DCIT(EXEMPTIONS)-1(1), MUMBAI, MUMBAI vs. ANU CHILDREN TRUST I, MUMBAI

आदेश / ORDER PER BEENA PILLAI, JUDICIAL MEMBER:

Present appeal filed by revenue arises out of the order passed by NFAC, Delhi [hereinafter referred to as “Ld.CIT(A)”] dated 23/09/2025, for A.Y. 2018-19, on the following grounds of appeal:- “1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 60,03,93,966/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961, without properly appreciating the fact that the assessee failed to satisfactorily explain the nature and source o f the sum credited in its books of account during the year under consideration. 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the explanation of the assessee that the impugned sum of Rs. 60,03,93,966/- represented corpus contribution from the settlor, Mrs. Anu Wadhawan, without verifying the actual source of such funds, and without ensuring whether such source was from income disclosed to tax in any year by the settler, Mrs. Anu Wadhawan 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the immediate source of Rs. 60,03,93,966/- was the redemption of fixed deposits and interest thereon, but the assessee failed t o explain the actual and original source of the saidxed deposits, the period when such FDs were made, and whether the same were sourced from income declared in the settlors returns. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to consider that capacity of the contributor Mrs Anu Wadhawan (the settlor o f the Trust) has not been established, as she had declared Total Income of Rs. 1,45,44,270/- only in her ITR for the Assessment Year 2018-19, and also failed to furnish the Balance Sheet as at 3 1 March 2018, therefore, her creditworthiness t o contribute total sum of Rs. 60,03,93, 966/- to the Trust during the Financial Year 2017- 18 was not substantiated with documentary evidences. 5) The appellant craves leave to add, amend, alter vary and/ OR withdraw any of the grounds of appeal.”

Assessee is private trust and filed its return of income for A.Y. 2018-19 on 31/08/2018 declaring total income of Rs.1,25,85,670/-. The case was selected for scrutiny and notice u/s 143(2) of the Act dated 22/09/2019 was issued and duly served upon the assessee. Thereafter, notices u/s 142(1) of the Act was issued from time to time, in response to which the assessee furnished partial details and submissions. The assessment proceedings were completed u/s 143(3) of the Act vide order dated 23/02/2021. During the course of assessment proceedings, the Ld. AO examined certain credits appearing in the books of account of the assessee and invoked the provisions of section 68 of the Act. Consequently, an addition of Rs.60,03,93,966/- was made under section 68 of the Act and the income of the assessee was assessed accordingly.

Aggrieved by the order passed by Ld.AO, assesse preferred appeal before Ld. CIT(A).

“4.7.2 It is observed that the appellant had provide the AO with the ITR filed by Mrs. Anu wadhawan for AY 2018-19, a fact which was also acknowledge by the AO. Page no. 2 to 5 of this ITR 3 gives the balance sheet of Mrs. Anu wadhawan. On the liability side of this balance sheet she had total declared source of fund of Rs. 261.83 Cr. Out of which the proprietor capital of Mrs. Anu wadhawan itself was Rs. 249.03 Cr. In view of the above available document, it was incorrect on the part of the AO that he did not have the balance sheet of the settler of the trust before him. In the ITR for AY 2017-18 the appellant had Rs. 249 Cr as proprietor capital. This information is also matter of record. Considering the fact that the settler has about 250 Cr. as her own capital. I fail to get persuaded by the observation of the AO that the settler of the trust was not creditworthy to settle the sum of Rs. 60,03,93,966/-. 4.7.3 The AO has admitted the genuineness of transaction by which the amount of Rs. 60,03,93,966/- was settled to the trust. The AO has also admitted that the proximate source of the funds which was so settled was redemption of the term deposit. He has however, based his opinion on the alleged fact that the appellant could not produce the evidence of source of the source of this fund which was transferred. The appellant in his reply dated 16.05.2024 has explained that on 24.07.2017 an amount of Rs. 56,25,21,200/- was transferred by the appellant herself from one of her account to the other account number 50100058528874. The term deposit was made from the money available in this later mentioned bank account. The redemption amount was also received in this bank account only and further the settled amount was transferred from this account. It is noted that the transfer entry dated 24.07.2017 is getting reflected in the bank account statement submitted by the appellant on 08.02.2023. It is reiterated that the remand report was called on the basis of inter-alia this documentary evidence. Therefore, even the second level of the source of the money was self explained on the basis of document forwarded to the AO.”

The Ld.CIT(A) thus, deleted the addition.

Aggrieved by the order passed by Ld.CIT(A), revenue is in appeal before this Tribunal. 4. Before us, the Ld.DR relied upon the assessment order and submitted that the Ld.CIT(A) erred in deleting the addition made u/s 68 of the Act. It was contended that although the assessee had explained the immediate source of the impugned credit as redemption of fixed deposits, the assessee failed to establish the actual source from which such fixed deposits were originally created. The Ld.DR submitted that the burden cast upon the assessee u/s 68 extends not only to establishing the identity of the contributor and genuineness of the transaction but also the creditworthiness of the contributor. According to the Ld.DR, the assessee failed to furnish satisfactory evidence regarding the origin of funds invested in the fixed deposits and, therefore, the source of the source remained unproved. It was thus argued that in the absence of a satisfactory explanation regarding the ultimate source of the funds contributed by the settlor, the Ld.AO was justified in invoking the provisions of section 68 of the Act and the Ld.CIT(A) was not justified in deleting the addition of Rs.60,03,93,966/-.

4.1. The Ld.AR, on the other hand, strongly relied upon the order of the Ld.CIT(A) and submitted that the assessee had duly discharged the onus cast upon it under section 68 of the Act. The Ld.AR submitted that the identity of the settlor, Mrs. Anu Wadhawan, was never in dispute and the genuineness of the transaction was also accepted by the Ld.AO. It was further submitted that the creditworthiness of the settlor stood established from the material placed on record, including her return of income and balance sheet reflecting substantial capital and net worth. 4.2. The Ld.AR contended that the source of the impugned contribution was duly explained as arising from redemption of fixed deposits and that the documentary evidence establishing the movement of funds through banking channels was furnished before the lower authorities. It was submitted that the Ld. CIT(A), after considering the remand report and examining the relevant bank statements and financial records, had rightly concluded that even the source of the source stood explained. The Ld. AR, therefore, submitted that no infirmity could be found in the order of the Ld. CIT(A) deleting the addition made u/s 68 of the Act and prayed that the same be upheld.

We have perused the submissions advanced by both sides in light of the record placed before us.

5.1. It is noted that in order to establish the identity of the contributor, creditworthiness of the settlor and genuineness of the transaction, the assessee had furnished various documentary evidences before the lower authorities, which are as follows:- “a. Ledger Confirmation of Mrs. Anu Wadhawan, Settlor, evidencing the nature and genuineness of the transaction.

b. Copy of PAN Card and Aadhaar Card of Mrs. Anu Wadhawan, Settlor, establishing the identity of the party.

c. Copy of the Bank Statement of Mrs. Anu Wadhawan, Settlor, highlighting the amounts settled by her in favour of the assessee Trust, evidencing that the payments were made through banking channels and thereby establishing the genuineness of the transaction as well as the creditworthiness of the settlor.

d. Copy of the Income Tax Return along with acknowledgment filed by Mrs. Anu Wadhawan for A.Y. 2018-19, substantiating the identity and financial capacity/creditworthiness of the settlor.

e. Copy of the Original Trust Deed of Anu Children Trust I”

5.2. We further note that, the Ld.AO has not disputed the identity of the settlor. The genuineness of the transaction has also not been doubted inasmuch as the contribution towards the corpus of the trust was made through banking channels and the immediate source thereof was accepted by the Ld.AO as redemption of fixed deposits. The primary objection of the Revenue is that the assessee failed to explain the source from which such fixed deposits were originally created. 5.3. We find that the Ld.CIT(A), after examining the documentary evidences and the remand proceedings, has recorded a categorical finding that the settlor, Mrs. Anu Wadhawan, possessed sufficient financial capacity to make the impugned contribution. The Ld.CIT(A) noted that the return of income and balance sheet of the settlor reflected total funds of Rs.261.83 crores, including proprietor's capital of approximately Rs.249.03 crores. The Ld.CIT(A) further recorded a finding that the movement of funds resulting in creation of the fixed deposits as well as the subsequent redemption thereof stood duly explained from the bank statements furnished by the assessee. Thus, even the source of the source was found to be explained on the basis of documentary evidence available on record. 5.4. The aforesaid findings of the Ld.CIT(A) have not been controverted by the Revenue by bringing any contrary material on record. Once the identity of the contributor stands established, the transaction is found to be genuine and the financial capacity of the contributor is demonstrated through documentary evidence, the requirements of section 68 stand duly satisfied. Mere suspicion regarding the source of the fixed deposits, in the absence of any material disproving the explanation furnished by the assessee, cannot form the basis for sustaining an addition u/s 68 of the Act. 5.5. In view of the above facts and circumstances, we do not find any infirmity in the conclusion reached by the Ld. CIT(A) in deleting the addition of Rs.60,03,93,966/-. We accordingly uphold the order of the Ld.CIT(A) and dismiss the grounds raised by the Revenue. Accordingly, Ground Nos. 1 to 4 raised by the Revenue are dismissed. Ground No. 5 being general in nature does not require separate adjudication.

In the result, appeal filed by revenue stands dismissed.

Order pronounced in the open court on 22/06/2026.

Sd/- Sd/- JAGADISH BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai Dated: 22/06/2026 SC, Sr. P.S.

Copy to: DCIT(EXEMPTIONS)-1(1), MUMBAI, 6TH FLOOR, MTNL BUILIDING, 1 PEDDAR ROAD, CUMBALLA HILL, MUMBAI, MUMBAI-400026, MAHARASHTRA ANU CHILDREN TRUST I, 3RD FLOOR, A WING, HDIL TOWERS, 2 ANANT KANEKAR MARG BANDRA EAST, MUMBAI, MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE