As long as the genuineness of the financial donation is upheld, the amount donated in anonymously will be increased

Fact and issue of the case

These cross appeals are filed by the Revenue and the assessee against the common order of the Commissioner of Income Tax (Appeals)-2, Aurangabad [‘CIT(A) or FAA’ hereinafter] vide Appeal No. ABD/CIT(A)-2/109/2014-15 dt. 12/05/2017 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ hereinafter].

Since the issue raised in these cross appeals are related to common facts, we proceed to dispose-off these together by this common order.

The Revenue raised following meritare grounds in the memorandum of appeal filed by it

The Ld. CIT(A) has erred in deleting the addition of Rs. 2,87,38,355/-(Rs. 2,88,20,955- Rs. 82,600) made u/s.115BBC of the I.T.Act, as anonymous donations, even though the AO brought on record defects in maintaining records as per the provision of said section.

The Ld. CIT(A) has erred in restricting the addition at Rs. 82,600/- on account of anonymous donation by specific donors only verified on sample basis, without extrapolating the ratio to the entire donation amount in view of the details available on record.

The appellant craves to leave, to add, alter, amend or delete any of the above Grounds of Appeal.

Whereas the assessee as raised the following grounds in the cross appeal filed;

Appellant Assessee trust contends that, the notice u/s 143(2) of the ITA, 1961; dated 03/03/2014; issued by the learned AO is bad in law, as the notice is issued in violation to the Instruction No. 10 & 13 of 2013 issued by the CBDT.

Appellant Assessee trust contends that, the enquiries conducted by the learned AO before 03/03/2014 (i.e. date on which notice u/s 143(2) of the ITA, 1961 is issued), are bad in law as the same were conducted without any jurisdiction / authority under the ITA, 1961.

Appellant Assessee trust contends that, the notice u/s 143(2) & 142(1) of the ITA, 1961 dated 03/03/2014 are ante-dated, considering the specific observation in Line-1 of Para-10 of the assessment order.

Appellant Assessee trust contends that, the learned I-T Authorities erred in law and on facts, in sustaining addition of Rs. 82,600/- as ‘Anonymous Donations’ u/s 115BBC of the ITA, 1961; on the analogy that the donors could not be reached on the given address. The earned I-T Authorities ought to have appreciated that Appellant Assessee Trust has maintain all the record of identity of donors indicating name and address as prescribed u/s 115BBC of the ITA, 1961; as such taxation u/s 115BBC of the ITA, 1961 is uncalled for.

The appellant craves leave to add / alter / modify / delete / amend all / any of the grounds of appeal.

We shall first deal with the cross appeal of the assessee i.e. ITA No. 525/PUN/2022.

We note that, the impugned order was passed on 12/05/2017 and was served on the assessee on 13/062017. The extant cross appeal is filed on 12/07/2022 with a delay of 1796 days. The assessee submits that the first part of delay of 930 days i.e. from 11/08/2017 to 27/02/2020 was attributable to its unawareness of the fact of filing of the appeal by the Revenue. And 2nd part of the delay of 866 days falling within the exclusion ordered by the Hon’ble Supreme Court in MA No. 665/2021 in SMW(C) No. 3/2020.

Before we advert to the merits of the controversy of the present Cross Appeal, from rival submissions, a short point that primarily arises for our determination as to ‘Whether appellant have explained sufficient cause for condonation of 1st part of delay of 930 days in filing the present cross appeal or not?’

Let us first consider well settled propositions of law relating to condonation of delay. In so far as the liberal approach to be adopted in condonation of delay is concerned, in “Collector, Land Acquisition, Anantnag and Anr. Vs Ms Katiji and Others” reported at 167 ITR 5 (SC), the Hon’ble Supreme Court vide paragraph 3 reiterated certain principles to be followed while dealing with condonation of delay which are summarily stated as;

Ordinarily a litigant does not stand to benefit by lodging an appeal.

Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.

Every day’s delay must be explained does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner.

When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.

It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

Observation of the court

We have heard the rival contentions of both the parties; and subject to the provisions of rule 18 of Income Tax Appellate Tribunal Rules, 1963 [‘ITAT-Rules’ hereinafter], perused the material placed on records, case laws relied upon and duly considered the facts in the light of settled legal position. 10. In the extant appeal of the Revenue, we observed that;

In the absence of return of income for the assessment year [‘AY’ hereinafter] 2011-12, the notice u/s 142(1) of the Act was served calling upon the assessee to file return of income [‘ITR’ hereinafter], pursuant to such notice only, the assessee filed its ITR alongwith audited financial statement on 19/11/2013 declaring total income ₹51,410/-. The verification of audited financial statement revealed that the assessee has accounted receipt of cash donations totalling to ₹2,89,20,955/- from 7145 person each ranging from ₹3500/- to 5000/- and in order to verify veracity thereof a list of donors was called out from the appellant assessee.

Upon receipt of a list, in the first instance Ld. AO issued letters to 25 random donors on 17/02/2014 of which 15 were returned unserved by postal authorities with a remark ‘insufficient address’ or ‘incomplete address’, and whereas 2 donors did not confirm the fact of making donation in-spite receipt of letters/notices from the IT-Department. To concretise the basis, before culminating the assessment proceedings, the Ld. AO in 2nd set has issued letters to another 25 donors from list provided by the assessee. However in this round also 19 of such letters were returned unserved by postal authorities with similar remark ‘insufficient address’ and reminder did not bother to reply, thus remained unconfirmed.

When self-serving confirmations and receipts failed inspire any confidence, therefore the Ld. AO as matter of last resort deputed his inspector to verify the identity of 10 random donors; however such exercise also remained futile. Consequently the appellant was put to show-case-notice, and in the event of effective failure on the part of appellant to discharge the onus casted upon it, the Ld. AO brought to tax the cash donations treating it as anonymous in nature u/s 115BBC r.w.s. 2(24)(iia) of the Act.

In the first appellate proceedings, the Ld. CIT(A) without first dealing with the objection of the Ld. AO raised against the admission of additional evidence submitted by the appellant in the form of ‘new set of donor list’, has restricted the anonymous donation addition to the extent attributable random donors whose identity remained unproved.

In the present case, beside making a note of failure to file ITR by the appellant suo-motu within the time allowed u/s 139(1) of the Act, we find certain highly improbable events in the matter of receipt of donations such as;

(a) all donations from 7145 persons are received in cash,

(b) all donations remained sliced in the range of ₹3500/- to ₹5000/-

(d) None of the cash donation were found deposited into the bank account

(d) The letters issued u/s 133(6) were mostly returned unserved with a remark ‘address not found’, ‘insufficient address’, ‘addressee left’,

(e) From the inspectors report dt. 11/03/2014 it remained uncontroverted fact that none of the donor found at the given address

(f) Most of the persons listed in the donor list do not represent complete name

(g) Further most of the person listed as donors with incomplete and vague address etc., therefore, in our considered opinion nothing more was required to apply the test of human probabilities so has to held such donation as ‘anonymous’ u/s 115BBC of the Act.

Having vouched the fact and circumstance, we are heedful to state that, the appellant has dejectedly failed to discharge the onus of rebuttal of the material with which it was confronted by the AO. These uncontroverted facts beyond any iota of smoke would shows that the transaction of the receipt of the donations is abnormal, fictitious and militates against the claim of appellant that the cash donations are genuine. It is settled position of law that the burden of proving the genuineness of transaction of receipt of donation is always on the assessee. This burden can be discharged by it adducing cogent and persuasive evidence. In the absence of any such positive evidences from the appellant assessee, the Ld. AO was justified applying the test of human probabilities and drawing adverse inference in the light of judgements of the Hon’ble Supreme Court in the case of ‘CIT Vs Durga Prasad More’, reported in 72 ITR 807, ‘CIT Vs Daulat Ram Rawatmull’, reported in 87 ITR 349, and ‘CIT Vs P Mohanakala’, reported at 291 ITR 278(SC).

The plea of the appellant that the clerk in the first instance submitted the incorrect list as the original list was maintained in a language other than english hence certain errors were crept-in which has been rectified before the first appellate proceedings by bringing on record new list of correct donors failed to inspire any confidence to us, thus deserves to be rejected. The very conduct of the appellant made us to believe that the information filed during the original assessment proceedings is not correct or incomplete, thus failure to maintain the identity of the person indicating full name and full address. As a result, on consideration of totality of facts & circumstances, we are of the considered view that all cash donation transactions are sham, a make believe story, a device adopted created to sleeve undisclosed income through anonymous donations. Holding so, we do not see any infirmity in the order of assessment framed u/s 143(3) of the Act, but the order of Ld. CIT(A) in restricting the taxation of anonymous donation to ₹82,600/-. For the reason, we set-aside the impugned order of Ld. FAA and restore the order of assessment intact.

Resultantly, cross appeal of the assessee is DISMISSED and the appeal of the Revenue is ALLOWED.

In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 14th day of June, 2023.