2019 (6) TMI 399 - AT - Income Tax

Tribunal upholds undisclosed income addition for corpus donation due to lack of proof and cooperation.

ANGIKA DEVELOPMENT SOCIETY Versus ASSTT. DIRECTOR OF INCOME TAX (EXEMPTION), INV. CIRCLE-I, NEW DELHI

The Tribunal dismissed the Assessee's appeal, upholding the addition of the corpus donation as undisclosed income under section 68 of the IT Act. The ... Addition u/s 68 - amount represented corpus donation received by the Appellant which was exempt u/s 11(d) - HELD THAT:- 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 DCIT, 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. Aall sufficient steps have been taken by the AO 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 AO. 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 ₹ 95 lacs, therefore, Ld. CIT(A) has rightly affirmed the action of the AO in treating the corpus donation of ₹ 95 lacs allegedly received from LEARN as undisclosed income in the hands of the assessee u/s. 68 - Decided against assessee. Issues:1. Disallowance of corpus donation under section 68 of the IT Act.2. Failure to conduct proper enquiries by the AO.3. Requirement to prove the nature and genuineness of the corpus donation.4. Lack of cooperation from LEARN in providing information.5. Genuineness of the transactions in question.Analysis:1. The appeal was filed against the addition of a corpus donation under section 68 of the IT Act. The Assessee claimed the amount was exempt under section 11(d) of the IT Act. The CIT(A) upheld the addition, stating that the AO did not bring any fresh evidence and failed to obtain a reply from LEARN. The Assessee argued that all evidence was produced to prove the genuineness of the donation. The Tribunal noted that the AO made efforts to verify the balance sheet of LEARN but faced non-cooperation. The mode of transaction raised doubts, and the Assessee failed to prove the nature and genuineness of the donation. The Tribunal upheld the addition, stating the Assessee did not discharge the onus to prove the donation's legitimacy.2. The Assessee contended that the AO did not conduct proper enquiries as directed by the ITAT. The AO had issued a letter to the Assessee to represent the case with documentary evidence. However, LEARN did not provide the required information, leading to the addition of the donation. The Tribunal observed that despite efforts to investigate, no new evidence emerged. The lack of cooperation from LEARN hindered the verification process. The Tribunal found that the AO took necessary steps but no new facts were discovered. Consequently, the Tribunal upheld the CIT(A)'s decision based on the failure to discharge the onus of proof.3. The Assessee argued that the corpus donation was received through legitimate banking transactions and was confirmed by LEARN's office bearers. However, the Tribunal found discrepancies in the transaction pattern and lack of cooperation from LEARN. The Assessee's failure to prove the donation's nature and genuineness led to the affirmation of the addition by the CIT(A). The Tribunal upheld this decision, emphasizing the Assessee's inability to establish the legitimacy of the donation.4. The lack of cooperation from LEARN in providing essential information was highlighted as a crucial factor in the case. Despite efforts to verify the balance sheet and conduct enquiries, LEARN's non-cooperation impeded the investigation. This non-cooperation contributed to the doubts regarding the genuineness of the donation. The Tribunal considered this lack of cooperation in affirming the addition of the donation.5. The Tribunal scrutinized the genuineness of the transactions, particularly the timing of cash deposits and demand drafts. Doubts were raised due to the sequence of events and conflicting statements from LEARN. The Tribunal concluded that the Assessee failed to substantiate the legitimacy of the donation, leading to the affirmation of the addition. The Tribunal rejected the Assessee's appeal based on these findings.In conclusion, the Tribunal dismissed the Assessee's appeal, upholding the addition of the corpus donation as undisclosed income under section 68 of the IT Act due to the Assessee's failure to prove the donation's legitimacy and the lack of cooperation from LEARN in providing essential information for verification.