that an intimation cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also 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 o....
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.... of earlier years. We noticed that the revenue has recognized the assessee trust as both charitable and religious in nature in terms of registration/approval granted to the assessee under various provisions of the Act. Hence, the assessee would be covered by the exceptions prescribed in sec.115BBC(2) of the Act and hence, the anonymous donations received by the assessee are not liable to be taxed u/s 115BBC of the Act. Hence, it cannot be held that the AO has formed a legally valid belief and accordingly, we hold that the reopening of assessment of the year under consideration is not valid. 19. We also prefer to address the grounds urged on merits. We shall first take up the appeal 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-....
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....al on record, we find that accumulation u/s 11 is to be computed on the gross receipts and not the net receipts. The issue settled by the Hon'ble Supreme Court in the case of Addl. CIT v. A.L.N. Rao Charitable Trust [1995] 83 Taxman 252/216 ITR 697 wherein it has been held that statutory accumulation u/s 11(1)(a) has to be computed on the gross receipts of the assessee. The relevant extract of the decision held as under: "A mere look at section 11(1)(a) as it stood at the relevant time clearly shows that out of the total income accruing to a trust in the previous year from property held by it wholly for charitable or religious purposes, to the extent the income is applied for such religious or 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 br....
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....ation of income of the previous year for the trust to earn exemption from income-tax as laid down by section 11(1)(a) would be rendered redundant and the said exemption provision would become otios. Out of the accumulated income of the previous year an amount of Rs. 10,000 or 25 per cent of the total income from property, whichever is higher, is given exemption from income-tax by section 11(1)(a) itself. That exemption is unfettered and not subject to any conditions. In other words, it is an absolute exemption. If sub-section (2) is so read as suggested by the revenue, what is an absolute and unfettered exemption of accumulated income as guaranteed by section 11(1)(a) would become a restricted exemption as 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 in....
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....e balance of accumulated income of Rs. 55,000 was invested as per section 11(2) then this additional amount of Rs. 20,000 of accumulated income would get excluded from the tax net as per section 11(2). (iv) The remaining balance of the accumulated income out of Rs. 55,000 that is Rs. 35,000 if not invested as per sub-section (2) of section 11 would be added to the taxable income of the trust and would not get exempted from the tax net. (v) If on the other hand, the entire remaining accumulated income of Rs. 55,000 was wholly invested as per section 11(2) the said entire amount of Rs. 55,000 will get exempted from the tax net. Therefore, the appeal was dismissed. " 32.1. Similarly in the case of CIT v. Programme 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 sh....
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....e record. We notice that the assessing officer has found certain deficiencies in Form No.10 and also in the Board resolution for rejecting the enhanced claim made u/s 11(2) of the Act. However, it is pertinent to note that the AO, relying on the very same documents, has allowed the deduction of Rs. 183.26 crores u/s 11(2) of the Act. Hence, we do not find any reason to reject the enhanced claim made by the assessee during the course of assessment proceedings. 25. The question whether the deficiencies, if any, in Form No.10 will disqualify the assessee from claiming deduction u/s 11(2) of the Act has been examined by Hon'ble Gujarat High Court in the case of CIT (E) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust (2019)(102 taxmann.com 122)(Guj) 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 ....