TaxTMI 
TaxTMI 
2026 (7) TMI 271
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....tions of Rs. 15.96 (crores) as unexplained cash credits u/s. 68 of the Act; in Assessing Officer's assessment order and upheld in the CIT(A)'s lower appellate discussion, reading as under: "8.1 I have carefully considered the facts of the case, the assessment order, the rectification order, the written submissions of the appellant, the remand report submitted by the Assessing Officer, the rejoinder filed by the appellant, and the applicable judicial precedents. 8.2 The primary issue for determination is whether the sum of Rs. 15.96 crores received by the appellant during the year under consideration can be regarded as corpus donation eligible for exemption under section 11(1)(d) of the Income-tax Act or is to be taxed as unexplained cash credit under section 68 of the Act. Treatment of Corpus Donations Received by a Trust Registered under Section 12A (Prior to the Amendment by the Finance Act, 2021 i.e., up to A.Y. 2021-22) According to section 11(1)(d), any voluntary contributions received by a trust or institution created wholly for charitable or religious purposes, with a specific direction that they shall form part of the corpus of the trust ....
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....form part of the corpus, evidenced by documentation. 8.4 In this case, the AO relied on the MoU between the appellant and Rajiv Jain & Family, which explicitly recorded that the donors would contribute Rs. 20 crores and, in return, be allotted two management seats in the Trust. This arrangement introduces a quid pro quo, thereby negating the voluntariness of the donation. Such a conditional arrangement more closely resembles an investment or a grant with control rights, rather than a philanthropic donation. 8.5 In the remand report, the AO reiterated that: • The MoU evidenced a quid pro quo arrangement; • No fresh confirmations or documentary proof regarding identity and capacity of the donors was provided; • The donors were not produced for verification despite multiple opportunities • Therefore, the donations lacked the essential characteristics of corpus donations exempt under section 11(1)(d); • The addition under section 68 was justified in the absence of proof of identity, capacity, and genuineness. 8.6 In reply, the appellant filed a rejoinder, submitting that: • The refe....
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.... or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the Assessee of that previous year (emphasis supplied) The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer 2: Proof of Identity of the creditors; CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) Capacity of creditors to advance money, and Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT3 and, Roshan Di Hatti v. CIT4 laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identi....
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....o fasten the assessee with such a liability" 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 10. On the issue of unexplained credit entries /share capital, we have examined the following judgments: i. In Sumati Dayal v. CIT 8 this Court held that "if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the asses....
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....ue, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself (emphasis supplied) vi. In a recent judgment the Delhi High Court 13 held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which parties approached each other, whether the transaction is entered into through [2003] 264 ITR 254 (Gau.) CIT v. N.R. Portfolio (P.) Ltd.[2014] 42 taxmann.com 339/222 Taxman 157 (Mag.) (Delhi) written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in....
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.... there is no dispute between the parties that the assessee is a charitable society duly enjoying section 12A as well as section 80G registration; as the case may be. And that it had claimed the amounts received from four parties, through cheques who had further filed their confirmations, bank details, bank statements with RTGS, banker certificates, MCA master data of corporate donors, MOU dated 06.12.2012 as corpus donations followed by the relevant utilization thereof as in the nature of application of funds. The first and foremost question which arises for the tribunal's apt adjudication herein is as to whether such a disallowance of corpus donation claim raised under section 11(1)(d) of the Act could attract section 68 unexplained cash credit additions or not. 4. The assessee invites our attention to DIT Vs. Keshav Social Charitable Foundation [2005] 146 Taxman 569 (Del), DIT Vs. Hans Raj Samarak Society [2013] 35 taxmann.com 642 (Delhi) and CIT Vs. Uttaranchal Welfare Society [2014] 42 taxmann.com 361 (All) that the learned departmental authorities could not invoke section 68 as are the facts in the assessee's case. We notice in this factual backdrop that hon'ble jurisdic....
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....l for the revenue submitted before us that essentially what the assessed was trying to do was to launder its black money or unaccounted income by converting it into donations and it should not be permitted to do so. On this basis, it was contended that a substantial question of law has arisen whether the order of the ITAT was correct in law. 8. We are afraid that it is not possible for us to agree with the submission of learned counsel for the revenue and we are of the view that no substantial question of law arises for our consideration. 9. In S. Rm. M. Ct. M. Tiruppani Trust v. CIT (1998) 230 ITR 636 (SC), it has been held that under section 11(1) of the Act, every charitable or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, of course, subject to accumulation up to a specified maximum which, in the present case, was 25 per cent. In the appeal that we are concerned with, it has been found as a matter of fact that the assessed had applied more than 75 per cent of ....