2016 (7) TMI 1675 - AT - Income Tax

Appeal granted on unexplained cash credit addition, remand for donor verification, compliance emphasized

Income Tax Officer (Exemption), Lucknow Versus Tathagat Shiksha Samiti

The CIT(A) deleted the addition of Rs. 1,74,35,100/- as unexplained cash credit, stating that disclosed donations used for charitable purposes cannot be ... Assessment of trust - Addition u/s 68 - donation received from 234 persons - capacity and genuineness of donors remained unproved - HELD THAT:- As we find that the order of the CIT(A) is cryptic and non speaking. If the CIT(A) was of the opinion that the donations were anonymous, then he ought to have invoked the provisions of Section 115BBC but he failed to do so, which amounts to miscarriage of justice. As held by the AO that the donations received by the assessee are not anonymous donations. The details in respect of the names and addresses are available on record in the form of donations receipts, which were impounded in the course of survey. As the CIT(A)’s order is non speaking order without recording any independent finding or giving any reason. In view of aforesaid finding, we send back this matter to the CIT (A) for verifying all the documents relating to donors PAN, addresses etc. and to decide the matter afresh after allowing adequate opportunity of being heard to the assessee. Issues Involved:1. Deletion of addition as unexplained cash credit.2. Application of Section 68 of the Income Tax Act.3. Compliance with Section 115BBC of the Income Tax Act.4. Verification of donor details and capacity.Detailed Analysis:1. Deletion of Addition as Unexplained Cash Credit:The core issue concerns the deletion of an addition of Rs. 1,74,35,100/- by the CIT(A), which was initially added by the Assessing Officer (AO) as unexplained cash credit. The assessee trust, registered under Section 12AA, claimed to have received donations totaling Rs. 2,21,00,000/- from 234 persons. The AO accepted Rs. 46,64,900/- as genuine and added the remaining Rs. 1,74,35,100/- due to unproven donor capacity and genuineness. The CIT(A) deleted this addition, referencing ITAT Lucknow Bench's decision in a similar case, emphasizing that once donations are disclosed as income and applied for charitable purposes, they cannot be added under Section 68 as unexplained cash credits.2. Application of Section 68 of the Income Tax Act:The CIT(A) and ITAT decisions highlighted that Section 68 does not apply when donations are disclosed as income and used for charitable purposes. The CIT(A) relied on judgments from various High Courts, including the jurisdictional Allahabad High Court, which held that Section 68 is inapplicable if donations are disclosed as income. The Delhi High Court's judgment in the case of Keshav Social and Charitable Foundation was particularly influential, stating that donations disclosed as income and applied for charitable purposes cannot be treated as unexplained cash credits under Section 68.3. Compliance with Section 115BBC of the Income Tax Act:The CIT(A) also considered the provisions of Section 115BBC, which deals with anonymous donations. The CIT(A) concluded that the donations in question were not anonymous since the assessee maintained records of donor identities, including names, addresses, PANs, and other details. The CIT(A) referenced Board Circular No. 14 and explained that the appellant trust complied with the requirements of Section 115BBC by maintaining detailed records of donors, thus exempting these donations from being taxed as anonymous donations.4. Verification of Donor Details and Capacity:The ITAT found the CIT(A)'s order to be cryptic and non-speaking, lacking independent findings or reasons. The ITAT noted that the AO had added the amount as unexplained cash credits due to unproven donor capacity and genuineness. However, since the assessee provided complete donor details, including PANs, the donations could not be termed anonymous. The ITAT remanded the matter back to the CIT(A) for a detailed verification of donor details and capacity, instructing the CIT(A) to decide the matter afresh after allowing the assessee an adequate opportunity to be heard.Conclusion:The appeal by the Revenue was allowed for statistical purposes, with the ITAT directing the CIT(A) to re-examine the donor details and make a fresh decision based on the evidence provided. The CIT(A) is to ensure a thorough and reasoned order, addressing the issues of donor capacity and genuineness in compliance with relevant legal provisions.