Shri 1008 Digambar Jain Atishay Kshetra Papoura Ji vs. ITO (Exemption) Ward, Gwalior [TU-DT-14-ITAT-2026]
Background of the Case
The assessee, a religious trust engaged in managing a centuries-old Jain pilgrimage centre, filed its return for AY 2017-18 declaring a taxable surplus of ₹2.01 lakh. During scrutiny, the Assessing Officer noticed cash deposits of ₹90 lakh during the demonetisation period, which the trust explained as donations received for the proposed Panchkalyanak Pratishtha Mahotsava and Mahamastikabhishek of Lord Adinath scheduled in April 2017. The Assessing Officer treated the donations of ₹75.46 lakh as unexplained cash credits under Section 68 on the ground that they were received shortly before demonetization and that the trust was not registered under Section 12AA during the relevant assessment year.
Consequently, exemption under Sections 11 and 12 was denied and tax was levied under Section 115BBE. The CIT(A) upheld the assessment, leading the assessee to file an appeal before the ITAT Agra.
Arguments by the Appellant (Assessee)
The assessee contended that although registration under Section 12AA was granted on 26.11.2018 with effect from AY 2019-20, the benefit of Sections 11 and 12 was available for earlier assessment years in view of the proviso to Section 12A(2), as the assessment proceedings were pending on the date of registration and the objects and activities of the trust had remained unchanged. It was further submitted that complete documentary evidence, including audited books of account, donor-wise ledgers, donation receipts and details of the religious event, had been furnished before the Revenue authorities.
The trust argued that the donations had already been disclosed as income in its books and, therefore, the same amount could not again be treated as unexplained cash credit under Section 68. The assessee also challenged the applicability of the enhanced tax rate under Section 115BBE, relying upon judicial precedents holding that the amended rate was prospective in nature.
Respondent’s Response (Revenue)
The Revenue submitted that since the trust was not registered under Section 12AA during the relevant assessment year, it was not entitled to claim exemption under Sections 11 and 12. The department further argued that the trust had no history of receiving such substantial cash donations and that the deposits made immediately before demonetisation raised serious doubts regarding their genuineness. Accordingly, the Revenue supported the orders of the Assessing Officer and the CIT(A), contending that the donations had rightly been treated as unexplained cash credits liable to tax.
Court Findings and Decision
The ITAT Agra allowed the appeal and held that the proviso to Section 12A(2), read with CBDT Circular No. 1/2015, extends the benefit of registration under Section 12AA to earlier assessment years where assessment proceedings were pending on the date of registration and the trust’s objects and activities remained unchanged. Since the assessee had obtained registration before completion of the assessment proceedings, it was entitled to exemption under Sections 11 and 12. The Tribunal further observed that the donations had been duly recorded in the audited books of account, supported by donor details, receipts and other documentary evidence, and had already been offered as income.
In such circumstances, the same receipts could not be taxed again as unexplained cash credits under Section 68 without rejecting the books of account or disproving the genuineness of the religious activities. The Tribunal also held that the enhanced rate of tax under Section 115BBE was not applicable to AY 2017-18 and directed that the income be taxed under the normal provisions of the Act.
Accordingly, all the additions made by the Revenue were deleted and the appeal of the assessee was allowed.
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