2021 (10) TMI 347 - AT - Income Tax

Assessment of trust - unexplained donation - Addition of contribution to the building fund on the reasoning that the source of the same was not explained - HELD THAT - As assessee has furnished list of donors along with their addresses and the amount of donation - there are receipts issued by the assessee against the corpus donation received - But there was no enquiry conducted by the authorities below to verify the genuineness of the corpus donation received by the assessee in the under consideration - without verifying or conducting the necessary enquiries with respect to the donation shown by the assessee, the same cannot be treated as unexplained as alleged by the revenue. Thus, no addition of whatsoever is required to be made by treating the amount of donation as unexplained. - Decided in favour of assessee.

Issues:
1. Appeal against the order of CIT(A) upholding addition of unexplained investments.
2. Dispute regarding expenditure on building construction and unproved source of funds.
3. Verification of the source of contribution to building fund and taxability of corpus donation.

Analysis:
1. The appeal was filed against the order of CIT(A) upholding the addition of unexplained investments made by the Assessee. The Assessee contended that the addition was illegal and against natural justice. The CIT(A) was accused of not fully considering the submissions and evidence provided by the Appellant regarding the impugned addition.

2. The dispute revolved around the expenditure on building construction and the unproven source of funds. The Assessee claimed that the CIT(A) erred in confirming the expenditure on building construction and not proving the source of funds. The Assessee argued that the addition upheld by the CIT(A) should be deleted as it was not justified.

3. The main issue raised by the Assessee was the upholding of the addition representing the contribution to the building fund, amounting to ?8,64,967. The Assessee, a public charitable trust engaged in education, presented an addition in the building fund account. The AO added this amount to the total income, considering it as capital expenditure for building construction. The Assessee contended that the contribution received under the building fund was corpus donation and not taxable under section 11(1)(d) of the Act.

4. The Assessee appealed to the CIT(A), arguing that the building fund contribution was wrongly treated as building construction expenditure. The CIT(A) agreed partially with the Assessee, holding that the source of the contribution was not fully justified, confirming the addition to the extent of ?8,64,967. The Assessee, dissatisfied with the CIT(A)'s order, appealed to the ITAT.

5. During the ITAT proceedings, the Assessee provided details supporting the corpus fund received, including donor lists and receipts. The Assessee argued that the AO's assumption of building fund as construction expenditure was incorrect. The ITAT noted that no verification was conducted by the authorities to confirm the genuineness of the corpus donation. As a result, the ITAT allowed the Assessee's appeal, stating that without proper verification, the donation cannot be treated as unexplained or taxable.

6. Ultimately, the ITAT allowed the Assessee's appeal, emphasizing the lack of verification regarding the corpus donation. The ITAT ruled that no addition was necessary based on the details provided by the Assessee. The Assessee's ground of appeal was allowed, and the appeal was decided in favor of the Assessee.

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