Taxation of corpus donation as undisclosed income under section 68

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Taxation of corpus donation as undisclosed income under section 68

Short Overview : Where corpus donation could not be verified as donor was not co-operating in providing details, it was rightly treated as unexplained cash credit under section 68.

Assessment was completed by making addition of corpus donation received from a society, treating as unexplained cash credit under section 68. CIT(A) deleted the alleged corpus donation. Tribunal set aside issue for verification of corpus donations. During course of reassessment proceedings, various queries were asked from donor, which was not provided. Therefore, AO made addition as an accommodation entry in form of alleged donation.

it is held that AO made enquiry from each and every aspect, but nothing new had come up during intervening period. All efforts to verify balance sheet of donor, had gone in vain as it had not cooperated to provide the desired information which could have helped reaching truth. Mode of transaction viz. depositing of cash equivalent to donations immediately before issuing of demand drafts raised doubt as to genuineness of transactions, enumerating therein fact that donor had no capacity to pay donation. Therefore, CIT(A) had rightly affirmed action of AO in treating corpus donation as undisclosed income under section 68.

Decision: Against assessee.

IN THE ITAT, DELHI BENCH

H.S. SIDHU, J.M. & B.R.R. KUMAR, A.M.

Angika Development Society v. Asstt. DIT

ITA No. 666/Del/2016

6 June, 2019

Assessee by: Shashank Singh, Advocate & Sh. Arjun

Department by: Surender Pal, Sr. Departmental Representative

ORDER

H.S. Sidhu, J.M.

This appeal filed by the Assessee is directed against the Order of the learned Commissioner (Appeals)-21, New Delhi pertaining to assessment year 2005-06 on the following grounds :–

1. On the facts and in the circumstances of the case, the Commissioner (Appeals) has erred in upholding the addition of Rs. 95,00,000 (Rupees Ninety Five Lakhs Only) under section 68 of the Income Tax Act, disregarding the claim that this amount represented corpus donation received by the Appellant which was exempt under section 11(d) of the Income Tax Act.

2. That on the facts and in the circumstances of the case, the Commissioner (Appeals) erred in upholding the addition of Rs. 95,00,000 (Rupees Ninety Five Lakhs Only) without appreciating that the assessing officer did not carry out enquiries as directed by the ITAT, Delhi Bench in its Order, dt. 15-7-2011 in ITA No. 2295(Del) of 2010 and did not bring on record any fresh evidence against the Appellant.

3. That on the facts and in the circumstances of the case, the Commissioner (Appeals) erred in upholding the addition of Rs. 95,00,000 (Rupees Ninety Five Lakhs Only) under section 68 without appreciating that the Appellant, having produced all evidence to prove the genuineness of donation received, was not required to prove the source of source of donation given by LEARN.

4. That on the facts and circumstances of the case, the Commissioner (Appeals) has erred in upholding addition of Rs. 95,00,000 (Rupees Ninety Five Lakhs Only) without appreciating that the assessing officer did not bring any fresh evidence on record against the Appellant and that the assessing officer having failed to obtain any reply from LEARN, could not be used against the Appellant to sustain the addition.

5. That the Commissioner (Appeals) ought to have followed the decision of his predecessor and deleted the addition as the assessing officer has not brought any fresh material against the Appellant on record.

6. That the Commissioner (Appeals) ought to have deleted the addition, as the assessing officer in his enquiries conducted as per directions of the ITAT, in its Order, dt. 15-7-2011, has not been able to prove that cash deposits made in the bank account of LEARN were made by the Appellant and represented the undisclosed income of the Appellant.

7. The appellant craves liberty to add, amend, alter, modify, and/or delete any of the grounds of appeal in its hearing before your honour.

8. The appellant prays for justice and that its appeal may be allowed on the grounds raised hereinabove.

2. The brief facts of the case are that the assessee is an educational society duly registered under the Societies Registration Act and filed its return on 17-10-2005 declaring income of Rs. 20,166 alongwith Audit Report for the period ending 31-3-2005.

The case of the assessee was selected for scrutiny and the assessment was completed at Rs. 97,20,170 by making addition of corpus donation of Rs. 95 lacs received from M/s. Locus for Educational & Academic Research Network (LEARN) of Imphal, treating as unexplained cash credit under section 68. Against the assessment order, Assessee filed an appeal before the learned Commissioner (Appeals), and the learned Commissioner (Appeals) deleted the alleged corpus donation of Rs. 95 lacs by LEARN.

Aggrieved by the order of the learned Commissioner (Appeals), the Department preferred an appeal before the ITAT and the Tribunal vide its Order, dt. 15-7-2011 set aside the issue for verification of corpus donations. In compliance to the directions of the ITAT, a letter, dated 5-2-2013 was issued to the assessee to represent the case before the assessing officer alongwith the documentary evidence. During the course of reassessment proceedings various queries were asked from the LEARN, which was not provided to the assessing officer. Therefore, the assessing officer has no option but to make an addition of Rs. 95 lacs in the hands of the assessee as an accommodation entry in the form of alleged donation. Aggrieved with the above assessment the assessee appealed before the learned Commissioner (Appeals) and learned Commissioner (Appeals) vide his impugned Order, dt. 13-10-2015 has upheld the action of the assessing officer in treating the corpus donation of Rs. 95 lacs allegedly received from LEARN as undisclosed income in the hands of the assessee under section 68 of the Income Tax Act, 1961 (in short “Act”) and by Corrigendum, dated 4-12-2015 has dismissed the appeal of the assessee. Aggrieved with the order of the learned Commissioner (Appeals), assessee is in appeal before the Tribunal.

3. Learned Counsel for the assessee submitted that as per the directions of the ITAT, the assessing officer passed the Order, dt. 31-3-2013 wherein he added the corpus donation of Rs. 95 lacs under section 68 of the Act, but he did not carry out enquiries as directed by the ITAT and did not bring on record any fresh evidence. He further submitted that assessing officer was not justified in adding the corpus donation as one of the major reason for adding the corpus donation was lack of information received from LEARN to the queries that were raised by the assessing officer during the course of reassessment proceedings as LEARN failed to provide the desired information. It is further submitted that the account of LEARN has no connection with the activities of the assessee society, therefore, investigations into the account of LEARN has no co-relation to the donation received by the assessee society through a legitimate banking transaction and which was duly declared as such by the assessee society. He further submitted that learned Commissioner (Appeals) has wrongly upheld the action of the assessing officer in declaring the corpus donation as undisclosed income, despite the fact that corpus donation was received through account payee cheque/drafts and moreover these modus of donation have been confirmed by the office bearers of LEARN and assessee is not required to prove the source of source of donation received as corpus donation. In view of above, he requested to cancel the orders of the authorities below and delete the addition in dispute.

4. On the contrary, learned Departmental Representative relied upon the orders of the authorities below and stated that in compliance to the Tribunal directions, the assessing officer has taken all necessary steps to enquire the veracity and genuineness of corpus donation by LEARN on the basis of direction issued by the ITAT but no new facts or evidence have been gathered during the enquiry and Assessee has failed to discharge his onus to prove the nature and genuineness of the corpus donation of Rs. 95 lacs. Hence, learned Commissioner (Appeals) has rightly upheld the action of the assessing officer, which does not need any interference.

5. We have heard both the parties and perused the records especially the impugned order. We note that in compliance of the directions of the ITAT, the assessing officer has made enquiry from each and every aspect, but the fact remains unchanged as nothing new has come up during the intervening period. It is also noted that all efforts to verify the balance sheet of LEARN, has gone in vain as the LEARN has not cooperated to provide the desired information which could have helped reaching the truth. However, the details of bank account in Bank of India, Ghaziabad was enquired but nothing new could come from. It is also noted that the mode of transaction viz. depositing of cash equivalent to the donations immediately before the issuing of demand drafts raises doubt as to the genuineness of transactions, as also observed by the ITAT and earlier denied by the two letters written by Chairman, LEARN during original assessment, enumerating therein the fact that the assessee had no capacity to pay donation and now reflected in Deputy Commissioner, Circle Imphal, letter, dated 21-3-2013 received in fax, that the said NGO, LEARN only received donations from other parties during the assessment year 2005-06. We further note that assessing officer has taken all necessary steps to enquire the veracity and genuineness of corpus donation by LEARN on the basis of directions issued by ITAT but no new facts or evidence have been gathered during the enquiry.

It is further observed that all sufficient steps have been taken by the assessing officer in accordance with the ITAT directions to investigate and unearth the truth behind the genuineness of corpus donation but no new facts or evidence came up as a result of same. It is germane to mention here that during the course of reassessment proceedings various queries were asked from the LEARN, which was not provided to the assessing officer. In view of above, in our considered opinion, the assessee has failed to discharge his onus to prove the nature and genuineness of the corpus donation of Rs. 95 lacs, therefore, learned Commissioner (Appeals) has rightly affirmed the action of the assessing officer in treating the corpus donation of Rs. 95 lacs allegedly received from LEARN as undisclosed income in the hands of the assessee under section 68 of the Act, which does not need any interference on our part, hence, we uphold the action of the learned Commissioner (Appeals) of affirming the addition in dispute and accordingly reject the grounds raised by the Assessee.

6. In the result, the Appeal of the assessee is dismissed.

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