Reassessment Invalid Where Income Reopened U/s 68 but Ultimately Taxed as Anonymous Donations U/s 115BBC: ITAT

The ITAT Pune held that Sections 68 and 115BBC operate in distinct and mutually exclusive fields, and a reassessment founded on one provision cannot be legally concluded under another. Since the final addition was not made on the ground forming the “reason to believe” for reopening, the assumption of jurisdiction under Section 147 was held to be bad in law, rendering the reassessment proceedings unsustainable. The bench of Dr. Manish Borad (Accountant Member) has observed that reassessment initiated on one statutory ground cannot be sustained when the final addition is made under an entirely different provision of the Income Tax Act, 1961 and ruled in favour of Rajarshi Shahu Shikshan Sanstha, a Maharashtra-based educational trust, and set aside additions made towards alleged “anonymous donations” under Section 115BBC. The assessee, Rajarshi Shahu Shikshan Sanstha, is a charitable organization engaged in imparting education through schools and colleges in Miraj and surrounding districts of Sangli, Maharashtra. For Assessment Years (AYs) 2012-13 to 2017-18, the trust declared either nil income or marginal surplus after claiming exemption under the charitable provisions. For AY 2012-13, the return was filed on 26 February 2013 declaring nil income. The case was selected for scrutiny, and a regular assessment under Section 143(3) was completed on 25 March 2015, accepting the returned income. Subsequently, the Income Tax Department conducted a survey under Section 133A on 13 February 2019 at multiple premises of the trust. Based on statements recorded during the survey and responses from certain alleged donors who denied making donations, the Assessing Officer (AO) reopened the completed assessment under Section 147. In the reasons recorded for reopening, the AO alleged that the trust had failed to satisfactorily explain the nature and source of donations aggregating to ₹1.36 crore received during AY 2012-13. The AO explicitly recorded that the donations were not genuine and therefore required to be taxed as unexplained cash credits under Section 68 of the Act. Approval for reopening was also obtained on the same footing—that the escaped income was chargeable under Section 68. However, while completing the reassessment on 24 December 2019, the AO did not make any addition under Section 68. Instead, the entire amount of ₹1.36 crore was treated as “anonymous donations” and taxed under Section 115BBC, which imposes a special tax on charitable institutions receiving donations without maintaining prescribed donor particulars. The reassessment order thus departed from the very foundation on which reopening was initiated. Aggrieved, the assessee challenged the reassessment before the Commissioner of Income Tax (Appeals), which upheld the AO’s action. The matter then reached the ITAT. The core issue before the ITAT was whether a reassessment initiated on the allegation of unexplained cash credits under Section 68 could be validly sustained when the final addition was made under Section 115BBC, without issuing fresh reasons or notice. The Tribunal undertook a detailed comparison of Sections 68 and 115BBC and noted that the two provisions operate in entirely different fields. Section 68 deals with unexplained credits and treats them as the income of the assessee, requiring proof of identity, creditworthiness, and genuineness. Section 115BBC, on the other hand, applies only to charitable institutions and merely taxes anonymous donations at a special rate, provided donor identity details are not maintained. It does not require proof of source or genuineness in the same manner. The Bench observed that the AO’s “reason to believe” was strictly confined to Section 68. Yet, the final reassessment order completely abandoned that charge and invoked Section 115BBC instead. The Tribunal relied heavily on the Bombay High Court’s ruling in CIT v. Jet Airways (I) Ltd., which held that if no addition is ultimately made on the issue for which assessment was reopened, the reassessment itself becomes invalid. It also placed reliance on Lark Chemicals Pvt. Ltd., where the Supreme Court declined to interfere with a similar view taken by the Bombay High Court. Rejecting the Revenue’s argument based on Explanation 3 to Section 147, the Tribunal held that such explanation does not permit the AO to completely substitute the original basis of reopening with a new and unrelated charging provision. The ITAT further noted that no fresh show-cause notice was issued to the assessee proposing taxation under Section 115BBC. Approval under Section 151 was obtained only for reopening based on Section 68, not Section 115BBC. The reassessment was initiated beyond four years from the end of the assessment year, without demonstrating failure on the part of the assessee to disclose fully and truly all material facts. These lapses, according to the Tribunal, went to the root of jurisdiction and rendered the reassessment unsustainable. Allowing the assessee’s appeal on legal grounds, the ITAT quashed the reassessment proceedings for AY 2012-13. Since the reopening itself was held to be invalid, the Tribunal did not adjudicate the merits of the addition under Section 115BBC. Case Details Case Title: Rajarshi Shahu Shikshan Sanstha Versus ITO Case No.: ITA Nos.1121 to 1126/PUN/2024 Date: 18.12.2025 Counsel For Petitioner: Kishor B Phadke Counsel For Respondent: Amit Bobde & Shri Shashank Ojha Click Here To Read Order Read More: Export Duty Exemption Can’t Be Denied for Exports Without Letters of Credit of Parboiled Rice: Chhattisgarh High Court

Reassessment Invalid Where Income Reopened U/s 68 but Ultimately Taxed as Anonymous Donations U/s 115BBC: ITAT

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