2025 (6) TMI 219 - AT - Income Tax

Assessment of trust - Addition u/s 68 - treating donation received from trustee as unexplained cash credit - HELD THAT - We find that assessee has furnished various documents in the paper book explaining the genuineness of the said donation. Once the donor has given the confirmation and also accepted to have given donation to the assessee along with the source of income burden of proof stands discharged by the assessee and the same shifts on to the Revenue. In case Revenue was not satisfied with the confirmation and statement given by Dr. Bhagwan Nivrutti Elmane then they should have taken action against the alleged donor for giving false statement. However in absence of any such action on the part of Revenue we find that assessee has successfully explained the nature and source of the alleged donation received from Dr. Bhagwan Nivrutti Elmane during the year and the same cannot be taxed u/s. 68. Cash donation received from Mr. Bhagwan Dnyanoba - This donation has also been received in cash. Apart from confirmation letter of Mr. Bhagwan Dnyanoba there is no other document to justify the source of income. In this case no statement was taken by the AO. It is also observed that the amount received as donation during the year has been applied for charitable purposes and the same is not in dispute at the end of Revenue authorities. Income-tax return along with Audit Report of the assessee society has been filed. Now once the assessee is unable to prove the detail of alleged donation section 115BBC of the Act can be invoked which is regarding anonymous donation to be taxed in certain cases. Subsection (1)(i)(B) of section 115BBC applies on the given facts of the case as the donation received has been applied for charitable purposes but since it is held to be anonymous donation only the amount in excess of Rs. 1.00 lakh can be taxed @30%. We therefore are of the considered view that out of Rs. 1.10 lakh only Rs. 10, 000/- can be subjected to tax as per the provisions of section 115BBC of the Act as we have treated Rs. 1.10 lakh of cash donation as anonymous donation. Ground No.2 raised by the assessee is partly allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the addition made under section 68 of the Income-tax Act, 1961 (the Act) amounting to Rs. 2,51,000 received as donation from Dr. Bhagwan Nivrutti Elmane can be sustained as unexplained cash credit, given the confirmation and statement of the donor.

(b) Whether the addition made under section 68 of the Act amounting to Rs. 1,10,000 received as donation from Mr. Bhagwan Dnyanoba can be sustained as unexplained cash credit in absence of sufficient proof of source of income.

(c) Whether the provisions of section 115BBC of the Act relating to taxation of anonymous donations apply to the Rs. 1,10,000 donation and, if so, the extent of tax liability thereunder.

(d) The applicability and interpretation of sections 11(1), 12A, 12AB, 143(3), 144B, 143(2), 142(1) and 131(1)(b) of the Act in the context of the charitable trust's assessment and the scrutiny proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of addition under section 68 on Rs. 2,51,000 donation from Dr. Bhagwan Nivrutti Elmane

Relevant legal framework and precedents: Section 68 of the Act mandates that any unexplained cash credit can be added to income if the assessee fails to satisfactorily explain the nature and source of such credit. The burden of proof initially lies on the assessee to prove the genuineness of the transaction, failing which the addition is justified.

Court's interpretation and reasoning: The Tribunal noted that the assessee furnished confirmation of the donation along with PAN and Aadhaar details of the donor. Further, the donor appeared before the Income Tax Officer under section 131(1)(b) and admitted the donation, also disclosing his sources of income (agriculture and personal coaching). The Tribunal held that once the donor confirms the donation and the source of funds, the burden shifts to the Revenue to disprove the genuineness.

Key evidence and findings: Confirmation letter, PAN and Aadhaar details, recorded statement under section 131(1)(b), and absence of any adverse action by Revenue against the donor for false statement.

Application of law to facts: The assessee discharged the initial burden of proof by providing satisfactory evidence and confirmation from the donor. The Revenue failed to rebut this evidence or initiate proceedings against the donor for falsehood.

Treatment of competing arguments: The Revenue contended that the addition was justified under section 68. However, the Tribunal found no basis to sustain the addition in light of the evidence and confirmation.

Conclusion: The addition of Rs. 2,51,000 under section 68 was deleted as the donation was satisfactorily explained and genuine.

Issue (b) and (c): Validity of addition under section 68 on Rs. 1,10,000 donation from Mr. Bhagwan Dnyanoba and applicability of section 115BBC

Relevant legal framework and precedents: Section 68 again applies for unexplained cash credits. Section 115BBC provides for taxation of anonymous donations received by specified charitable trusts or institutions. Anonymous donation is defined as a voluntary contribution where the recipient does not maintain records of the identity of the donor.

Court's interpretation and reasoning: The Tribunal observed that apart from a confirmation letter, no other evidence or statement under section 131(1)(b) was produced to establish the source of the Rs. 1,10,000 donation. The assessee admitted inability to prove the details of the donation. However, since the donation was applied for charitable purposes and the income tax return and audit report were filed, the Tribunal invoked section 115BBC.

Key evidence and findings: Confirmation letter only, no statement recorded from the donor, application of donation for charitable purposes not disputed, audit report and return filed.

Application of law to facts: The Tribunal held the donation to be an anonymous donation within the meaning of section 115BBC. Under subsection (1)(i)(B), only the amount in excess of Rs. 1 lakh is taxable at 30%. Thus, out of Rs. 1,10,000, only Rs. 10,000 is liable to tax under section 115BBC.

Treatment of competing arguments: The assessee argued that the donation should not be treated as unexplained cash credit and that the tax under section 115BBC should be applied only on the excess amount. The Revenue supported the addition under section 68. The Tribunal partially agreed with the assessee's submission and restricted tax liability accordingly.

Conclusion: The addition under section 68 was partly disallowed. Rs. 10,000 (excess over Rs. 1 lakh) was held taxable under section 115BBC as anonymous donation.

Issue (d): Applicability of other provisions and procedural aspects

Relevant legal framework: Sections 11(1), 12A, 12AB relate to registration and exemption of charitable trusts. Sections 143(3), 144B, 143(2), 142(1) concern assessment and scrutiny procedures. Section 131(1)(b) empowers recording statements during inquiry.

Court's interpretation and reasoning: The assessee was a charitable trust registered under Bombay Public Trusts Act and granted provisional registration under section 12AB. The case was selected for scrutiny under CASS and notices were validly issued. The Tribunal noted that the procedural requirements were complied with and the assessee filed audit reports and returns timely, except for delay in filing Form 10AD.

Key evidence and findings: Registration certificates, audit reports, notices, statements under section 131(1)(b).

Application of law to facts: The procedural compliance and registration status entitled the assessee to claim exemption under section 11(1) subject to conditions. The scrutiny and assessment were conducted as per law.

Treatment of competing arguments: No significant dispute on procedural aspects was raised.

Conclusion: The procedural framework was properly followed, and the substantive issues were decided on merits.

3. SIGNIFICANT HOLDINGS

"Now once the donor has given the confirmation and also accepted to have given donation to the assessee along with the source of income, burden of proof stands discharged by the assessee and the same shifts on to the Revenue. In case Revenue was not satisfied with the confirmation and statement given by Dr. Bhagwan Nivrutti Elmane, then they should have taken action against the alleged donor for giving false statement. However, in absence of any such action on the part of Revenue, we find that assessee has successfully explained the nature and source of the alleged donation received from Dr. Bhagwan Nivrutti Elmane during the year and the same cannot be taxed u/s. 68 of the Act."

"Section 115BBC(1)(i)(B) applies on the given facts of the case as the donation received has been applied for charitable purposes but since it is held to be anonymous donation, only the amount in excess of Rs. 1.00 lakh can be taxed @30%. We therefore are of the considered view that out of Rs. 1.10 lakh only Rs. 10,000/- can be subjected to tax as per the provisions of section 115BBC of the Act as we have treated Rs. 1.10 lakh of cash donation as anonymous donation."

Core principles established:

(i) Confirmation and admission by the donor regarding the donation and source of funds shifts the burden of proof from the assessee to the Revenue in unexplained cash credit cases under section 68.

(ii) Absence of sufficient evidence or donor confirmation may attract provisions of section 115BBC for anonymous donations, with tax liability limited to the amount exceeding prescribed thresholds.

(iii) Proper procedural compliance in scrutiny and assessment proceedings is essential but does not override substantive proof requirements under section 68.

Final determinations:

(a) Addition of Rs. 2,51,000 under section 68 was deleted as the donation was satisfactorily explained and genuine.

(b) Addition of Rs. 1,10,000 under section 68 was partly disallowed; Rs. 10,000 was held taxable under section 115BBC as anonymous donation.

(c) The appeal was partly allowed accordingly.