Corpus donations supported by evidence were not taxable as unexplained cash credits; rectification enhancing the addition was upheld.

Corpus donations received by a registered charitable society, when shown in the books with banking evidence, confirmations and other supporting material, could not be taxed as unexplained cash credits under section 68 merely on general suspicion about the donors; the Tribunal held the addition unsustainable and deleted it. The rectification enhancing the addition under section 154 was treated as a valid arithmetical correction and was not found to involve any debatable issue requiring interference. The assessee therefore succeeded on the main addition, while the rectification was upheld.

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Issues: (i) Whether corpus donations received by a charitable society could be treated as unexplained cash credits under section 68 of the Income-tax Act, 1961, or were eligible for exemption under section 11(1)(d) of the Income-tax Act, 1961; (ii) Whether the rectification enhancing the addition under section 154 of the Income-tax Act, 1961 was valid.

Issue (i): Whether corpus donations received by a charitable society could be treated as unexplained cash credits under section 68 of the Income-tax Act, 1961, or were eligible for exemption under section 11(1)(d) of the Income-tax Act, 1961.

Analysis: The assessee was a registered charitable society and the receipts were claimed as corpus donations supported by banking channels, confirmations, bank particulars and supporting documents. The Tribunal considered that corpus donations, when received with a specific direction and disclosed as such, are not to be brought to tax merely because the Revenue questions the donors, especially where the surrounding material shows the receipts were treated as corpus in the books. The Tribunal accepted the assessee's reliance on the line of authority that section 68 cannot be invoked mechanically against disclosed donation receipts and found the Revenue's contrary reliance insufficient to sustain the addition on the facts presented.

Conclusion: The addition under section 68 was not sustainable and the assessee succeeded on this issue.

Issue (ii): Whether the rectification enhancing the addition under section 154 of the Income-tax Act, 1961 was valid.

Analysis: The Tribunal treated the enhancement as an arithmetical correction and found that it did not involve any debatable issue requiring interference.

Conclusion: The rectification under section 154 was held valid.

Final Conclusion: The impugned addition treating the corpus donations as unexplained cash credits was deleted, and the assessee's appeal succeeded in full.

Ratio Decidendi: Corpus donations of a registered charitable entity, when disclosed and supported by surrounding evidence, cannot be sustained as unexplained cash credits under section 68 merely on a generalized suspicion; the addition must rest on legally adequate proof on the facts of the case.

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