In a significant ruling, the Mumbai bench of the income-tax appellate tribunal (ITAT) has dismissed the appeals filed by journalist Rana Ayyub Shaikh and upheld the addition of over Rs1.23 crore under section 56(2)(x) of the Income Tax (I-T) Act, citing that the donations collected via crowdfunding platform Ketto for Covid-19 relief were diverted for personal use.
In an order on 2 May 2025, the Mumbai ITAT bench of Saktijit Dey (vice president) and Narendra Kumar Billaiya (accountant member) says, "We are of the considered view that the donations collected were not just for Covid-19 relief but also for other so-called purposes like funds for slum dwellers and farmers as also for relief work in different states for different purposes. But all the donations collected were parked in the savings bank account of Ms Shaikh and family members and no separate accounts were maintained. The funds were also used for personal purposes and also for investment in fixed deposit (FD) and substantial amount of donation received remained un-utilised in spite of long-time gap."
"The claim that the end use of these funds was initiated for charitable activities remains unproven. The manner in which the funds were collected is also not understandable, as the donations were collected and parked in the bank accounts of the relatives of Ms Shaikh. On the given facts, the donations collected by Ms Shaikh are taxable under section 56(2)(x) of the Act and orders of the authorities below on this count cannot be faulted with," the bench says.
The tribunal observed that Ms Shaikh had failed to utilise the funds for the stated charitable purposes, instead mixing donation proceeds with her personal finances. ITAT noted that the funds, including foreign contributions, were credited into her personal bank accounts and those of her family members, without maintaining any separate records or books for donation receipts.
ITAT held that, since the donations were received without any corresponding obligation to repay and were used at Ms Shaikh’s discretion, they were taxable under Section 56(2)(x). The order stated, “Ms Shaikh’s action of depositing the entire donation into personal accounts and later making FDs in her name cannot be seen as pious.”
The tribunal also rejected the argument that the donations were meant for identified beneficiaries as per Ketto’s campaign structure, noting that no evidence was produced to substantiate that the ultimate recipients were anything other than Ms Shaikh herself or her relatives.
While Ms Shaikh reported raising Rs1.23 crore through the Ketto platform in the first campaign, the ITAT order noted that a larger sum—Rs2.40 crore—remained unutilised. This apparent mismatch arises from Ms Shaikh's failure to maintain separate accounts for donations and personal funds. As all contributions, including foreign donations, were deposited into personal or family accounts and commingled with existing funds, the I-T department treated the total corpus at her disposal, not just the Ketto collections, as relevant for assessing taxability. The tribunal, accepting this view, considered Rs2.40 crore as the unutilised portion of the funds available with Ms Shaikh.
ITAT affirmed the tax department’s invocation of Sections 174 and 175, which deal with persons leaving India and discontinuation of business, respectively. The bench found no infirmity in the assessing officer (AO)’s approach, given Ms Shaikh’s alleged intention to shift abroad and the lack of transparency in fund utilisation. It pointed out that when confronted with a summons under section 131, Ms Shaikh offered the full amount collected as income, an act ITAT viewed as an admission.
The tribunal remarked that the assessee only began engaging with the central board of direct taxes (CBDT) over the taxability of such donations after being summoned, not proactively.
The order underscored that, despite the campaign garnering Rs1.23 crore, Ms Shaikh could only produce records substantiating relief expenses of Rs18 lakh. Notably, even one year after collecting the funds, the majority of the amount remained unaccounted for.
When asked about the fund’s deployment, Ms Shaikh reportedly claimed that the balance was being reserved to build a hospital—an objective that was never mentioned in the original fundraising campaign.
The ITAT further highlighted that Ms Shaikh had received foreign contributions without proper registration under the Foreign Contribution (Regulation) Act, 2010 (FCRA) and did not route the money through an authorised FCRA account. This, the bench concluded, raised additional red flags about the legitimacy of the entire fundraising effort.
Ms Shaikh had placed reliance on Supreme Court rulings such as Bijli Cotton Mills (P) Ltd and Tollygunge Club Ltd and decisions of coordinate benches in Six Continents Hotels Inc and Chandrakant H Shah. However, ITAT deemed all these cases factually distinguishable and not applicable to the present circumstances.
The tribunal held that there was no merit in the appeals and that Ms Shaikh’s conduct reflected clear misuse and personal benefit derived from the donations. The assessment order passed by the AO and upheld by the commissioner of income -tax (appeals) (CIT(A)) was confirmed in full.
(ITA Nos.2281/2282/2283/Mum/2023 Date: 2 May 2025)
