2026 (4) TMI 184 - AT - Income Tax

Section 68 cannot tax already disclosed fee receipts again merely because they were deposited in cash during demonetisation.

Cash deposits made by an educational society during demonetisation could not be assessed as unexplained cash credits under section 68 where the receipts ... Addition u/s 68 - cash deposits made by an educational society during the demonetisation period - difference in pattern of cash deposits made by the assessee during the assessment year and preceding assessment year. HELD THAT: - The Tribunal found that the assessee was a registered society engaged in education, had been claiming exemption over the years, and had disclosed the entire fee receipts as part of its gross receipts for the year. The cash deposits questioned by the Assessing Officer were stated to be out of fee collections, and those receipts already stood recorded in the books and offered as gross receipts in the return. Applying the principle that section 68 does not extend to amounts already disclosed as income of a charitable institution, the Tribunal held that the addition had been made merely on the basis of the pattern of deposits during the demonetisation period, despite the receipts being accounted for. On that footing, the addition sustained by the first appellate authority was liable to be deleted. [Paras 20, 21, 22, 23, 24] The addition under section 68 in respect of the cash deposits was deleted and the assessee's grounds were allowed. Final Conclusion: The Tribunal held that the impugned cash deposits formed part of the assessee-society's disclosed fee receipts already recorded in the books and returned as gross receipts, and therefore section 68 had no application. The addition sustained by the appellate authority was deleted and the appeal was allowed. Issues: Whether cash deposits made by an educational society during the demonetisation period, being receipts already reflected in the books and returned as gross receipts, could be assessed as unexplained cash credits under section 68 of the Income-tax Act, 1961 and taxed under section 115BBE of the Income-tax Act, 1961.Analysis: The assessee was a registered society engaged in education and enjoyed exemption status. The cash deposits were explained as fee collections and were supported by the cash book, fee records, course details and other documentary evidence. The receipts had already been disclosed as gross receipts in the return of income and in the books of account. On these facts, the addition was made only because of the pattern and quantum of cash deposited during the demonetisation period. The governing principle applied was that section 68 does not apply where the receipts are already disclosed as income or gross receipts of a charitable entity, and the same income cannot be brought to tax again merely because it was deposited in cash.Conclusion: The addition under section 68 and the consequential application of section 115BBE were not sustainable, and the relief was granted to the assessee.Ratio Decidendi: Where a charitable or educational has already disclosed receipts as income or gross receipts in its books and return, section 68 cannot be invoked again merely because those receipts were later deposited in cash in the bank account.