2025 (7) TMI 1564 - AT - Income Tax

Addition u/s 68 - assessee failed to establish the identity creditworthiness and genuineness of the alleged donors and lenders - corpus donations receipts - onus to prove - HELD THAT - According to settled law the onus u/s 68 lies with the assessee to provide a satisfactory explanation regarding the nature and source of any credit found in its books. It is settled that mere furnishing of confirmation or general explanations without credible supporting evidence is not sufficient to discharge the burden. In respect of corpus donations we note that the assessee has not submitted proper documentation evidencing the identity of the donors. In terms of section 115BBC of the Act anonymous donations received by a charitable or religious trust are chargeable to tax at the rate of 30%. Even if such donations are styled as corpus donations the assessee must still establish the identity of donors unless falling within the exceptions prescribed. In this case the failure to provide PAN details bank statements or any form of verifiable documentation means the donation qualifies as anonymous u/s 115BBC and the addition is rightly sustained. Regarding unsecured loans the law requires the assessee to prove the identity of the lender their creditworthiness and the genuineness of the transaction. This three-fold requirement u/s 68 was not satisfied. The affidavits and confirmations produced lacked bank statements or financial records of the lenders. Therefore we concur with the CIT(A) in holding that the loans are unexplained and liable to be added u/s 68. Decided against assessee.

Summary

ISSUES:

Whether the assessee has discharged the onus under Section 68 of the Income Tax Act to explain the nature and source of unexplained cash credits in the bank account.Whether additional evidence filed under Rule 46A of the Income Tax Rules, 1962, relating to corpus donations and unsecured loans, is sufficient to establish the genuineness of the transactions.Whether corpus donations qualify as anonymous donations under Section 115BBC of the Income Tax Act due to failure to maintain prescribed records.Whether unsecured loans received by the assessee satisfy the requirements of identity, creditworthiness, and genuineness under Section 68.Whether non-appearance and lack of prosecution by the assessee justify dismissal of the appeal.

RULINGS / HOLDINGS:

The assessee has failed to discharge the burden under Section 68 as the explanation regarding the nature and source of deposits was not supported by corroborative evidence; "mere affidavits or self-serving confirmations without independent verifiability cannot be taken as sufficient compliance of section 68."The additional evidence filed under Rule 46A was examined but found insufficient because it did not establish "the nexus between the deposits in the bank and the disclosed sources," and lacked credible financial documentation.Due to the failure to provide PAN details, bank statements, or verifiable documents, the corpus donations qualify as "anonymous donations" under Section 115BBC, and the related addition to income is sustained.The unsecured loans do not satisfy the three-fold requirement under Section 68 of proving "the identity of the lender, their creditworthiness, and the genuineness of the transaction," and hence are liable to be added as unexplained credits.The appeal is dismissed for non-prosecution and on merits, as the assessee's conduct indicates a lack of interest in prosecuting the appeal and the substantive issues were adjudicated against the assessee.

RATIONALE:

The Court applied the statutory burden of proof under Section 68 of the Income Tax Act, which requires the assessee to provide a "satisfactory explanation" regarding unexplained credits, supported by credible and verifiable evidence such as bank statements and PAN details.The Court relied on the procedure under Rule 46A of the Income Tax Rules, 1962, for admission of additional evidence, but emphasized that mere submission of affidavits or general confirmations is inadequate without independent verification.The interpretation of Section 115BBC was applied to classify donations as anonymous where the assessee fails to maintain records of the donor's identity and particulars, triggering a tax liability at the prescribed rate.The decision reaffirmed settled legal principles that "mere furnishing of confirmation or general explanations without credible supporting evidence is not sufficient to discharge the burden" under Section 68, maintaining consistency with precedent.The Court noted the assessee's repeated non-appearance and failure to prosecute the appeal, justifying dismissal both procedurally and substantively, without any dissent or doctrinal shift.