Nandlal Tolani Charitable Trust Vs ITO (Exemption) (ITAT Mumbai)
Assessee Trust made a donation of ₹10,00,000 to All India Social Educational Charitable Trust, a registered trust holding valid 12A & 80G approvals. AO treated the donation as bogus u/s 69C solely on the basis of search statements of two persons managing the donee trust, who allegedly admitted to returning donation amounts after retaining 0.25% commission. No seized material, no bank-trail, no corroborative documents, & no incriminating evidence against Assessee were brought on record. Assessee was never confronted with the statements nor given cross-examination despite specific request.
Assessee established genuineness by filing donation receipt, bank statements, books of account, & proof of donee’s valid registration. Tribunal held that additions cannot be based merely on uncorroborated statements recorded u/s 132(4), relying on Harjeev Aggarwal, Best Infrastructure, Andaman Timber Industries & Stellar Investment. Tribunal observed that Sec. 69C applies only where the source of expenditure is unexplained; here the donation was made through accounted bank funds & duly recorded in books. CBDT Circular No. 1132 (05.01.1978), clarifying that inter-trust donations are valid application u/s 11, is binding & supports Assessee. No evidence of “cash-back” ever existed. Tribunal deleted the entire addition of ₹10,00,000 & held that once primary evidences are furnished, burden shifts to Department, which failed to discharge it.
