Section 68 Addition on Anonymous Donations Set Aside by Visakhapatnam ITAT

Anil Swathi Balram Foundation Vs ITO (ITAT Visakhapatnam)

Summary: The Visakhapatnam ITAT allowed the assessee’s appeal concerning anonymous donations received during A.Y. 2017-18. The assessee Trust, registered under section 12A and claiming exemption under section 11, had received anonymous donations of Rs.1,90,00,000/- and paid tax at 30% under section 115BBC. The Assessing Officer treated Rs.1,93,92,158/- as unexplained cash credits under section 68 and taxed the amount under section 115BBE, which was confirmed by the CIT(A). The assessee contended that section 115BBC did not require maintenance of records identifying anonymous donors by name and address. The Tribunal held that once a Trust or Institution claims anonymous donations and pays tax under section 115BBC, section 115BBC(3) does not require maintenance of records of the identity of anonymous donors. It therefore held that the AO’s reason for treating the anonymous donations as unexplained cash credits could not be upheld. The CIT(A)’s order was set aside, and the AO was directed to compute tax at 30% on the total anonymous donations received by the assessee under section 115BBC. The appeal was accordingly allowed.

A charitable trust registered under section 12A cannot be subjected to section 68 merely because the donors of anonymous donations are not identifiable. Where section 115BBC specifically taxes anonymous donations and section 115BBC(3) does not require maintenance of the identity, name and address of anonymous donors, such donations have to be dealt with under the specific regime of section 115BBC and not as unexplained cash credits under section 68.

Core Issue Before ITAT Visakhapatnam

The issue before the Tribunal was whether anonymous donations received by a trust registered under section 12A, on which tax had been offered under the specific provisions of section 115BBC, could nevertheless be treated as unexplained cash credits under section 68 merely because the assessee could not furnish the identity, name and address of the donors.

Facts of the Case

The assessee-trust, Anil Swathi Balaram Foundation, was registered under section 12A and claimed exemption under section 11. For AY 2017-18, it received anonymous donations of ₹1.90 crore and itself treated the donations as taxable anonymous donations under section 115BBC, paying tax at 30%. The return declared total income of ₹1,83,00,090 after claiming exemption under section 11. During scrutiny, however, the Assessing Officer treated ₹1,93,92,158 as unexplained/unproved cash credits under section 68 and consequently taxed the amount under section 115BBE. The assessee’s appeal before the CIT(A)/NFAC was dismissed, leading to the appeal before the ITAT.

AO’s Finding: Anonymous Donations Treated Under Section 68

The AO took the view that the assessee had failed to establish the anonymous donations with relevant supporting particulars. The AO was also influenced by the fact that cash had been deposited into the assessee’s bank account during the demonetisation period and considered the explanation of anonymous donations to be an attempt to explain the source of those cash deposits. Since the donations were not proved to his satisfaction, the AO treated the amount as unexplained cash credits under section 68 and taxed it under section 115BBE.

CIT(A)’s Finding

The CIT(A)/NFAC confirmed the addition under section 68. The assessee had contended that section 115BBC specifically deals with anonymous donations and, under section 115BBC(3), there was no requirement to maintain records identifying the name and address of anonymous donors. The CIT(A), however, sustained the AO’s action.

ITAT Findings on Sections 115BBC and 68

The Tribunal noted that the assessee was admittedly a trust registered under section 12A and was claiming exemption under section 11. It examined section 115BBC, which specifically provides for taxation of anonymous donations received by eligible charitable or educational institutions at the prescribed rate, subject to the statutory threshold. The Tribunal emphasised that section 115BBC(3) itself provides that the assessee is not required to maintain records of the identity, name and address of a person making an anonymous contribution, or such other particulars as may be prescribed. Therefore, the very absence of donor-identification particulars could not be used as the basis for treating the donations as unexplained cash credits under section 68.

The Tribunal accordingly held that once a trust claims the receipts as anonymous donations and pays tax under section 115BBC, the statutory scheme of section 115BBC has to be given effect to. The AO’s reasoning that the donations were unexplained merely because the assessee could not furnish the identity of anonymous donors was held to be unsustainable. The Tribunal also observed that the CIT(A) had sustained the addition without properly considering the relevant statutory provisions.

Cases Relied Upon by the Assessee

The assessee relied upon Director of Income Tax (Exemption) v. Keshav Social & Charitable Foundation, (2005) 146 Taxman 569 (Delhi), and ACIT, Circle-2, Meerut v. Shree Shiv Venkateshwar Educational & Social Welfare Trust, (2019) 106 taxmann.com 249 (Delhi-Trib.). These authorities were relied upon in support of the proposition that anonymous donations in the case of eligible charitable institutions have to be considered within the specific statutory framework governing such donations.

ITAT Allows Appeal and Directs Taxation Under Section 115BBC

The ITAT allowed the assessee’s appeal, set aside the order of the CIT(A), and directed the AO to compute tax at 30% on the anonymous donations in accordance with section 115BBC, instead of treating the receipts as unexplained cash credits under section 68 read with section 115BBE.

Key Proposition

Section 115BBC is a specific charging mechanism for anonymous donations received by eligible charitable institutions. Where the statute itself does not require the identity of an anonymous donor to be maintained, absence of such identity cannot convert the anonymous donation into an unexplained cash credit under section 68. The receipt must be taxed under the specific provision of section 115BBC.

Cases Discussed

• Director of Income Tax (Exemptions) Vs. Keshav Social & Charitable Foundation (Delhi High Court), (2005) 146 taxmann 569 (Delhi)
• Asst.CIT, Circle-2, Meerut Vs. Shree Shiv Venkashawar Educational & Social Welfare Trust (Delhi-Trib), (2019) 106 taxmann.com 249 (Delhi-Trib)

FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM

This appeal is filed by the assessee against the order of the Commissioner of Income Tax(Appeals) [“Ld.CIT(A)”], National Faceless Appeal Centre (“NFAC”), Delhi vide DIN & Order No. ITBA/NFAC/S/250/2025 -26/1084561908(1) for the A.Y.2017-18.

2. The brief facts of the case are that the appellant Trust, Anil Swathi Balaram Foundation filed its return of income for the A.Y.2017- 18, declaring total income of Rs.1,83,00,090/ – after claiming exemption of Rs.30,79,552/- u/s 11 of the Income Tax Act, 1961 (“the Act”). During the Financial Year (F.Y.) 2016-17, relevant to Assessment Year (A.Y.) 2017-18, the appellant Trust had received anonymous donations of Rs.1,90,00,000/- and the same has been treated as income and paid tax @30% u/s 115BBC of the Act. The case was selected for scrutiny and the assessment has been completed u/s 143(3) of the Act, where, the AO made addition of Rs.1,93,92,158/ – towards anonymous donations as unexplained /unproven cash credits u/s 68 of the Act and consequently taxed the same u/s 115BBE of the Act.

3. On appeal, the Ld.CIT(A) vide their appellate order dated 08.01.2026 dismissed the appeal filed by the assessee and confirmed the additions made by the AO towards anonymous donations u/s 68 of the Act.

4. Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.

5. The Ld.Counsel for the assessee, Shri M.V.Prasad, CA submitted that the Ld.CIT(A) erred in confirming the additions made towards anonymous donations of Rs. 1,93,92,158/- u/s 68 of the Act, even though as per the provisions of section 115BBC of the Act, the assessee need not maintain any records, including name and address of the donors in case of receipt of anonymous donations. In this regard, he relied upon the decision of Hon’ble High Court of Delhi in the case of Director of Income Tax (Exemptions) Vs. Keshav Social & Charitable Foundation (2005) 146 taxmann 569 (Delhi) and also decision of ITAT, Delhi Bench in the case of Asst.CIT, Circle-2, Meerut Vs. Shree Shiv Venkashawar Educational & Social Welfare Trust (2019) 106 taxmann.com 249 (Delhi-Trib).

6. Sri A.P.Babu, Ld.Sr.AR for Revenue, on the other hand, supporting the order of the Ld.CIT(A) submitted that the assessee has failed to prove the anonymous donations with relevant details. Further, the assessee has made cash deposit into its bank account during demonetization period and to explain the source for cash deposit it has come up with the theory of anonymous donations. Since the assessee failed to prove the anonymous donations, the AO has rightly assessed credits as unexplained cash credits and brought to tax u/s 115BBE of the Act. The Ld.CIT(A) after considering relevant provisions has rightly sustained the additions made by the AO, therefore, the order of the Ld.CIT(A) should be upheld.

7. We have heard both the parties, perused the material on record and had gone through the orders of the authorities below. The appellant Trust is registered u/s 12A of the Act, claiming exemption u/s 11 of the Act in respect of its income derived from property held under the Trust. Provisions of section 115BBC deals with anonymous donations to be taxed in certain cases and as per the above provision, where the total income of an assessee, being a person in receipt of income on behalf of any university or other educational institution claiming exemption u/s 10(23C) or institution referred in section 11 & 12 includes any income by way of any anonymous do nation, the income-tax payable shall be the aggregate of the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of the higher of five per cent of the total donations received by the assessee; or one lakh rupees, and the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of anonymous donations received in excess of the amount referred to in sub-clause (A) or sub-clause (B) of clause (i), as the case may be. In other words, if any institution or Trust receives anonymous donations, the same shall be chargeable to tax @30%, subject to certain conditions. In the present case, there is no dispute with regard to the fact that the appellant is a Trust registered u/s 12A of the Act is claiming exemption u/s 11 of the Act. In fact, the AO allowed exemption claimed by the assessee. However, the AO assessed anonymous donations claimed by the assessee as unexplained cash credit and taxed the same u/s 68 r.w.s. 115BBE of the Act on the ground that the appellant has failed to prove anonymous donations with relevant details. In our considered view, once any Trust or Institution claims anonymous donations and paid taxes as per section 115BBC, then as per sub section (3), it does not require to maintain the record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. Since the provisions do not mandate maintenance of records of identity of the anonymous donors, in our considered view, the reasons given by the Ld.AO to treat anonymous donations as unexplained cash credits cannot be upheld. The Ld.CIT(A) without considering the relevant facts simply sustained the addition made by the AO. Thus, we set aside the order of the Ld.CIT(A) and direct the AO to compute tax @30% on total anonymous donations received by the assessee as per the provisions of section 115BBC of the Act.

8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 13th August, 2026.